The way to choose the most promising and reliable ICO project was already described in the articles: "How to choose an ICO project?" and "ICO for Dummies. How not to lose your funds and perhaps make money?". In these articles you can also find information on how to identify deliberately fraudulent ICOs. And in this publication we want to focus on the main components of each ICO which constitute basic elements in forming overall project’s rating.
Ratings enable investors to compare fundamentally dissimilar ICO projects as it might seem. For example, one project offers innovative system of cryptocurrency payments and second distributes its tokens among electric car owners to pay for charging stations service. Basically bakers and individual token buyers are interested in only one ICO component - whether token’s purchase will bring financial and other benefits in the future.
This integral indicator is a rating of an ICO project. The following factors should be considered as main components:
Legal aspects of an ICO
On many rating resources “risk-score” indicator is part of project's "risk level" assessment because lack of legally registered investor’s rights makes their investments extremely risky. If an ICO project functions according to clearly defined and legally prescribed rules which regulate tokens’ buyers rights then in terms of stability and investors' rights protection its rating will be high.
Place of project legal registration is also important – for investors it will be easier to defend their interests in countries with transparent and stable legislation.
Concept or in other words an idea of an ICO project - that is what its being held for. ICO projects raise funds for realization of some idea, which makes them similar to crowdfunding. Overall project rating and its future depend on how genuine this idea is. When creating a concept that will be presented to public, ICO founders always have to choose between its clarity for the masses and the need to correctly describe its essence technically.
Often investors back the projects the success of which can not be evaluated due to the lack of their own knowledge. In this context you have to rely on opinions of external experts and rating agencies.
ICO project’s concept should not only capture wide circles of investors but also founders need to assess market and society demand of their idea and product, assess prospects for its development and scaling-up. "The Big Bang Theory" series characters somehow got carried away with idea to create mobile application for scientists, potential audience of which was about 100 people around the world. It’s clear that in real life economic benefit of such project is close to zero.
ICO concept should convincingly give an answer to questions: why project’s product will be in demand, how its popularity will look like in the near and distant future. All these factors will effect cost and relevance of project tokens.
At this point you can evaluate project’s technical aspects - in what way, using which technologies project’s idea will be deployed and how will it function in the future. It’s important to realistically assess opportunities for successful implementation of revolutionary ideas and demand for them.
Description of an ICO project technology should be clear and describe what products and services will be available once the general idea (launched by founders) is implemented. In other words, an ICO project technology is a detailed product description - characteristics, calculations, graphs, a list of possible ways to use the product (where and for what it can be used).
It's not enough to come up with a cool idea or technology, you have to be able to make it a reality. Many promising ICO projects are falling apart at this stage. It is necessary to solve many technical and organizational problems before the designed idea turns into at least a crude preliminary product version.
Experienced programmers, talented managers, creative PR agents - all these components contribute to the success of an idea implementation for which tokens are released. Taking into account demand for IT staff and brain drain from team into team, an ICO project founders must be prepared for big difficulties. Part of an ICO project team is founders, partners, external experts and advisers - their reputation and connections can play a big role in creating a successful team.
Tokenomics is a description of all possible token use cases - the more of them, the better. For example, bitcoin is only a means of payment and nothing more. For comparison, Ethereum tokens additionally serve asa fuel (or "gas") for operation of the whole Ethereum ecosystem and smart contracts, which increases their value and stability in the long run.
There are already hundreds of cryptocurrency payment methods, and it will be very difficult to succeed in this highly competitive industry. If an ICO project founders have managed to come up with a maximum number of options for practical application of their tokens then this is a big plus for the entire project - both in terms of technology and finances.
In some rating resources this indicator for an ICO is also called “hype-score”, literally means "level of hype". Potential demand for project tokens depends on it. Obviously a mass buyer would prefer to purchase tokens from projects that are well advertised. For a good hype-score the following is important:
Hype-score indicator is important for those investors who want to earn on tokens reselling at a hype wave. It is quite possible that when a widely advertised project quickly sells its tokens to purchasers and then turns out to be technically and organizationally insolvent. Therefore, if you are interested in long-term investments or you want to participate in an ICO project’s future life, hype-score indicators should be treated with restraint - they show only current project’s status and not its future.