Tips from the NOIZ Team: How to Avoid ICO ScamsCryptocurrencies have given rise to a new a type of crowdfunding, or means of raising funds, known as an Initial Coin Offering (ICO), Initial Token Offering (ITO) or a Token Generation Event (TGE). Each of these terms describes the same thing: raising funds by offering the public a share in coins or tokens that exist on a blockchain. Unfortunately, this method of fundraising is very prone to scams.
A simple analogy can be drawn between the well-known initial public offering (IPO) and an ICO. In an IPO, fiat currency is exchanged for shares by investors, whereas in an ICO funds are raised when a quantity of the crowdfunded cryptocurrency is sold to investors in the form of “coins” or “tokens,” in exchange for legal tender or other cryptocurrencies such as bitcoin or ethereum.
These tokens are promoted as future functional units of currency in the project environment if or when the funding goal is met and the project launches. Due to their relative newness, the regulatory environment concerning ICOs and cryptocurrencies is still evolving and the inherent nature of an ICO also renders them susceptible to scams. A majority of projects behind ICOs do not present a functioning product or service before the ICO.
According to research by Ernst & Young, over 10 percent of funds raised by a sample of 370 ICOs were lost or stolen in hacker attacks. Given the ease with which scam ICOs can be set up by fraudsters, investors should be cautious before making an investment.
https://medium.com/@NOIZchain/tips-from-the-noiz-team-how-to-avoid-ico-scams-51546a908b57