Regular money has gone out of style, it seems. These days, more and more Singaporeans are becoming interested in investing in cryptocurrency, despite the fact that the Bitcoin bubble seems to have burst in spectacular fashion.
That’s why people actually paid attention when Kodak recently announced the release of its KodakCoin cryptocurrency along with the KodakOne platform, which was ostensibly created to enable photographers to register, archive and sell their work, but implicitly creates a marketplace that uses the KodakCoin cryptocurrency.
This announcement was, unfortunately, overshadowed by Kodak’s announcement that they will be renting out KashMiners, which is a basically a bitcoin mining machine they’ve created. They’ll rent out KashMiners to people hoping to make money by mining bitcoins—but in exchange will take $3,400 AND half of the profits you make.
Of course, that just makes Kodak look like money-grubbing opportunists who’ll do anything to profit from a cryptocurrency bubble.
So how can you tell if Kodak’s, or indeed any, Initial Coin Offering (ICO) is something worth monitoring, or a scam (like *cough cough* BitConnect) designed to take naive investors’ money? Here are 6 red flags to look out for:
Is the Initial Coin Offering promising the world?
Virtually all ICOs are a gamble. There is absolutely no guarantee that even the projects launched in good faith will become the next Bitcoin.
To put things in perspective, there are more than a thousand cryptocurrencies in the world right now. There are also many failed cryptocurrencies that have left investors holding on to nothing but digital ether.
Any cryptocurrency project that claims that it’s going to bring about world peace, end capitalism or become the next Bitcoin is making wild claims that should be a red flag that they’re just trying to dupe investors into parting with their money.
You can’t understand their concept or white paper
Read the creators’ explanations of the cryptocurrency project and what it hopes to achieve, as well as their white paper. If it doesn’t make sense to you or you can’t understand what they’re trying to do, it could be a scam.
Don’t get intimidated if you get lost in a bunch of indecipherable jargon that you can’t make head or tail of. It’s probably not you—it’s them, trying to hoodwink potential investors using confusing language.
It looks suspiciously like a Ponzi scheme
When you meet someone who sounds suspiciously like an MLM salesman, you distance yourself from them immediately. The same should apply for cryptocurrency schemes.
One good example of a pyramid or Ponzi scheme is BitConnect, which has just unceremoniously shut down their investment platform. They were offering approximately 1% return per day on investments.
Not only did you have to buy BitConnect Coin with BitCoin, which means you’re trading a more legitimate cryptocurrency for a less reliable cryptocurrency, but buyers of BitConnect Coin were also offered very generous incentives to recruit other people to the platform. BitConnect then used the money from new members to pay the interest of existing members.
That’s some MLM-level schtick right there.
Their website looks dodgy and is riddled with spelling and grammatical errors
You can spot an email from a Nigerian prince from a mile away. Yet people are less careful when it comes to cryptocurrency scams.
If you see dodgy English on the company’s website, head for the hills. Even if the founders are not native English speakers, a legitimate enterprise will hire someone to write and edit their material.
On the other hand, a scam is just a few guys who want to make a quick buck, and they’re less likely to hire a professional to correct their poor English.
The people behind the company don’t seem credible
Just as you wouldn’t invest a ton of money in the business of some stranger you just met, don’t throw your money into a cryptocurrency project started by anonymous people who have no profile online.
A project is less likely to be a scam if it’s helmed by people who have already made a name for themselves, if not in the cryptocurrency community, then in other industries. No way are these people going to put their reputations on the line by running a scam.
Even if a famous person’s name is being used, you want to make sure this isn’t a case of impersonation.
You can look at the project’s code and see that it’s being regularly updated
One of the key steps when doing your due diligence on cryptocurrency projects is to use Github to look at their code. Github is an online repository that allows code to be shared between developers and laypeople. While not every single developer users Github, the majority do.
So run the project’s website through Github and check that development is still ongoing. Even if you don’t understand code, you want to generally be able to see that meaningful changes are being made on a regular basis. If all they’re doing is correcting spelling mistakes, that calls into question whether they’re doing anything besides taking people’s money.
Have you ever invested in cryptocurrency? Share your experiences in the comments!
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