Too many advisors
With ICOs, an advisory board is often quickly founded and announced, which is intended to act in the role of advisor for the project. The existence of such a board engenders trust, because if Vitalik Buterin – the very public founder of Ethereum – is advising a project, then nothing can go wrong, can it? Theoretically, the project stands a better chance, but in practice…
Does the adviser know he is an adviser?
There have been reports of cases in which Vitalik Buterin was listed an advisor on a project board and he knew nothing about it. The initiators asked him a question about some technicality at a conference and he answered the question because he is a nice person. It must have been a great honor for him to have been instantly and unknowingly elevated to the advisory committee of the project. It was doubtless no honor for the investors who invested in a very dubious ICO.
Nowadays, you can find an advisory committee on nearly every ICO website. Many white papers will also include details of their advisory board. Many of the advisors are actually the initiators’ advisors and are aware—unlike in the previous case—that they are listed there. Before you invest, you have to ask a couple of questions.
Asking the right questions
What is the advisor doing for the project, and can he really help or have influence? If he can help at all, how much time will he be able to devote to the project? Is this person a paid advisor who advises on a lot of projects because that is his or her job? Is this person truly contributing to the project? Will the project be any better because this consultant is advising?
If the answers to these question can be ticked off and you are satisfied that the advisor or advisors are contributing real value to the project, then that is another green light for investment in this ICO.
However, if this advisory board is just for show or is filled with paid positions, then you have to consider whether it really makes sense. It can be assumed that the wheat is quickly sorted from the chaff with this procedure because most ICOs are watched like hawks by the authorities around the world. Genuine advisors do not commit easily to projects because—time and energy aside—they are publicly named as associated with a project and thus could be personally liable if something goes wrong. Not to mention potentially tarnishing their professional reputation and credibility if a project goes very wrong.
Smart advisors are careful
This would certainly cause anyone getting involved in a project to be cautious and check more closely when they are asked to endorse a project and its initiators publicly.
As already stated, a white paper has mutated from a purely technical discussion paper to a marketing paper in recent years. In fact, in many cases, these papers look a lot more like a financial prospectus than a technical document. So, it is time to dedicate some time to the regulations and check what ICOs are, or what they can be.
Coming up next are IPOs versus ICOs. We will discuss their differences and what kind of risk booth bear for you.
Only information, not investment advice This course is not just about the opportunists and rip-off artists that lurk at every turn; it is also about the enormous opportunities that proper ICOs offers to investors. However, it must be stated categorically at this point that this course is only intended to explain and inform. The statements in this course are in no way intended as instructions or advice for investment, nor can they be construed as such. Any investment in an ICO and every purchase and sale of cryptocurrency is undertaken at your own very high risk, and should not be based on any of the statements presented in this course under any circumstances. Do your own due diligence in every instance before you participate in any transaction