ICO ratings have become increasingly more important since there are many ICOs popping up on a daily basis. Due to the fact that there is new ideas and ICOs on the market there is a new wave of investors as well. The new token buyers joining the game want to make the smartest and safest decisions so ICO ratings are important to them. Check this article to find out what to expect from rating websites and what factors to consider when rating an ICO properly.
How does rating work?
When rating an ICO, key factors such as what are the most important elements of the project will be analyzed, as well as the transparency of the project is trustworthy and has potential, is inherent. Ratings for an ICO launcher are important as the third party rankings demonstrates that they are open, honest and trustworthy about their business. Especially if they get a positive result from the rating, the company will emanate trust and transparency.
Now down to business of some sample ways these ranking websites are evaluating ICOs:
Risk score: used to evaluate the fraud risk and the quality of the projects. In this score the the whitepaper, team, legal and MVP are analyzed.
Hype score: evaluates the potential level of interest of investors. This can be calculated based on a variety of factors such as social media mentions of the particular ICO, following on social media, and search engine hits on the ICO.
Investment potential: in this score the business model, finances, and market dynamics are researched. Usually this method will determine whether the ICO is worthy of long-term investment and will even show the positives and negatives of the projects.
On rating websites you can also find a list of suspicious ICO and scams which is definitely necessary to weed out the bad seeds in the industry.
No business is without problems
Some rating websites have been called out at being corrupt or rigged to favor some projects over others. But this phenomenon is not always the fault of the actual website. There are many bounty campaigns run by the ICOs and they are incentivizing for creating positive reviews and shares for their project. This is achieved by incentivizing early contributors to perform different marketing tasks in order to raise awareness for the project with free tokens. In addition to this there have been cases where bounty hunters are promoted and incentivized to post positive and high rankings on rating sites. This kind of motivation could lead to an increase of false and overly positive rankings of ICOs online just so a bounty hunter can make more money, this in turn will lead to an influx in dishonest reviews.
Another prevailing problem in the industry is that there are no limits to who can become an ICO reviewer and give out ratings. Some rating sites do not have much criteria necessary to apply, only mandate can be to validate your email, choose a username, add a photo, place a link to your LinkedIn profile, write a title and bio and add your location. I observed this style on ICObench, but it seems that in their defense they do not approve every random Joe off the street, yet at the same time they are asking for too minimum of requirements. One other zero barrier entry is that some ICO review sites consider only general crowd ratings, as noticed with wiserICO.com.
ICO rating sites are not providing a bad service but they are positioned in a way that can possibly be abused by bad actors in the community to inflate certain ICO egos.
Possible solutions
If you are evaluating an ICO by yourself make sure to look closely at the team, what the community thinks of the project, tech aspects, and the market the project is entering in. Some other important factors to pay attention to are the product information, business know-how of the team and market robustness. It is very important to do the research for yourself outside of rating sites. Always remember to use your common sense, if something feels fishy then do not pick that project. If it seems to good to be true it usually is.
In terms of the issues going on with the ICO ranking sites being overflowed positive results there should be a filter put in place that notices positive rankings for certain ICOs. This kind of alert or indicator can wave the red flag to look into a certain ICO being over evaluated on the site. Also there could be a notice and take down system in place on their site if users notice too much over inflation they can report it themselves. This would allow for transparency and equality on ranking sites.
Many rating websites have their own techniques to analyze on top of these basic steps and it is important to use more than one source before investing in an ICO. Cross check with multiple rating sites and you will get extra insight on the projects and maybe even find a more reliable one to invest in. Some reliable services you can check out are: Top ICO list, ICOrating and CrushCrypto.
If you are interested in the possibilities of raising funds through an ICO with a Blockchain startup, download our guidebook on how to do cost-effective marketing for an ICO.
This article written by Yuliya Avdyusheva and was first published on our Medium. Check it out here.