It is known that the biggest profits are collected by those who are first in the ICO project. The same applies to crypto currencies. If we look at the most popular ones, we find that a lot of them are recorded by hundreds of percent growth, and many even thousands of percent. This is almost impossible to achieve with conventional investments into investment stocks, bank investments, precious metals and the like.
It is often the case that when a good investment comes to the stock exchange, and to the public, the price has already been raised by several times.
Therefore, experienced investors are looking for an opportunity to join the investment at the very beginning – even in the field of crypto currencies. Namely, new currencies are created through new ICO projects, where the founder issues a certain number of so-called token chips, which are offered to investors for their buying at a starting price, often with an additional discount.
In a way, the process is comparable to the purchase of company shares in the first issue or when they are issued.
As this method of fundraising is fairly easy and quick, more and more people are choosing to finance their project, which relates to blockchain technology, precisely in this way, that is, through a call to crypto tokens. The procedure is called ICO (Initial Coin Offering). In Slovenia alone, which is known for the great success of such projects even on a global scale, there are currently around 50 ICO projects.
The process is carried out in such a way that the designer and the founder announce the idea and amount of money that he wants to collect for the realization of the project. For this purpose, he issues a certain amount of chips (tokens) that determine the starting price and which mainly everybody can buy. If a founder succeeds in collecting the minimum required amount (“soft cap”), the project is considered to be successful and the token chips or coins start listing on the digital crypto currency exchange. Almost all crypto currencies that we know today – they are already about 1,500 – plus a lot of others that did not keep up, finished this process.
Although this method of investing is very attractive, since it is a purchase at an extremely low price, the greatest art in a large number of projects is to choose the one whose coins will become the most sought after by the success of the project, and therefore their price will increase most. Many projects also fail, and in this case, investors lose some of the funds, or even all of the investment.
Since there are currently very few regulations in this field, project promoters do not have any obligations in terms of return on investment to coin buyers; ICOs have also become an opportunity for fishing in “empty sea”.
According to some estimates, only 5% of all ICO projects are high quality ones, in which could be worth to invest.
Does this mean that there is no sense in investing in such projects? For answers, we contacted the Slovenian Institute PREON, which was founded by two renowned academics. The task of the Institute is to stabilize the market of crypto currencies, educate the community and protect consumers in investing into ICO, through the specific, credible evaluation and certification.
For answers, we contacted both founders of Preon Institute, ass. prof. dr. Marko Vidnjevic, a scientist, researcher and lecturer at the Alma Mater Europea European Academy of Sciences and Arts, and prof. dr. Slobodan Slovic, a scientist, professor of economics and investments from the Russian Academy of Natural Sciences, also former director and member of the board of directors and supervisory boards in various banks throughout Europe and in the countries of the former Soviet Union.
Question: Is it not worthwhile investing in projects because of the very low success of ICO projects for security reasons? Or, whether it is better to stick to the side and not even enter such a risky project?
Answer: Let’s look at the case from another point of view. If we know that in the mine are 100 stones and that we will find “only” 5 diamonds or “only” 5 grains of gold, we will not therefore evaluate the project as bad or unworthy of our attention. It is important to find out how to identify the real thing in the mass of almost identical cases. The same applies to ICO and other business projects. It is well known that most of the classic start-ups fail in the first five years. Some of them still survive and prosper. The key lies in identifying of such projects, and then to invest more carefully into the best ones.
What role the PREON Institute have?
In addition to the other functions within the Institute, the special international commission CCIC™ (“Crypto Community Intelligence Council”), which deals with the verification and certification of ICO projects, also operates. The Commission is currently in the process of enlargement, and we expect members from America, China, Portugal, Spain, England, Lithuania, Estonia and Russia. Otherwise, each ICO founder can apply for one of three types of certificates at the Preon Institute: CTC ™ silver, which includes a basic analysis and expert assessment by five independent experts, CTC ™ golden, which additionally includes also a semi-annual and annual audit of the business, as well as a special issue of golden TBBGC ™, which also includes a guarantee for reimbursement of the complete stake.
What is the Preon Institute’s benefit for an investor who wants to invest in a specific ICO? What can the Institute offer to him, which himself can not done?
Especially two things. Since we are an independent, non-profit research institution with an academic background, we have several doors open. So we can come up with answers that the average investor can not usually do. For example, the commission is run by risk-managers from reputable, world-renowned companies, who are able to assess the value of the project and its added value to the market, and in particular whether the project can be realized at all under the conditions described in the implementation plan (White paper). If we need a professional answer, we can turn to the highest instances, both at the state and the business, and we are looking for a relevant answer.
The other thing is that investors often do not ask the right questions because they are not experts in the area where the project takes place. For example, if the project covers the field of insurance, it rarely falls to the idea of wondering whether the project can at all be able to obtain the necessary license to market products that it wants instead to market with its national currency instead. Members of the CCIC™ Commission draw attention to such and similar potential obstacles and require a response from the project founder. If they do not receive the appropriate answer, the certificate will not be issued, and the public will be notified why we did not issue it.
What is the benefit of the project’s founders who procure a certificate?
In particular, we draw attention to matters that they may not have thought about or have paid little attention to. For example, if it involves the production of a physical product, we are looking for a producer’s ProForma Invoice and a Contract of potential purchase capacity. In addition, we contact a reputable manufacturer of such products and ask for an opinion; for example, whether the product represents a really big added value, as the founder claims, and whether the project is feasible under the promised conditions. With this I mean primarily time and money.
With all the answers, we familiarize the founder and point out the possible weaknesses of the project. If we are issued a CTC™ Golden Certificate, a few months after the ICO’s implementation, we also check that the process was carried out properly and correctly, and in half a year, how the implementation was done. After one year, we request a report on the first results and compare them with initial promises. We inform the public about everything, and we help the founder with the answers and instructions for a successful realization of the project.
What are the most common reasons that the ICO project does not come to life, and the investors lose their investment?
Over the past six months, we have been intensively examining many ICO projects so that we have created our “image” on the basis of verified facts, namely: scientific, legislative, economic, moral and ethical, not speculative, as is usually the case. We were surprised to find that at least 88% of all ICO projects are completely unreasonable and will represent a great “headache” to investors.
The reasons that the ICO project does not come to life are often on the side of the lack of knowledge of the founders. Even if they have a good idea, they are not exactly called to realize it; for example, they may not be technically well-trained for project realization, they may “fall” because of lack of key skills in a particular field, they can be overestimated and predicted unrealistic costs or implementation deadlines, and the like. The other thing is that sometimes they do not have a strong social platform for themselves … enough good reputation and trust in the market … or business contacts so that the project can be positively launch.
In such cases, it is more than likely that they hope to succeed to represent final products to customers. Or that, someone will notice their potential and join them as a strategic partner, or to buy the project. We often encounter projects that do not even solve a major problem or do not represent a significant added value to the market, so we can predict that the market will not simply consume their ideas.
Namely, the point is not only that the idea leads to performance. Then it must be successfully completed, maintained and, if necessary, upgraded, adapted to new business environments, adequately responded to competition, successfully navigated through a possible change in the statutory and other regulations, nurture customers and similar. Here, “over the finger”, it can be said that founders who do not have previous business experience are very difficult to bring the ICO project to a successful realization on their own, and keep it “above the water”.
Well, sometimes it goes for purely banal stuff – the founder wants to collect money first, and then think about implementing the idea, which usually does not work.
Is there something new about namely “hot” crypto market in the near future? Some revolutionary changes?
As this market is very new, we witness daily changes, especially in the direction of the desire to introduce regulations. ICO projects are also a great opportunity for small investors who do not have the opportunity to get to projects in the initial phase, that why also the returns are even higher. Of course, you have to be careful. All investments in the economy are risky, and even more so in the crypto market.
We are pleased that the balance scales back to projects of real value, that is, into tangible issues. So far we have talked about computer applications, where it is often impossible to evaluate how much the project is worth and how successful it will be.
We are just negotiating with the founder of an innovative project that can be a “game changer”. Of course, I can not say more, but it is a combination of solving one of the world’s biggest problems and the production of green energy. The key thing in this project is that technology already works, it is innovative, and that after the completion of the patenting process, this provider will be the only one in the world to offer the mentioned technology. Such details, for example, make our commission much easier when it comes to assessing the project. Well, in addition, long-term contracts for the purchase and sale of already known, highly demanding products have already been concluded, thus avoiding speculation as to whether the market will grab the project or not.
Last but not least, the project is carried out by an experienced entrepreneur with a team of almost twenty experts who have more than twenty similar and successfully realized projects behind them.
So once again, I emphasize – ICO projects are often uncertain and investing in them is a risk. However, sometimes there is a really good opportunity, which is worth considering.
How many percent of own portfolio should investors invest in, attracted by ICO projects?
A little, perhaps between five and fifteen percent of their liquid assets, intended for saving and investing. The first rule of investment is to invest only money that can be missed. If we take into account these two tips – that is, we only invest the money that we do not count on or need, but only up to 15% – we will not “feel the headache” even if our expectations for profit will not be realized. Nonetheless, ICO projects have a high potential for small investments to bring us significant profits.