The Risks of Investing in ICOs

As is the case with any investments there is always a risk of capital being lost. However, the nature of ICOs and the space in which they operate also present a host of new dilemmas that investors must be aware of.

ICOs are unregulated securities that allow the founders to raise huge amounts of capital without having a tangible product, prototype or beta version. They are simply an ambitious idea. As a result, it is a safe assumption that the vast majority of ICOs will fail to deliver their product and lose investors the money they invested. This must always be taken into account by investors and is why extensive research of the concept and team is encouraged.

How much to invest in an ICO

ICOs are high risk and unregulated securities that are rarely based on a proven product, but instead an ambitious idea to utilise blockchain technology. It is then pragmatic to assume that most will fail, losing investors their money. Therefore, an investor needs to consider how much they are willing to lose if the project doesn’t take off. Only invest what you are willing to lose.


Despite the fact that the ICO space is not currently highly regulated, there is always the looming notion of new laws being created to cover this growing phenomenon. Such changes could immensely alter the investment landscape as well as value and availability of tokens. Should these laws adversely effect ICOs, investors could potentially be liable for the loss of their investments. This must always be considered by potential investors.

Scam ICOs

The lack of a legal frameworks has led to a few scams in the space wherein an ICO whitepaper is presented and investments are raised, which the founders then keep for themselves. Due to the nature of ICOs and blockchain technology there is little that can be done in this scenario. This is one of the reasons extensive research is encouraged before participating in an ICO. The more time is spent on ensuring the company and concept are credible, the less likely an investor is to lose their money.

Phishing Sites

Equally, ICO scams appear in the form of phishing sites. These sites are designed to appear just like the sites of legitimate ICOs. However, when investments are sent, no tokens are received in return. Investors need to be conscious of this and always ensure that they are on the official, legitimate ICO site. Joining official social media channels such as Twitter and Telegram help minimise the risk of being a victim of a phishing scam. Asking questions and participating in discussions on these social channels in always advised.

How do I know if a website is secure?

When searching for an ICO, on Google for example, do not click on ads pertaining to that ICO. There is a risk that these can be scams, made to look like the ICO page. Always follow the organic search links that appear after the ads and always look for the green padlock by the URL when on the site.

Once you’re absolutely confident you reached the official ICO page, bookmark it to minimise risk of reaching a fake one on your next visit. If ever unsure about anything, ask in the ICOs official social media channels.

To conclude, ICOs can be good investment opportunities with considerable dedication, research and wariness of scams. They are not a way to make quick money and they require extensive research to minimise the risk of losing your investment.

What’s next?

How to Run an ICO

Despite the reputation ICOs have garnered, running one is a delicate and complex process and should be treated so. In this segment of the Academy we will detail general requirements and best practises to follow, as well as some tips based on the experiences of the Co-Founder and President of the Lisk Foundation, Max Kordek.
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