Today, huge numbers of people are wishing to register a company under ICO, as well as obtain a license for cryptocurrencies. This number has reached almost a record level thanks to the active assistance of the regulators of many countries seeking to create mutually understandable and honest conditions for conducting this type of business.
Nowadays, entrepreneurs can open a company under an ICO in Canada, obtain a license to launch an ICO in Germany, or get a license to conduct an ICO in Austria or Hungary, and also order a license for crypto activities in the UK, receive crypto license in Estonia, Poland and many other prestigious jurisdictions of their choice.
However, all of them are unanimous in their desire to know about how reliable and safe such activities are, therefore we dedicate this material to the process of conducting a comprehensive security check, and we will use the example of Blocklancer, an extremely popular Austrian blockchain platform, for illustration.
Key Verification Steps
Just a few years ago, the ICO world was booming with the number of projects attracting considerable investment growing fast. Here are just a few of them:
- Ethereum;
- EOS;
- Tezos;
- Waves;
- TheDAO;
- Status;
- Qtum and more.
The Blocklancer blockchain platform is one of the successful projects, and it will serve us as a model for better understanding how the due diligence procedure for investing in ICOs should be carried out.
The procedure consists of 4 main steps, which we will examine in detail, and one optional, but also essential step. If you intend to conduct Due Diligence, then at each stage of this process you will have to ask yourself the question “Why?” and answer it.
Step 1. Business Plan and White Paper
To begin the Due Diligence procedure, you will first need to select a current project that is raising capital through ICO. In our case, it will be the Blocklancer platform.
Then, it is time to see a business plan, white paper or strategic plan which gives a basic understanding about:
- Project mission;
- Main problems and how they are going to solve them;
- Prospects of the business growth.
It’s a good sign when the ICO project has at least one of the above documents, and a detailed technical White Paper is of prime importance. A well prepared explanation why a token is needed in the project will be valuable. We draw the attention of those who intend to open an ICO company and order a crypto-exchange license that most modern freelance platforms are managed by corporations with a certain number of their own investors, to whom they report, so that the platforms of this kind are mainly designed for the shareholders’ benefits.
Step 2. Consumer token, blockchain selection and crowdsale structure
Further, if you want to carry out a Due Diligence procedure, you will need to study the features of the token. There is a Lancer Consumer Token (LNC) on the Blocklancer system. Token Lancer holders are eligible to participate in the Token Holders Tribunal (THT) and are authorized to resolve disputes between platform freelancers and their clients.
Those wishing to open a company under an ICO and issue a license for cryptocurrencies should take into account that those who have a certain number of LNC tokens receive premium membership on their freelance platform, which gives access to an expanded range of functions.
If you want to conduct or order a due diligence procedure, just make sure that the crowdsale structure and blockchain choice are consistent with the project objectives. It is important to know for those entrepreneurs who are going to get an ICO license, because some projects will have a different structure. For example, in the White Paper, this may be written: “Unsold tokens will be stored by the steering group to stimulate the growth of projects.”
If such information comes up, you can safely assume that the Due Diligence check has not been passed. In this case, it will not be difficult to imagine a “grab money” scenario that could come to life if, for example, a project stores 800 million unsold tokens and issues 200 million to ICO sponsors. Then it’s quite possible for the working group to simply “dump” unsold tokens into the market, focusing on the dynamics of ICO sponsor price growth.
Blocklancer platform also shows us the ICO distribution system:
- Improvement of the platform - 35%;
- Marketing - 40%;
- Administrative goals - 10%;
- Reserve - 10%;
- IT infrastructure - 3%;
- Software licenses - 2%.
As for the distribution of tokens, this system looks as follows:
- ICO sponsors - 78%;
- Developer - 20%;
- Remuneration - 2%.
Our model platform gives out to ICO sponsors 78% of all issued tokens, which can be called a fair amount, given that 20% owned by the developer are intended for the long-term stability of the platform, almost serve as a reserve fund in case ICO funds run out.
Some entrepreneurs who wish to obtain a license to launch an ICO may consider that 20% of the issued tokens for a developer are quite small. However, such a decision can serve as a good incentive to increase profits on the platform.
Step 3. Steering team
At the next stage of the security check, you will need to take a thorough look at the team behind the project. Especially, make sure that the team has a good programmer with the necessary tools to navigate the technical requirements of the blockchain project – this is a matter of prime importance.
Particular attention from venture capitalists and angel investors deserves the presence of a “technical founder” in a technology startup. Looking in the eyes of the project leader is always encouraging.
Blocklancer founder Michael Kaiser not only decided to show his face from the very beginning, but also gave an interview to CryptoCandor, in which he explained in detail the important aspects of the Blocklancer ecosystem. This is especially important for those who are going to register a company under ICO activity or intend to order due diligence.
Step 4. The Choice of Cryptocurrency
If one day you decide to invest in cryptocurrency, be sure you are aware of the basics of blockchain technology like how to create crypto-wallets and correctly process transactions. But still, the main thing is to determine that it is a profitable cryptocurrency you are going to invest in. There is no single answer to the question: “What cryptocurrency should I invest in?”. Before you invest, study the market and analyze the prospects of a project. Pay attention to the following indicators:
The degree of popularity in the blockchain community. If the trading ticker of this cryptocurrency can be found on major exchanges, and the news related to its peer-to-peer network is published by solid blockchain publications, then this is one of the most promising cryptocurrencies. Tokens of this network are easy to sell and by investing money in this project, you most likely will not suffer a loss in any scenario.
The convenience of movement. Solid blockchain startups issue several types of wallets, in addition, their coins are supported by many third-party multicurrency storage companies. Having a reliable crypto paper (or better several options) is very important for the investor.
Safety. From the above, the conclusion suggests that a promising network should be well protected from hackers. The best cryptocurrencies powered by POW should have a fairly powerful network to minimize the likelihood of an attack of 51%. And if your chosen project uses an alternative consensus algorithm, then it should have a clearly thought out protection scheme from unscrupulous validators.
Step 5 (Optional). Legal Assistance
If you intend to register a company under an ICO or if you want to take part in an ongoing ICO project, but you have some doubts about its reliability, then you can order the Due Diligence procedure from IQ Decision specialists. We will help you check the project you are interested in as quickly as possible or assist you in creating your own project and get a license for ICO.
