There are hundreds of crypto based currencies and tokens around, the most popular being the ones pictured above, however all of them have a place and all of them use generic terms to describe attributes. While not exhaustive, the following will provide some basic information on the crypto world, so you can make informed decisions and hopefully remove some of the confusion.
What is an Airdrop?
An Airdrop is an Advertising method used by crypto based projects to get people aware of and interested in these new projects, typically by giving away tokens or coins for free. These tokens speculatively may increase in value as the project matures, and gives a feel for the new currency and uses for it.
What is an ICO?
ICO stands for Initial Coin Offering. It is a new way to raise capital for all sorts of blockchain-related projects by selling cryptocurrency. New projects use it to sell freshly minted crypto tokens in exchange for Bitcoin, Ether, other cryptocurrencies, and, at times, fiat (Government issued money with no real backing like gold or silver). In a way, it resembles Initial Public Offerings for business startups (IPO), except that ICO’s are mostly unregulated and grant little to none rights to investors. However they provide an opportunity to obtain new cryptocurrency for a low cost in hopes to get good returns on their investment (sort of like buying Bitcoin in 2011).
How to identify ICO scams
Exit scam ICOs are quite popular so the ability to identify them can save you much money.
According to Ernst & Young, almost 10% of all funds raised by ICO’s end up in the scammers’ wallets. But don’t let that scare you, people get scared of renters destroying rental property’s but that figure is around 8% as well, there is always a little risk.
To minimize the risk there are ways to identify fraudulent ICO.
Look for these common signals:
- Anonymous team. Many scams do not advertise their team, so no one can verify who is related to the project. Major red flag.
- An offer seems to too good to be true. If the project offers you crazy returns or impractical products, Major red flag.
- No roadmap. A serious startup always plans ahead and is open about its future steps. If the future of the project is hidden, red flag.
- Bitcointalk.org thread. A legit way to launch an ICO is by announcing it on BitcoinTalk.org. It is the largest forum for Bitcoin and cryptocurrencies, and well founded projects will openly participate in the discussions and answer all the questions.
- Code. Credible projects will commit their code to Github where everyone can review it. No code, no project, red flag.
- Is the token or blockchain necessary? Many projects can function well without a distributed ledger. Many projects try to take advantage of ICO’s just to collect extra money. So ask yourself, does it really need its own coin?
- PR and media activity. Trustworthy projects hire qualified marketing specialists who manage to create an active, engaged community. Also, it is always a good sign if the project gets positive mentions in quality publications.
Remember not all ICOs are scams, and they also provide a legit way to raise funds for many legit and cool projects.
What is a Cryptocurrency Faucet?
Most simply stated, a cryptocurrency faucet is a website that gives out small amounts of cryptocurrencies as a reward for doing small tasks. Bitcoin Faucets are sites that every so often dispense a small amount of Bitcoins (aka Satoshis) for “free”.
There have been many that have come and gone, but there are several that have so far stood the test of time, banners for these are above if you would like to click, learn more and start collecting 🙂
What is a satoshi?
The satoshi is the smallest unit of the bitcoin cryptocurrency. It is named after Satoshi Nakamoto, the creator of the protocol used in blockchains and the bitcoin cryptocurrency. The satoshi to bitcoin ratio is 100 million satoshi’s to one bitcoin. Other crypto currencies use similar units to make up a whole coin, all based on the satoshi.
I’ve got more to add, this is a work in progress so please come back and check again 🙂
