Initial Coin Offerings or ICOs are quite similar to crowdfunding whereas the company/team accepts BTC/ETH from the people in exchange for a certain amount of their coins/tokens, depending on how much you sent them.
ICOs aren’t really scams as some are definitely legitimate, but a big percentage of ICOs are indeed either scams, or are bound to fail. Unfortunately, some well-made ICO scams are quite hard to detect as a scammer could create a legitimate well-thought project and simply just not deliver the product and run away with the money. Though some characteristics could be enough proof for you to stay away from certain ICOs.
How the scam works
-You see an advertisement for a cryptocurrency ICO on social media or on some forums.
-The cryptocurrency’s team makes some outrageous claims like “bitcoin killer”, “ethereum killer” or that the whole world will be using that certain cryptocurrency.
-You invest your money into the ICO.
-The project team fails to accomplish their promises.
-The coin’s price slowly goes down in the long term, effectively losing your money, most of the time more than -95%.
How to protect yourself
-Do your own research.
-Be very wary of ICOs.