ICOs: sorting the scams from the investment opportunities

October 17, 2018
Chris Wheal

Initial Coin Offerings (ICOs) have appeared in the thousands since the concept first launched a few years ago. These offerings went unregulated before governments began spotting the dangers of marketing these schemes to naive retail investors. Today, cryptocurrency and blockchain ventures continue to offer tokens for sale to willing consumers, many of whom are hoping for a quick profit. 

Many of these ICOs are deliberately out to con investors. A July analysis by Satis Group explored all the ICOs offered in 2017 and concluded that more than 80% of them were identified scams, defined as projects advertising for ICO investment that had no intention of developing products or services with the funds. 

However, it also found that only 11% of ICO funding that year went those scams. Take away Savedroid, the German firm that faked its exit scam as part of an ill-advised PR stunt, which Satis still classifies in the scam category, and the number drops still lower. 

Another study, produced in July by researchers at Boston College, found that just 44.2% of token projects are active into the fifth month or beyond after their ICO. However, it also said that average returns on token sales are high, especially in the first month after the sale. This tells us that while there are many duds in the ICO market, there are some quick winnings to be made.

The question is, how do you sift the wheat from the chaff? Investors could always use a little extra help in sorting the scammy or simply mediocre from the potential rock stars. There are several companies and community-led services conducting crowdsourced due diligence on ICOs to sort the scams from the legitimate plays. 


ICORating is one such organization. It has three kinds of analytics: a basic review evaluates aspects of the project including its team, its product or service, and its financial prospects. It is based on publicly available information. 

An investment rating scores the ICO with a grade from Default (that’s bad) through to Positive+ (the top grade). It also issues a post-ICO rating, which assesses a project’s performance after the fact to see how well it is delivering on its promises.

ICORating also analyses the ICO market to see how well token sellers are performing. ICO funding reached $8.4bn in Q2 2018, it said, which is a rise of 151% over Q1, although most of this increase was down to EOS. 

More than half of the ICO projects announced in 1H 2018 could not attract more than $100,000 in funds, which was up from 13% in 1H 2017. That means the overall quality of projects has significantly worsened between those two periods, according to the agency.


ICObench uses an algorithm to rate ICOs based on a range of criteria, including the number of team members, photos, full names and social media links, along with any team members that have participated in two or more ICOs in the past. It also evaluates the quantity of publicly available ICO information, and the availability of white papers, milestones, and video presentations. 

The ‘Benchy’ ICO profile is automated enough that ICOs can enter their own information into it multiple times to see how they can improve. This raises concerns about ICO organisers repeatedly trying to game the system.

ICObench also draws on ratings from a community of experts, who rate ICOs voluntarily. Anyone over 18 can register as an expert, and the site weights their input based on their expertise, experience in the field, and publications.


ICOmarks rates ICOs according to the amount of information available about them. “The most detailed information positively affects the rating,” it says. It also uses social activity and the number of subscribers in social networks, along with other metrics such as the Alexa rank of the project’s web site. ICOmarks’ own experts also rank the product, and evaluates its implementation stage.


Services that rely heavily on the availability of information without analysing its quality are likely to fall short when it comes to due diligence. ConcourseQ is a community-powered ICO due diligence service that prides itself on digging more deeply.

While it is registered as a for-profit, it isn’t aiming to make money. It is part of a broader set of decentralized apps created by an open community called Concourse, and co-founder Scott Lewis explains that some projects under that banner are simply provided as public services. 

The people conducting the research also put their names behind it. You can see which individuals contributed to due diligence on each ICO, along with basic bio information. That transparency is rare.

It also presents information about ICOs in easily digestible ways. It includes a ‘green lights’ section with positive information about a company. Meanwhile, the ‘red flags’ section highlights potential stumbling blocks for the ICO. 

Finally, while the broader community can contribute, comments are moderated by a group of ‘QFellows’ who must undergo an interview process. The system has a no-promotions policy, and community members clearly trying to pump up or remove red flags about their own ICOs are quickly banned.

ConcourseQ has already seen a couple of ICOs delete themselves from the site after being exposed. This is definitely one to watch.


Anyone familiar with Snopes, the site that debunks popular myths, will instantly get what TruStory is trying to do. Whereas Snopes uses its own researchers to debunk urban legends and general online misinformation, TruStory hands that task off to a community of participants that use their own reputation to debunk misinformation, and it will focus on the ICO business. 

Participants can forward claims made by an ICO to the community for others to evaluate. If enough people challenge the information, it goes into a voting phase. People can vote on the information using tokens, and there are different tokens for different categories of information. 

If a community decision about a piece of information goes in their favour, they ‘win’ tokens. If it doesn’t, they lose them. In this sense, the tokens are their reputation. 

TruStory won’t sell its tokens via an ICO, as it doesn’t want the core community to be driven by the token price. Instead, it is privately funded.

Which ICO rating system is best?

Some of these monitoring mechanisms feature rating systems that seem to rely on the information about an ICO simply being there, rather than emphasising the quality or accuracy of that information. ICORating’s information on ICOs seems more extensive than the others, though.  

All the rating services here other than ConcourseQ and TruStory rely on ‘premium listing’ services, giving ICOs advantageous placement on the site. We all have to make a living somehow, and magazines online and offline have long had a tense relationship with advertisers as they try to maintain a degree of independence. 

This doesn’t mean that these advertising-driven sites are biased or inaccurate, but it’s definitely worth understanding those relationships.

ConcourseQ and TruStory have structures in place that promote good governance and transparency in evaluating information about ICOs. 

All of these sites have something to offer, but you should take their evaluations as incidental information, rather than investment advice. As with any high-risk investment, you’re ultimately responsible for the money you lay down, and you should understand the risks.

Post written by Chris Wheal
Chris Wheal is editor of OpenLedger's news and features service. An award-wining business journalists himself, he runs a team of freelance journalists from across the UK and north America.

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