Plenty has been written about how to best judge an ICO. The FT's Alpha Grid has supplied some useful tips, transcribed (and cut to length) below. I would agree with all of these; they make commercial and investment sense.
The general approach on the legal side is to say "well, no rights anyway, I may as well not worry". I say there are areas to watch. The three main tips are as follow:
- Read the white paper from a due diligence perspective. Has the company said how it will deal with tax issues arising? Has it got any customer contracts? Has it got a sound business? These may sound like basic questions, but those need to be asked to make sure the token is worth having.
- Read the terms and conditions. A particular focus should be the risk factors. Are these clear and do they tie to the white paper?
- Get a laywer. If you are investing a substantial amount or being asked to sign a soft commit (a kind of discount arrangement) get someone to look over those for you.
So how do you judge if an ICO might be worth putting money in? One, start with the development team. Read their biographies. Two, read the white paper. This is the document that every ICO produces that describes the technical underpinnings of the project, how the tokens will be distributed, and how they'll be used. Three, ask yourself if this project really needs its own cryptocurrency or blockchain to function. If the answer is no, it could be that this ICO is jumping on the cryptocurrency bandwagon just to make a quick buck. Four, look at how the tokens will be distributed. If most of the tokens are being reserved for the development team, they could be more motivated to maximise their own profits than to really build out a viable network.