How to evaluate STO whitepaper? Learn and avoid scam


March 28, 2019, | AtoZ Markets - A new term has recently floated on the surface of token investments known as STO, STO whitepaper. We used to hear of ICO, which stands for “Initial Coin Offering”. The latter was in the headlines in the last period of time, reported as “dead”, as many top informational sources in the industry confirmed. 

The replacement for such a project is the STO today. STO, as a term, stands for “Security token offerings”, that is said to be better than ICO, in terms of security and regulation.

However, like any other project, taking part in an STO needs to do some feasibility study to outline the overall outcome it will turn after all. So what things to look at to help protect ourselves from scam?

 

It all comes down to the whitepaper

Every new token should have an explanatory document that details what is the project all about, that includes the technical, financial and commercial information about the project.

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That document should also include overview of the market, risks, and the use of invested funds. The information mentioned above, called together: Whitepaper.

The whitepaper should also be explained in a clear, straightforward language, away from expressions that stand more than one interpretation.

 

How to evaluate an STO Whitepaper?

  • Technology: one of the basic pillars a project stands on when it is introduced to the public, is the technology it uses and the approach in resolving a problem in case of any. If the procedure followed presents nothing as a solution, then failure will be the most expected result.
  • The team: verify the names you read in the whitepaper as the owners and directors of the project. Check for them over the web, and see if they hold legit LinkedIn accounts. Many scam incidents in the ICO days were famous to have such a method; which is copying fake or authentic photos of people pertinent to the industry or not, and then those who ran the scam campaign said those were them, meaning that the ICO was run by non-identified people eventually.
    Along with checking the authenticity of their being, check as well their career history, practical experience in the FinTech domain or another one, their education, and whether there are other projects in which they take part.
  • Token allocation- legitimate questions to ask: the most important point here that should be super clear, is the amount of tokens the STO will bring out. That should be referred to very clearly. Plus, it should be clarified as well whether the tokens will be locked up for team members (vesting) or not. Have they got the potential to make extra token when decided to go that way or not? Or are they gradually releasing new tokens at set times? Will they burn unsold tokens? Is there an inflation rate? What about the consensus mechanism?
    Usually, the lower supply the token project has, the best token allocation for investors it is.
  •  
  • Roadmap: this part means checking the technical development details, which will draw an idea about the authenticity of the project.
    The timing of delivering the mainnet is important here. If the project says the delivery is after a year onward, then this poses a risk that needs reflection.
    a mainnet is a blockchain that actually carries out the functionality of transferring digital currency from senders to recipients. This is different from a testnet, which basically is just a test of such transaction functionality.
  • Regulation: Check with the project owners and directors if there is a SEC-filing on the tokens introduced and read the SEC’s rules to confirm the STO is going in the right way.

 

STO Scam concerns

  • Delivering the mainnet within a short time is a positive point in an STO. However, this can also mean the project just wants to make a quick turnover in a short time. Unless the project started its development considerably before the announced start date of the project.
  • If the total token supply and pricing result in the project is really a high market cap, the you should be in doubt about their intentions.
  • Look if the website of the STO advertised looks real or not. Many scam ICOs used the method of copying content from other websites, to impersonate companies and lure people into paying money for nothing. The same applies to the social media pages of the STO, which also should be checked for authenticity altogether.
  • Check the partners’ names, when claimed there is such a thing, and see what kind of partnership gathers the STO project and the partner in question. One of the funny examples to cite here is that one of the token offering firms once claimed a partnership with Microsoft, the thing that boosted their credibility very highly, and after investigation, the matter turned out to be a mere Microsoft Office 365 paid subscription!

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