How to recognize a dummy token?

With the advent of a huge number of tokens on the crypto market, the question of choosing an investment object is becoming more and more complex. Three main criteria for a dubious cryptocurrency will help you navigate the world of altcoins.

It is impossible to give guarantees regarding any particular investment. You can only find out the essence of a coin after the fact, assessing the development of events and the news background, but these criteria can protect you from selecting tokens for an investment portfolio at an early stage.

How not to fall for a financial pyramid and choose a promising coin to generate income? Let's try to outline the main criteria.

First criterion: presence of a beneficiary

The beneficiary is the final recipient of the profit. That is, the person who will ultimately receive the majority of the pie. Most cryptocurrencies do not have central holders of the coin supply. Or they do not affect the market capitalization of the token in any way. A coin release in which the ICO organizers reserve a significant portion of the coins for the team in advance may be a sign of a pyramid scheme. 

The second factor: the use of network marketing (MLM). 

Network marketing is based on creating a network of distributors who receive compensation for attracting a wider range of users. This is a matter of trusting positive information about this coin when there are doubts about the objectivity of the information.  

Third factor: listing on exchanges

An important (but not the main) factor is the presence of the coin on trading platforms. Exchange operations and speculation on exchanges are an integral part of the crypto market. The absence of a coin in the listings of large exchanges does not allow investors to form the market price of an asset through supply and demand, and this reduces its liquidity and trading volume. 

Summary

A coin that concentrates a large share of the profit from the ICO organizers is distributed according to MLM principles and is not traded on a crypto platform - most likely it has a pyramidal component. Pyramids are always built on loud promises and unjustified expectations. No project or token issue can guarantee fast and stable capital growth. 

The presence of these factors indicates increased risk for investors. At the stage of a coin’s appearance on the market, we can only talk about increased or acceptable risks. Each of these factors is just a risk factor. The absence of such factors does not provide a guarantee, but significantly reduces investment risks.