What Is «Red Flag»

We are obviously in the midst of a blockchain frenzy right now. Every day, we are getting news stories about promising start-ups that are going to change the world, and hundreds of companies pursuing ICOs. So,...

The ability to filter information, sort the wheat from the chaff is a must-have skill for a twenty-first century person. Whereas in the earlier epochs access to knowledge was a privilege of the elite and the lower classes lived in ignorance, mankind today is facing the opposite challenge of too much information. It has become so rampant that it is sometimes difficult to tell the useful from the useless, the truth from deceit, value from garbage. And, unfortunately, no sociocultural sphere has been a pleasant exception in that respect.

What Is «Red Flag» In Blockchain

Blockchain is a promising technology, there is no doubt about it. But everything has its heroes and its rascals, therefore the analysis of current projects is a very useful and necessary thing. It is not uncommon that specialists evaluating blockchain start-ups come to the conclusion that the state of affairs in a company is somewhat worse than claimed by its founders. This situation gave rise to the term «red flag». It originates from the shipping industry: at sea, it is a signal of danger, which is why it was often used by pirates.

So, red flag is the name of the indicator of blockchain network problems. It can be a negative sign of any nature standing out in any cryptocurrency analytics. But since there is a wide array of evaluation methods, a red flag can also mean just about anything. Moreover, what is red flag for one analyst can be a positive sign for another one.

Let us look at a few examples of the red flag:

A project without a goal. With the growing popularity of ICOs, scammers are setting up start-ups on a massive scale, the only purpose of which is to collect as much money as possible. By contrast, projects that are inherently good try to solve a problem that is relevant to people.
A project that can be implemented without blockchain. This example is similar to the first one, the only difference being that such a project may actually have a goal, but it can be achieved without creating the project’s own coin (for instance, by using the already existing Bitcoin or Ethereum), or without blockchain at all.
Project founders without bios. If you, while surfing the Internet, come across a startup, whose official website does not have information on the project founders, it is a good reason to leave such a page and forget about it. A project where the developers do not have enough experience is also a red flag.
A project has no whitepaper and roadmap. I believe there is no need for further comment in that case. You wouldn’t want to entrust your money to someone, who can’t even explain what they are going to do with it.

Red flag examples are countless. And if you are just beginning to explore the world of blockchain, proceed with care and invest responsibly.