Many lately, seeing the explosive growth of cryptocurrencies like Bitcoin, have begun to consider jumping into the world of blockchain investing. A major focus has been Initial Coin Offerings (ICOs), in which a business sells a blockchain-based “token” that forms the basis of a software platform. Companies have raised over $3.6 billion in these offerings to date in 2017.

But the lightning growth of ICOs has also attracted skepticism from investors wary of bad actors and get-rich-quick schemes. Indeed, the regulatory status of blockchain tokens remains murky, undefined and often contradictory. U.S. Securities and Exchange Commission Chairman Jay Clayton’s statement this week urging “extreme caution” around ICOs has done nothing to calm market fears. Enforcement actions in the U.S., which this week declared two ICOs to be in violation of securities laws, indicate that it will likely be very difficult to offer a token that regulators view as a utility rather than a security. And if a token is judged to be a security, then it is subject to the same regulatory requirements as equity shares in any other business.

This security-utility binary is really a false choice. It attempts to shoehorn a generational new technology into a regulatory regime designed for the previous century. Crypto tokens are not necessarily utilities or securities. If correctly designed, they can be much more than deeds of title or the keys to the car. They can power entire economies that grow and multiply. They represent a new and powerful type of financial instrument and will eventually require their own set of regulations to reflect that reality. In the meantime, keeping in mind the additional advice in Clayton’s statement that investors “be open to these opportunities” while applying “good common sense,” there are some questions that can help differentiate the good ICOs from the bad.

First, what does the token actually do? Is its only value the promise that it will appreciate in price, or does it form the basis of a fully-thought-out ecosystem? Tokens that offer nothing beyond promises of Bitcoin-style price growth should be approached with caution. Provenance is important as well: Who issues the token, and how many issuances can there be? Many variations exist here, including the ability to “earn” tokens by performing defined actions on the platform. Are issuances controlled by a central party, such as the company that offers the token? Or are they decentralized and governed by agreed parameters, as is the case with Bitcoin? There is no “right” or “wrong” approach to issuance, but the answers will help an investor gain a clearer picture of what exactly she is buying into.

Other questions relate to the post-issuance characteristics of the token. What is its lifespan? Does it last forever, and can it be traded in secondary markets? Or is it “burned” upon fulfilling a function, like a gift card? What rights does it confer? Some tokens bring with them an ownership stake or a share in company distributions. In other instances, the token is a “key” enabling the holder to participate in a marketplace or ecosystem.

These questions, combined with standard due diligence, can enable a potential investor to draw accurate conclusions about a given token offering. If answers to any of these questions are not forthcoming, the investor should be wary. If they are, they will enable him to make informed decisions and invest in strong, honest ICOs. No investment is ever a sure thing. But the “good” offerings I allude to here, though obscured for the moment by the current bubble-like atmosphere and regulatory uncertainty, really do herald a generational shift that can improve life and business in dramatic ways.

Jed Grant is the founder and CEO of Peer Mountain, building an ecosystem where individuals own their own data and safely transact with enterprises. Jed has educated regulators and investors around the concept of ICO 2.0 and has signed up to the ICO Charter, a manifesto for compliant, transparent token crowdsales.