Do. Your. Own. Research.
Crypto currency and blockchain technology are still in their infancy. It is a wild west of lawlessness and confusion and the onboarding process of someone wanting to learn more can be daunting. Billions of dollars have been lost to scams and untrustworthy projects so you need to be aware and just like anything with your money, you want to be cautious. As of now, there is no consumer reports, government regulation, or consensus of best practices on how to vet projects.
But everyone agrees that you should DYOR – Do. Your. Own. Research.
Well, ok… what does that mean? You might ask “How can I do my own research if there aren’t any rules or regulations in this industry?”
Well, here are some suggestions and some resources that you can use to make your own conclusion. Remember, you can add or ignore any of these because its your own research and your own risk appetite!
- Does the project have a website? Public Team? Social Media? Online Presence?
If a project doesn’t have a website this is not a red flag but there is a lot of information you might get from a website.
One way is to look for the team or leadership behind the project. Do they LinkedIn pages? How old are the pages? If they look like relatively new pages or don’t have a lot of followers, they may even be fake pages.
Does the project host AMA (Ask Me Anything)s or Community Town Halls or Community Calls to update the community on the project?
Does the project have social media accounts? Are their social media pages brand new or can you scroll back through past posts to see the age of the project?
Scams won’t typically go through the trouble to put any effort into a built out website. Hosting can be expensive and lots of developer time is required to maintain a site. Some projects will rely on social media only, which again is a red flag but also limiting in the scope of the community that they can reach.
- Is the project listed?
This doesn’t only refer to exchanges but also to data aggregator sites like CoinMarketCap, CoinGecko, Dexscreener or DexTools which aggregate data from exchanges as an informational tool. For example, if a project is on CoinMarketCap you could also look to see ranking of the site by Market Cap, Volume or how many users have the project in their Watchlist.
- Is there a community for this project and is that community active, engaged and growing?
Looking for a community on Discord, Telegram or mentions of the project on Twitter are good places to gauge the depth of a community.
- Is there a White Paper, or a document that provides a guide to the project? What is on the roadmap? Do they even have a roadmap?
In these documents you will find the scope of the project and what it promises to deliver. Are these far fetched or are they reasonable? Do they have real world implications? A good project will be focused on using the blockchain to solve real world problems.
- Is the project growing?
Can you see if users are trading the token? A low price isn’t necessarily a sign of a bad project but there should be trades to prove that people have use for the token.
Can you use Etherscan, Polyscan or other Block Explorers to see the number of users or wallets of a project?
- Does the project have utility?
What do they actually do? Is there a real world problem they’re hoping to solve or a real world application.
As a note, self described Memecoins have no utility.
For example, Pepe Coin (a Top 50 token in Marketcap on CoinMarketCap) states on its website (pepe.vip): “PEPE is a meme coin with no intrinsic value or expectation of financial return. There is no formal team or roadmap. the coin is completely useless and for entertainment purposes only.”
- Other things to look out for: Pump and Dumps and Rug Pulls
A Pump and Dump is a scam when scammers create or obtain a large amount of an altcoin, promote it, and then sell it to unsuspecting buyers. The goal is to artificially inflate the token price, which is called the “pump”. The “dump” is when the scammers sell off their tokens at the higher price with new buyers providing exit liquidity to the “pumpers”.
A Rug Pull is a type of exit scam that involves a team raising money from the public by selling a token only to quietly shut down the project or suddenly disappear, stealing the raised funds and leaving “investors” (i.e., their victims) with worthless tokens.
Again, its your decision what you do with your money and this is not financial advice. This is by no means a comprehensive list of how to DYOR, buts a start to help you gather information so that you can make informed decisions in accordance with your personal risk appetite.
The information provided in this content regarding blockchain and crypto is for educational and informational purposes only. It is not intended as, and should not be construed as, legal, financial, or investment advice. This content is not a substitute for professional advice from a qualified financial advisor, tax consultant, or legal counsel. The blockchain and cryptocurrency sectors are rapidly evolving and can be highly volatile. We encourage all users to conduct their own thorough research and due diligence before considering an investment or involvement in blockchain technology. Understand the risks associated with digital assets and blockchain-based investments, as they may not be suitable for all investors. The opinions, charts, forecasts, and any other information presented represent the personal views of the authors and are subject to change without notice. We make no representations or warranties about the accuracy or completeness of the information provided. Do not base any investment decision upon material found in this content or in any of our publications. We are not liable for any loss or damage you might incur as a result of using this information for investment or financial decisions. Always seek the advice of a qualified financial service provider before making any investment decisions.
