Knowledge Is Power

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When looking at a project, a great question to ask is, "Who made it? A look at the founders is a great check. It is always scary to see a group of people asking you to support their project yet remaining anonymous. Not all projects with an anonymous team are bad; for example, Pancake Swap, a well-established DEX on the Binance chain; these projects have achieved success while keeping their identities hidden. However, most of the time, you will want to know who is building the project. This is especially true when interacting with young projects. It is common, though, to see the top members of the team doxxed and several lower-ranking members go anonymous. You would also like to know the experience of the team. Are they truly capable of providing what they promise? Don’t forget to check the size of the team. A group that is small and is working on a large metaverse project can be concerning. They might be acting in good faith, but how long will it take them to complete the project at hand? This can be offset a bit, though, if they are recruiting extra help. Does the team engage with the community? In smaller groups, it should be easier to get ahold of the founders and get a feel for how they conduct themselves. Someone might have a great idea but is hard to communicate with or does not like to take suggestions. Larger projects normally have a representative who can answer questions and help you out. This is due to the large workload the founders have completing day-to-day operations. However, most founders of large projects will try to interact with the community as time permits.

Every project has a purpose or a goal it is trying to achieve. The reality of the value, though, will differ from project to project. You need to ask, "What is the purpose of this project?" Is it something that will last for a long time and have real usage? Or is this going to be a passing fad that will peak quickly and be gone in the next week? Depending on what kind of investor you are, it depends on what kind of project you are looking for. Maybe you like to invest in the short term or like to hodl. Even if the idea is a great one, you should think about if the problem the project is trying to solve is solvable with today’s technology. If it seems farfetched, always ask. I know there have been projects for which I had no idea how they could be done until I dug into the white paper or talked to the community.

When looking over the trading metrics, it is great to see an active chart. Constant flow in and out of trading pools for the project in question is a healthy sign. This shows that others do think there is some value in it. Be wary, though, of the number of wallets interacting with the token. If there are only a few, this can be a red flag. Sometimes scammers will use different wallets to interact with it and give the appearance of high traffic. If the project has not listed its token on an exchange due to still being in development, it is not a bad thing. Younger projects are always riskier but can have the potential to offer decent rewards if you are willing to take the risk. If the token is not ready to be listed, you can always inquire as to what steps are being taken to get it listed.

During your investigation, you should always look for the project’s roadmap. This is a set of goals the project leaders have laid out and want to achieve. They should have dates with the road map as well, so you know if they are on course or not. Many times, projects will keep past goals visible on the map so you can verify if they have actually completed what they set out to do on time. The goals should be laid out and written in a way that is not confusing and is simple to follow. There should be adequate time for the project to complete each task. This means if they want to complete a project from start to finish in one year, it probably isn't going to happen. It can happen, but what will the quality of the project be in the end? It is disheartening to see projects fail to complete tasks on time, but it does happen. You should check and see what the reasoning for the missed goal was. It could be as simple as a small team, someone having an emergency in their life, and a third party helping who failed to come through.

Being stated before advertisements for crypto projects are tricky. Social media makes up the bulk of crypto's advertising. An active community is great. Several projects will have multiple platforms they use, but normally the community migrates to one platform. It does not matter which platform is chosen as the main one, just as long as there is effective communication. Conversations with growth potential are examples of effective communication. You don’t want your chat just filled with "to the moon" and "when Lambo" with several rocket ships and moon emojis. You do need the excitement, but scams will incorporate over-the-top hopium to entice people to buy in. When looking through the different platforms, it's good to see references to help you understand what the project is about. Most will have links to their web page and white paper. Check how organized everything is. Is it rushed and thrown together, or is it laid out neatly and easy to navigate? Don’t forget to check the response times when questions are asked. A quality community will be able to give you a decent response promptly. It depends on the size of the team. Smaller ones tend to have a harder time giving 24-hour support. You can normally scroll through past communications to get a good understanding. Never be shy to engage the community.

When a project says that their contract is locked and can’t be altered or that they did not burn any coins to induce a price spike, how do you tell? This is where learning how to navigate blockchain transactions comes in handy. Every blockchain has a different system of doing this, so it can be time-consuming to learn. Using this during your research is very helpful. With crypto, everything is out in the open. As stated in the trading section, you should check the number of wallets interacting with the project token. This is what enables you to do so. You can see all the transactions and the amount in them. The time and price of the trade are also present. You are able to see who owns the majority of the tokens. It is not uncommon for a DEX or CEX to hold a significant amount of the tokens. What can be worrisome is if a single wallet owned by an unknown user holds the majority of the tokens. This could be an indicator of a scam. Some projects at the start, though, who have not had time to list their tokens on an exchange, will hold the tokens in a wallet after they are minted. You can inquire or check to see if it is tied to a multisig wallet.

Looking at a project normally starts with checking out the white paper. This is where the project explains everything they do, plan on doing, and how it will be done in one spot. Depending on who writes the paper, it can be a few pages or over sixty pages long. It should be noted that just because the white paper is long, that does not mean it’s a great project. There have been several projects that would use lots of filler in their writing and large pictures and graphs to take up space. You should ask yourself when reading the white paper, "Does this make sense? Is what they say they are doing achievable by the developers? And what problem are they trying to solve?" Several times, bad actors have quickly thrown a white paper together and doctored it up to make it sound like a solid project. With further inspection, you will be able to see through the trickery. If the paper is extremely technical or contains a large number of mathematical formulas, never be afraid to reach out to others for help. Some projects rely heavily on mathematical formulas and out of transparency will share them. For these types of white papers and ones that are extremely detailed the project might write a light paper. This is a simple, down-to-earth version of the white paper so the average person can understand what the project is about. You will want to pay close attention to the tokenomics and inspect how they are handed out. You don’t want a small group in the project controlling the majority of the tokens. It's important to know if they have a limited supply or an unlimited one. Are they going to have a deflationary token or a token with an unlimited supply but with a burn mechanism in place to keep inflation under control? What is the token going to be used for? Is it intended to be used to purchase project items or to grant voting rights? A few items that can be in the white paper as well that we already touched on are the road map and information about the development team.