In order to protect yourself from scams, understand technology, evaluate investment opportunities, understand the latest market trends, and take control of your financial decisions, it is important to conduct your own research in the cryptocurrency space. It allows you to make informed decisions based on your own analysis and evaluation of available information.
How to investigate crypto projects? With the help of the extensive resources available in the open Web3 ecosystem, of course, including white papers, Discord channels, and blockchain explorers.
Most crypto projects have their own white papers, Discord channels, and detailed reports on the underlying smart contracts that you can view using a blockchain explorer (like Etherscan). The openness of Web3 allows you to look beyond the hype and check some things out for yourself.
Let’s start with blockchain basics. Every crypto project, token or platform is based on smart contracts. Since smart contracts are blockchain-based tools, all important data is recorded and available for you to view.
You may be wondering how to access this data exactly – this is where blockchain explorers like Etherscan come into play. Blockchain explorers are similar to search engines designed specifically for blockchain; they can analyze large amounts of on-chain data for a specific blockchain and show you the results of various queries related to the project you are researching.
By looking at some key metrics in a blockchain explorer like Etherscan, you can get a very clear picture of a project. These include:
1) Contract Creation Date.
Here you can see the creation time of the smart contract underlying the project, letting you know how long the project has been running. This may help identify rug pulls since such projects are expected to be short-lived.
2) Total Token Supply.
Viewing a project's total token supply gives you an overview and indicates how many projects each token will purchase. Purchasing 1,000 tokens may seem like a lot, but when the total supply reaches 50 million, you’ll quickly understand the influence you have in the project.
3) Token Allocation.
Again, you will gain important insights by looking at how these tokens are allocated. A supply of 50 million coins may seem normal, but if you notice that 10 million of them are all in the same crypto wallet, it could be a sign that this is an unstable project or even a robbery because only one person owns it.
4) Wallet Transaction History.
When you view a project's smart contract data, you will also see a history of all transactions that the project has ever made and the wallet IDs with which it was interacted. If many transactions are actually just tokens circulating through the same few wallets, this could indicate, for example, wash trades to increase the price and image of the project. If you are looking at a token you want to buy from a large collection and its smart contract transaction history only shows some recent contract interactions, it is most likely a fake smart contract. Regardless, checking out Etherscan will give you a behind-the-scenes look at the projects you care about.
Before analyzing this data, you must determine the smart contract ID of the project you are working on. It will appear on the project's official website, the project's OpenSea page, the white paper, and even the GitHub page. It may also appear on the corresponding CoinMarketCap or CoinGecko page. After copying this ID, you can go to a blockchain explorer (compatible with the project's underlying blockchain) and enter the copied smart contract address. You can access all of the above metrics and more to understand your prospects.
Discord started as a social hub for gamers and developers, but has grown into one of the central communication platforms on Web3. More or less every crypto project has its own Discord server that serves as a hub for the community to ask questions, collaborate, and share alpha. But fundamentally, Discord is a source of information where you can learn about a project’s community and even its founders.
- Evaluate the team's projects. For example, if you have questions about the prospects or technology of your project, this is a great place to start. A responsive team is always ready to answer your questions and concerns, which is what you would expect from a real project staffed by hard-working founders. On the other hand, unanswered questions or a central team that doesn’t respond at all could be a sign that the project has no vision or, even worse, is a scam.
- Assess the community’s sentiment. Browsing community reviews can also reveal a lot about a project. If most reviews seem to be praising the item or urging you to buy it quickly, you may find that the item isn't all it seems. Discord is about real community, not shilling.
You can also check how the community feels about the project - for example, whether they are engaged, disappointed, or have important alpha information to share about an upcoming release. #nonbankdefi
Regardless, looking at activity on Discord is another great way to gather information about your planned project, and should definitely be part of your research.
A third important resource for your own research are white papers. In Web3, most projects have their own white paper, and the purpose of this document is to provide an in-depth understanding of the project's underlying technology, its specific use cases (if any), future roadmap, and underlying team. All of this will help you evaluate whether the project has a bright, realistic future.
The first thing you should look for is the use case for your project - is there an application within an existing company or industry? Who are the competitors – does the project have to be based on blockchain? If the answers to these questions aren't clear, consider whether the project's utility can outweigh the hype.
White papers often mention the founding team, which can be valuable information. If the founding team already has a history of success in the DeFi or NFT space, the project may look more attractive. However, if the founder isn't mentioned or doesn't have a clear track record with crypto projects and their potential use cases, you may want to dig deeper before making a decision.
Finally, every white paper should contain a roadmap showing how the founders plan to develop the project in the future. This is your chance to understand their intentions and decide whether you think the plan is realistic before intervening.
These are just a few key resources for understanding the Web3 space and secure interactions - but there are hundreds more, and that’s why your own research is crucial when investing in cryptocurrency projects. Taking the time to DYOR will help you make informed decisions and navigate the ever-changing world of cryptocurrency with confidence. Remember to always check your sources, ask questions, and stay up-to-date on the latest news and updates.
