DYOR: Factors (and Red Flags) to Look for in a Crypto Project

Adam Kantrowitz
Adam Kantrowitz
DYOR: Factors (and Red Flags) to Look for in a Crypto Project
Table of Contents
Table of Contents

Let’s get one thing clear: asking questions and expecting answers before investing your hard-earned money into a crypto project is smart investing, not FUD (fear, uncertainty, and doubt). You should always DYOR (do your own research) and never invest more than you can afford to lose.

Let’s get one thing clear: asking questions and expecting answers before investing your hard-earned money into a crypto project is smart investing, not FUD (fear, uncertainty, and doubt). You should always DYOR (do your own research) and never invest more than you can afford to lose.

While the contents of this article are not investment advice, I hope it can help you learn a few ways to DYOR when considering whether you should put money into a crypto project.

What a Crypto Project Needs in Order to Be Successful

Here is a quick rundown of the things a crypto project needs in order to be successful:

· Funding – Without money, a project isn’t going anywhere. It’s okay to get some funding from the community, but the community alone cannot usually provide all the capital for a business to reach its goals.

Photo by Mufid Majnun on Unsplash

· Talent – It’s expensive to hire developers for a crypto project. Any project that doesn’t have in-house developers is going to need a lot of funding. So make sure the team has the necessary skills to accomplish the roadmap.

· Professionalism – The team should be courteous, even in the face of criticism and FUD. They should be particularly kind to legitimate investors trying to use a DYOR approach.

Photo by Adam Jang on Unsplash

· Connections – Which projects are the team connected to? Are they talented teams with a professional approach? You can tell a lot about a project by who their friends are.

· Vision – Where is the roadmap going? The team needs a clear vision for the project, even if the eventual goal is to turn it over to the community.

· Utility – Is the project meeting a real need? They need to be able to demonstrate a use case for the project they are creating.

Watch Out for Red Flags

Red flags are indicators that the crypto project is lacking the factors noted above. As you DYOR on a project, you may come to notice the following:

Photo by C. G. on Unsplash

· You’re the piggy bank – The project has no real funding. They just keep asking the community for more money. This could indicate they can’t get a loan because of IRL financial issues, they can’t attract VCs, or they just don’t budget well.

· There are very few updates – It’s okay for the team to “have their heads down working,” but there should always be consistent communication with the community (daily, if possible). There should also be regular updates showing the team is making progress. Otherwise, they may just be stuck and not sure how to proceed.

· Poor customer service – If the team is rude to the community (or even to detractors), this is a huge red flag. Good customer service means being able to handle any type of customer. Yes, there are some people who are impossible to please, but even those people should be treated with respect.

Photo by Steve Johnson on Unsplash

· Shady collaborations – Anyone can make a mistake, but if a project is surrounded by other projects with major red flags, they may just be putting up a good façade that will eventually crumble.

· No use case – Have you ever seen a talented team create something simply because they had the idea, even though there is no legit use case? Sometimes, cool tech is just cool tech. If you are going to get anything back on your investment, the project must fill a need.

· No value prop – What are you getting in return for your investment? Sometimes there seems to be value on the surface, but the promise of future airdrops of NFTs or tokens doesn’t equal ROI if the project has no future.

DYOR: Is the Valuation Reasonable?

The final thing to consider is whether you are getting a reasonable valuation. I’ll address this more in a future article. For now, just be sure you’re not investing in a web3 project based on the value of a similar web2 project. I promise you that the web2 project didn’t start with the valuation it has today, and no one should get to stand on another team's shoulders to ask you for more money.

Again, this is not investment advice. It is simply a list of things to look for when you DYOR.


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