How to research crypto projects
There are different types of crypto: Bitcoin, Altcoins and tokens. These are the three key categories you might find yourself buying into, and give a rough overview of the system as a whole. But within these categories, there are literally thousands of options, and new projects springing up every day. Risks to be Aware Of
The decentralized environment offered by crypto is an amazing hotbed for innovation, because more or less anyone can develop and launch a project. For you, that means an incredible array of choice when it comes to buying in. But this freedom to create comes with a caveat – it’s also a perfect place for well planned scams to be staged.
One typical example of this is a rug pull. This is a project (a coin or token) set up with the express intent of making money, where the developers of that project will wait for people (like you and me) to buy in, raising the value of the currency. Once this has happened, the developers sell off all their own holdings at once, draining all of the money out of the project (the money you used to buy in) and leaving you with some tokens that probably aren’t worth a lot.
A rug pull is exactly what it sounds like – a project that pulls the rug out from underneath its community. And this type of scam is not uncommon in crypto, because you don’t need to pass any tests or audits to start a project. This means anyone can claim to be a legitimate platform, even when they’re not. Resources and Questions to Ask
So how do you assess a project for yourself?
Read the White Paper
Here’s a good starting point: almost every legitimate crypto has a purpose and a vision, so establishing what this is (and if it even exists) for the project that interests you is a key data point. You can do this by reading the reference document called a white paper is therefore a must-do to assess the potential of a crypto. By reading it, you have to pay attention to two main points to assess the project’s viability:
Is the project answering an existing problem and is it useful for the crypto ecosystem? Does the project really need a dedicated crypto to work and achieve its ambition?
Join the Project Discord
You can also get a feel for what’s happening on the project by joining its community server on Discord. Here, you can ask the developers questions directly to build a profile of the project, its future and the authenticity of the creators. You can also chat to the existing community to get exclusive information about the project or upcoming developments.
You can find the Discord link for most projects on their main page and also on their Twitter profile, but if you want to take a deep dive into how to use the platform, check out our article right here!
Ultimately, it is impossible to know if a crypto project will achieve the objectives. But if there seems to be a clear plan in place, along with an engaged community and responsive developer team, then there’s a stronger case for the future of the project.
While the most famous cryptocurrencies have already proved their worth, research is very important with smaller cryptocurrencies. Because those are like startups: their value can drastically increase but they are still fragile. In a nutshell, there is no bad choice but one universal rule instead: buy only the crypto you believe in once you have educated yourself.