Picking The Gems: The Route To Proper Due Diligence
“Do Your Own Research (DYOR)” — is one of the most popular phrases often used in the crypto space, and rightly so considering the volatility of cryptocurrency prices. Everyone uses the phrase, mostly to avoid litigation should their postulations go wrong. However, DYOR is meant to encourage an interested investor to do some due diligence about a project or possible investment before throwing in money.
Cryptos aren’t all sunshine and rainbows. The class of 2018 still remembers the gory details. Adequate research and due diligence might have mitigated the carnage. By doing your research, you get to see a project for what it truly is — a value-providing entity or a scam looking to fleece unsuspecting investors. The big question is how do you manage to do your research the right way? That’s what this piece hopes to achieve.
Investing In Cryptocurrency
Crypto research isn’t fashion — the one size fits all approach doesn’t apply. Everyone’s due diligence process is different, but the template remains relatively the same.
True crypto research puts the project under scrutiny, identifying its value proposition, team, tokenomics, and much more. It’s hard work, but you do get more efficient with practice.
Your crypto research journey starts with identifying what you hope to achieve by investing. Are you looking for the next 1000X shitcoin or an existing project with room for growth? Armed with the answers to these questions, you can proceed to pick viable projects for investing in.
Project Value Proposition
Typical of any startup, most projects seek funding to provide value through problem-solving. Your crypto research journey would often attempt to assess what the project brings to the table. Usually, the project’s whitepaper tells it all. Many arrive at their conclusions about a project from its whitepaper, and that’s not a bad thing. A whitepaper that’s lacking in substance is considered a sign that a project hasn’t done its homework, and no investor hopes to commit funds to such a pipedream.
If a project fails to communicate the benefits of its products to the populace, that’s a red flag. Effective communication is a vital aspect of value proposition, so a project falling short in that area won’t cut it. Your crypto research entails identifying these pitfalls, so you can cull such projects from your radar.
Your research should also scrutinize the problem solved by the project. The higher up the problem is on the scale of things, the greater the chance of the project hitting success. Ideally, you want to consider projects looking to solve critical problems, not flimsy irritation. For instance, the Ethereum chain’s huge gas fee crisis created a big problem for retail not keen on paying outrageous fees. HALO Network’s low fee setup solved this problem, and the public chain remained compatible with Ethereum-based dapps. If a crypto project solves a pressing problem, it’s more likely to deliver the goods than another that jumps on a trend.
The success of any project is heavily dependent on the team. Your crypto research isn’t complete if you don’t dig up information on the team. You need to look at the available record of the team. What have they built in the past? How did those projects fare? Are they good communicators? These are pertinent questions that should make up your crypto research. Having the answers to these questions will tell you a lot about the team, and if the project is worth the effort.
Learn The Niche
Before you delve into any crypto project, you need to get acquainted with the space. Your focus should be on getting reliable sources of information. For coin information, CoinMarketCap and CoinGecko have all the relevant intel, including market capitalization, supply, and trading information. LinkedIn profiles can be used to assess team members; red flags on profiles are all you need to identify a sloppy team. Of course, you can learn a lot about a specific niche through YouTube videos and social media platforms like Twitter and Reddit.
One of the reasons why learning about the niche is critical to your crypto research is that it helps analyze the project’s chances. You get to compare the project with the competition, evaluating its likelihood of success. If a project isn’t unique, then it’s bound to remain in the shadows of the first movers. For example, Ethereum has a first-mover advantage, which has seen the blockchain grow quite popular. Interestingly, the competition such as HALO Network brings their unique attributes to the table, including an efficient cross-chain bridge and support for Ethereum-based dapps without the high gas fees.
Learning the niche also entails looking at the failures in that niche. Examining the cause of failed projects in the same niche could prove helpful in exposing the same pitfalls in a project of interest. Often, the most visible sign of failure is the lack of originality. If a project is merely a replica, then it’s doomed to fail. Your crypto research must look at the past failed projects and what they have in common with the project of interest.
Learning to DYOR is a must in a heavily volatile crypto space. However, it’s not an easy feat where hype and rug pulls have become commonplace. Fortunately, the existence of projects like HALO Network, a public chain with multiple ecosystems is proof of the effectiveness of due diligence in crypto.
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