A 5-Step Framework for Effective Crypto Due Diligence
Investigating projects yourself is essential to avoid scams. I outline a process covering whitepapers, team verification, tokenomics, code activity, and red fla
The community repeats one phrase constantly: "DYOR" (Do Your Own Research). Everyone states that you must investigate investments yourself. You might agree this matters, yet feel lost about where to start. Here is a practical 5-step guide to filter scams and find real value. I will summarize the process clearly.
1. Whitepaper: "Why are you building this?"
The whitepaper acts as the projectβs business plan. It is often full of technical jargon, making it seem difficult. However, you need to verify only one core concept.
- Many projects launch a coin to raise funds without needing a blockchain. You must see why this coin is necessary. Does it offer an advantage over existing services?
- Avoid projects that rely on vague promises. Ignore grand statements like "integrating global data." Look for specific technical structures instead.
2. Team & Partners: "Do not trust faceless leaders"
Do not be fooled by fancy website designs. Ultimately, people execute the work.
- You must search for the development team on LinkedIn and review their history. If profile photos look like AI-generated fakes or their backgrounds are unclear, you should suspect fraud.
- Some sites display logos claiming "partnerships with Google or Samsung." You must perform cross-verification. Check the partnerβs news or official website to confirm if the partnership is real.
3. Tokenomics: "Who holds the supply?"
Who holds the coins and when they are released (unlocking) affects price significantly.
- If the team or early investors hold over 30β40% of the total supply, the risk is high. They can dump large amounts onto the market, causing the price to crash.
- Supply might flood the market right when your price rises. Checking the "vesting schedule" is essential. You need to know when large unlocks occur.
4. Roadmap & Development Status: "Are they delivering or just talking?"
Anyone can draw a plan (roadmap). What matters is whether they keep their promises.
- Visit the "GitHub" repository where code is stored. You do not need to understand code. Just check for recent updates. Frequent commits indicate the team is working. Silence suggests they have vanished.
- Join Telegram or Discord channels. Compare the discussions. If users only ask "when price go up," be wary. A healthy project has active Q&A about technology and operations.
5. Scam Detector: "Run if you hear this"
Even if a project looks good, these phrases indicate a 99.9% probability of a scam.
- "Guaranteed N% profit monthly"? Guaranteed returns do not exist in investing. This is a classic Ponzi scheme tactic.
- "Bonus for bringing friends"? If the project focuses more on multi-level marketing (referrals) than technology, it is likely unsustainable.
Conclusion
DYOR can feel tedious and difficult at first. But shouldn't you invest this effort to protect your assets? Before you buy based on someone else's tip, spend just 10 minutes verifying these points. Doing so will significantly improve the quality of your investment decisions.
