Want to get into crypto but don’t know where to start? We got you covered! Read on to learn how to evaluate digital asset projects so you can make informed investment decisions.
1. Does it have a clear whitepaper and a well-defined roadmap?
A whitepaper tells you what problem the project is trying to solve, and how the team will solve it. It has all the details—roadmap, technology, and token economics (“tokenomics”).
Where to find a project’s whitepaper?
Many crypto projects post their whitepapers on their website. If you can’t find one there, you can search for it on an online directory like The Whitepaper Database.
Questions to ask while evaluating a whitepaper:
- Does it have a clear use case?
- A well-written whitepaper should give a clear overview of the problem the project is trying to solve, and the solution proposed.
- Does the roadmap provide full details of the project’s development?
- A well-crafted timeline should provide a high-level overview of the project’s major phases, as well as key events that will occur during each phase.
- Make sure the roadmap is realistic and achievable, with clear milestones that can be used to measure progress.
- You can monitor a project’s progress by paying attention to milestones that have been reached and are upcoming.
2. Has the project been audited by a third party?
Third-party audits are conducted by independent experts who analyze the feasibility of a project, conducting technical analysis to verify the accuracy of the claims made in the whitepaper. They also help identify potential red flags that might otherwise be overlooked.
They offer an extra level of assurance for investors, as they provide an unbiased assessment of a project's strengths and weaknesses.
3. Is the team experienced?
While the technology and potential application of a project are important factors to consider, it's also crucial to look at the team behind it.
- Are they experienced in the industry?
- Do they have a good track record?
- Are they committed to transparency and accountability?
- Has the team been “doxxed?”
Doxxing is often used as a way to target and expose anonymous team members.
However, it can also be a strategic move by the team itself. For example, a "doxxed" project is one where the team has chosen to make their identities public. This can help to build trust between a project and its community. When people know who is behind a project, they may feel more confident about the project.
4. Is the project backed by prominent investors?
If a project has big-time investors behind it, this may be a good sign that it has potential.
Their involvement can also help increase the visibility of a project and attract more interest from other potential investors.
There are different ways you can find out if notable investors back a project, but all of them center around something called “social listening”—the process of extracting key information about a project from social media, blogs, and anything else available on the web.
5. Is the community strong?
A project’s community is a group of advocates and stakeholders that typically convene on social media sites like Discord and Twitter to discuss and promote the project’s brand, latest happenings, and other projects they are involved in.
A robust community comes with several benefits, including marketing, spreading awareness through social media, and developing new use cases.
Want to be apart of the Web3 community? Learn about token projects raising funds now.