DYOR How to Investigate Cryptocurrency Projects

Not everyone is friendly in Web3. But hey, it's not all bad - you also have endless resources at your fingertips to do your own research. Most cryptocurrency projects will have their own whitepapers, Discord channels, and of course detailed descriptions of their underlying smart contracts on blockchain explorers like Etherscan.


Web3 may be an attractive environment for scammers - but it also gives you the ability to go beyond the hype and verify things for yourself. In this article, we explain the key resources you have at your fingertips to do just that.


How to use Etherscan to analyze a smart contract


Let's start with the basics of blockchain. Every cryptocurrency project, token or platform has a smart contract as its foundation. Since smart contracts are blockchain-based tools, all of their key data is recorded and available for you to examine.


You may be wondering how exactly you can get access to this data - that's where blockchain explorers like Etherscan come in. Blockchain explorers are kind of like search engines built specifically for blockchains; they can parse through a lot of on-chain data for a specific blockchain and show you the results of different queries about the project you're researching.


What can you learn from smart contracts?


By looking at some of the key metrics on a blockchain explorer like Etherscan, you can build a pretty clear picture of a project. These metrics include.


  • ContractCreation Date: this allows you to see when the project's underlying smart contract was created, so you'll know how long the project has been running. This is useful to help you spot a carpet pull, as you expect this type of project to last a short time.
  • Total Token Supply: looking at the total supply of tokens for a project gives you the big picture and indicates how many shares each person's tokens can buy in the project. Buying a thousand tokens may seem like a lot, but if the total supply is 50 million, you'll soon have some perspective on your influence in the project.
  • Token distribution:again, looking at how these tokens are distributed will give you important insights. a supply of 50 million tokens may seem standard - but if you notice that 10 million of them are in the same wallet, this could indicate an unstable project, or even a carpet pull, since just one person has that much influence.
  • Wallet transaction history:looking at a project's smart contract data will also show you a history of all the transactions the project has ever made, and which wallet IDs are interacting with it. If a large number of transactions are really just tokens circulating in the same few wallets, this could indicate a laundering of transactions to improve the project's price and image, for example. Likewise, if you're examining a token you want to buy from a large collection and its smart contract transaction history shows only a few recent contract interactions, chances are it's a fake smart contract. In either case, a look on Etherscan will give you a behind-the-scenes look at the project you're looking at.


How to find smart contracts


Before you can parse any of this data, you'll need to find the smart contract ID of the project you're dealing with. it will appear on the project's official website, the project's OpenSea page, its whitepaper, and even its GitHub page. It may also appear on the relevant CoinMarketCap or CoinGecko pages.


Once you've copied this ID, you'll be able to access the Blockchain Explorer (which is compatible with the project's underlying blockchain) and enter the address of the smart contract you copied. You'll be able to access all of the above metrics and more to help you build a picture of your prospect.


How to use Discord to research a project


Discord started out as a social hub for gamers and developers, but has now risen to become one of Web3's core communication platforms. More or less every cryptocurrency project has its own Discord server that serves as a hub for its community to ask questions, collaborate, and share alpha.


What do you learn on Discord?


But on a more basic level, Discord is a hive of information where you can get a feel for a project's community - and even do some digging into its founders.

  • Evaluating the team's project

For example, if you have some questions about the future of a project or technology, this is a great place to ask. A responsive team that is willing to answer your questions and concerns is what you would expect from a genuine project and hard-working founders. On the other hand, unanswered questions or a completely unresponsive central team may indicate a project with no vision or, worse, a scam.

  • Measuring the mood of the community

Browsing through the community reviews can also reveal a lot about a project. If most of the reviews seem to be selling the program, or urging you to buy it quickly, you may find that the program is not what it seems.Discord is about real community, not selling out.


Again, you can gauge how the community feels about the project - for example, whether they are engaged, disappointed, or have critical alpha to share about the upcoming price drop.


In any case, checking out the activity on Discord is another great way to gather information about your potential project, and should definitely be part of your research.


Read the project white paper


The third key resource for doing your own research is the white paper. In Web3, most projects have their own white paper, and the point of this document is to provide insight into the project's underlying technology, specific use cases (if any), future roadmap, and founding team. All of this will help you assess whether the project has a bright, realistic future.


Is the technology useful?


The first thing you should look for is the use case for the project - does it have an application in an existing business or industry? Who are the competitors - and does the project need to be blockchain-based? If these answers aren't clear, you may want to consider whether the project's utility will last through the hype.


Who are the founders?


Often, the white paper will list its founding team, which can be valuable information. If a founding team already has a legacy of success in the DeFi or NFT space, then the project may seem more attractive. On the other hand, if the founders aren't named or don't have an obvious track record when it comes to cryptocurrency, business, or basic use cases for the project, you may want to consider digging a little deeper before you make up your mind.


Is there a realistic roadmap?


Finally, each white paper should present a roadmap that shows how the founders will develop the program in the future. This is your chance to understand their intentions and decide if you think the program is realistic before you join.

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