Although blockchain technology and cryptocurrency are transforming the financial industry and making decentralization a reality. They have limitations in that anyone may establish a project with the technology with no genuine use case. As a result, uninformed investors risk losing money in the vast and uncontrolled crypto market. Still, those equipped with the necessary knowledge also have great chances. However, to adequately comprehend a crypto project before investing in it, you must do your own research (DYOR) on the project and assess its prospects of success.
What is DYOR?
The acronym DYOR is used to urge users to carry out research and, particularly, to comprehend a crypto project's goal and use case from a fundamental standpoint. With the help of the research, it will be possible to pinpoint precisely why there is a buzz around a particular project and why you should invest in a specific cryptocurrency.
This expression emerged and grew in popularity during the rise of initial coin offerings (ICO) projects when fraudulent ICO projects frequently duped investors. In addition, the term DYOR is used in many cryptocurrency discussions when crypto newbies inquire if investing in a specific project or cryptocurrency is worthwhile. Therefore, one of the most crucial parts of being a cryptocurrency investor is the notion of "Do Your Own Research."
DYOR is a gentle reminder to invest in knowledge first and be in charge of your learning before committing your funds to a project. Hence, doing your own research before making any investment decision is crucial. This is because, in the world of crypto, it appears that everyone, even those with no authority, has an opinion, so it's crucial to be discerning about who you take seriously.
Also, you should be able to distinguish between a shill and a genuine project with a clear purpose. Shilling is a frequent activity in the cryptocurrency world, where people prefer to promote the coins they hold in the hopes of raising the price. As a result, it might be challenging to tell the difference between a shill and a genuine project. Therefore, before investing in any cryptocurrency project, it is essential to extensively do your own research and make your decisions from your findings, and not only trust what other people –including experts– have said. Nonetheless, this does not mean you can't and shouldn't get expert advice. However, it is critical to remember that you are ultimately responsible for your investment decisions.
How to DYOR?
Identify possible project
A substantial element of DYOR involves determining which projects are appropriate for investment. This is the most significant consideration before committing funds. As a result, make a short list of projects that interest you. After that, evaluate each project by looking at its website, the team behind the project, smart contracts, blockchain protocol, marketing approach, etc.
Check out the official website and study project whitepaper.
After identifying a good project to invest in, you must visit the project's official website. A solid crypto project will have a well-designed functioning website that captures necessary information about the project. Also, the project whitepaper should be on the website and indicate a comprehensive justification of the project. Whitepapers' primary goal is to emphasize the coin's purpose, utility, prospects, and underlying technology. However, it's not a good sign when you finish reading a whitepaper with more questions and confusion than when you started.
Evaluate the team behind the project
An excellent method to determine whether a project has what it takes to succeed is to learn a lot about the founders, developers, and advisors. The founding team in the crypto industry frequently comes from the same business, startup, or educational institution. When buying the underlying coin, many cryptocurrency projects are still in development. Because of this, you must thoroughly investigate crypto founders' academic and professional backgrounds.
Project funding source
If the founders have ever invested money or private equity in other investment companies, you should find out which ones and how much, among other factors. Check the funding history to discover if prior investments produced profitable results. Generally speaking, you can continue conducting your study if the project has the support of credible, knowledgeable investors.
The blockchain consensus mechanism
Discover why the adoption of blockchain technology is inextricably linked to the project's survival. For example, why has the team decided to construct their solution using blockchain? This should be made clear in the whitepaper. In addition, as this is critical, the project will frequently have blog entries that expand on it.
Tokenomics is an economic model based on the project's token. The distribution of tokens over time is the main element of tokenomics. If a project has a native coin, it's worth learning about its economics. Determine the overall token supply, if it has a large cap, the proportion of tokens already in circulation, and the plan for releasing the remainder. This information will assist you in determining the token's future value. For the initial distribution, tokens may be distributed for free to participating wallet addresses via an airdrop, an ICO, or an Initial exchange offering (IEO). The founding team, project investors, developers, and the first community could be recipients of the distribution.
Join the community and stay updated with news
Joining crypto communities is an excellent way to network and expand your research, get sound advice, connect with like-minded individuals, and keep up with all the most recent news and developments in the crypto world. In addition, communities help clarify discussions and decisions you might find challenging to make.
Additionally, as highlighted in the roadmap, you should search the blogs on cryptocurrency websites and other news outlets to see if the project is progressing. The news updates on the project will give details on partnerships with some leading corporations that can impact the project tokenomics. This provides a solid indication of how reliable the project is.
Some valuable resources to DYOR
CoinMarketCap and CoinGecko
Before going into news sites and subreddits, one of the best things to do is visit a website like CoinMarketCap or Coingecko to obtain a basic view of the project. These platforms also list cryptocurrencies according to market capitalization, 24-hour trading volume, historical data, and the circulating supply of any cryptocurrency.
Social media platforms
When it comes to learning about crypto, time is the key, and for beginners, in particular, social media is frequently the best place to start. The founders of a genuine project will be active on social media, particularly Twitter. Every project should have social media channels to post its development news, updates, and information. Consequently, keeping up with these social media communities is beneficial. A team that communicates with its community, provides updates, answers questions, holds AMAs, and uploads articles are interested in keeping its community members informed and updated.
The developers of almost all cryptocurrencies upload updates to the project on Github. This is typically regarded as the most significant information source for a project.
A cryptocurrency project is continuously under research and observation. Understanding where you are investing your funds in a sector that is changing so quickly is crucial. Examining the team, tokenomics, and reliability of the project will give you an idea of the success and dividends of your investment.