We have heard the disclaimer “Crypto products and non-fungible tokens are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions.” and it haunts us pretty much all the time. Another term that we keep hearing is ‘DYOR’ which stands for Do Your Own Research.
Following are 7 areas one must look at before investing in any crypto project.
1. The Model of the Project
A successful business model represents a map of how it is going to create value for a mass group or a focus group of people or for the industry as a whole. Having a sound, value-creating, and revenue-generating business model ensures stability, sustainability, and growth led by innovation. Every business model is created with a) an objective to solve (more) problems; b) a vision beyond the immediate concept where the project has established a system in its network in which the problem has ceased to exist or curbed at maximum.
| Questions to Ask | Source | |
| CONCEPT | Is the proof of concept coherent and understandable? | Read the project’s white paper and try to understand the category it belongs to |
| REAL NEED | Does it address a real-life problem? | Look for the problem statement the project is solving |
| VALUE PROPOSITION | Is there a clear value proposition for all groups to participate? | Check if the model adds value to distinct groups |
| VISION | Is there a vision beyond the immediate concept that matches broader trends? |
2. The Mechanics of the Project
Decentralization has been the core goal of the blockchain industry to analyze a project’s effectiveness in maintaining immutability, transparency, automation, and resilience with its decentralized business model. The mechanics help evaluate the proficiency of the project’s business model in the highly competitive crypto space and the numbers a project will be able to achieve if it successfully reaches every milestone of its roadmap.
| Questions to Ask | Source | |
| FEASIBILITY | Does the concept look like it could work? | Check for their business revenue model and the offering of the product |
| MVP | Is the minimal viable product ready? | If yes, how good is it and what are the next steps for scaling their reach and acquire customers |
| DECENTRALIZATION | Is there a roadmap in place to become truly decentralized? | Check whitepaper and read tokenomics |
| INNOVATION | Is the product innovative? Does it contribute to the blockchain ecosystem? | Read through research blogs |
3. The Management of the Project
A well-experienced team leads the project with coherence in their strategies and collective progress toward the project’s vision. A balanced combination of hard and soft skills, the ability to overcome technical difficulties and entrepreneurial challenges, the team of advisors and partners, clear articulation of thoughts from management to the customers, timely accomplishments of the milestones, and the ability to cope up with adverse situations are some of the factors which are chiefly considered in this framework.
4. The Market Scope for the Project
Market research includes in-depth evaluations and SWOT analysis of these projects. Understanding and defining the project’s key offerings. It is important to study the size of its existing market, competitors’ activities, unique selling points (USPs) and challenges, and the product’s ability to acquire a market share.
5. The Motivation Behind the Project
Every project is using blockchain, building a network, and circulating a token within its network. The demand and supply of the token decide the price of the token, and this same demand and supply are decided by the utilities the token has within the network. Our team seeks an understanding of the application of blockchain, use cases, tokenomics, and the value generation spots of their tokens.
| Economics – Question to Ask | Source | |
| NEEDS BLOCKCHAIN | Does the project benefit from using blockchain technology? | Try understanding the token lifecycle |
| TOKEN UTILITY | Does the ecosystem get added and/or inherent value from having a token? | |
| TOKEN INCENTIVES | Do token economics create growth incentives & network effects? | Go through the tokenomics |
| TOKEN ECONOMY | Are there incentives to grow beyond the limits of a medium of exchange? | Look for the roadmap |
6. The Momentum of the Project
It is pivotal to identify the traction the project has received on social media over a period of time and the reputation a project has developed from its inception. Track the perception with which a project is perceived and study the company’s roadmap, its expansion in multiple directions, the network effects, partnerships established with high-profile organizations, and expansion of the existing customer base with active acquisition and growth strategies.
7. Money Invested in a Project
The supporters and investors/ partners of the project make all the difference. Check for all funding rounds, token lock-up plans, and the income that the crypto project has been able to generate. The statistics of a crypto project is publicly available and can be taken into consideration as it emanates a sense of transparency across all spheres. For example, if a crypto project showcases the number of wallets that have the native token of the project.
Wrapping Up
Not all crypto projects will necessarily stand 7 on 7 which means one could strike off a thing or two from the analysis. But it is best to check the 7 factors in order to be sure if the project is worth investing in.
Personal Note From MEXC Team
Check out our MEXC trading page and find out what we have to offer! You can learn more about crypto industry news. There are also a ton of interesting articles to get you up to speed with the crypto world. Lastly, join our MEXC Creators project and share your opinion about everything crypto! Happy trading!
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