How to do your own research (DYOR) and pick a crypto 100x gem.
Crypto is a very overwhelming industry. There is an awful lot to wrap your head around and it can often lead to people falling at the first hurdle. The whole idea of blocmates is to completely remove the barrier to entry for people getting into this space.
This needs to be done sooner rather than later in our opinion. Because the under the hood technology can be very confusing, this can quickly lead to too many abbreviations and jargon which excludes the everyday retail investor. There are a few reasons why this is bad.
The first, it’s exclusionary. In a permissionless industry that seeks to do away with borders and overreach, the very people that make up the communities within it can often be too focussed on technically getting across their point.
There is no reason for it to be more confusing than it needs to be. I don’t know how a car works but I know how to drive. I can’t code Java but I know how to use the internet. Knowing the fundamentals is often enough for a person to decide on a project.
The second reason the exclusionary language in crypto is bad is what I will refer to is snowballing. Once a person understands a particular area of cryptocurrency and the language around it, they are more likely to take on more complicated and complex understandings, with less effort. Effectively compound learning. This can be you if you are willing to learn.
Now, this is all well and good for the individual and consequently the industry, as once you understand how something works at its core, you can use that information for your own projects.
But, again, the industry is underpinned by open-source software, which is accessible to everyone and can be copied, modified and re-released under another company name, with no repercussions. It is a double-edged sword. The exponential growth this leads to is great and I am all for it. The problem I am seeing is that also comes with a greater barrier to entry and a greater gulf between the guys/gals who know and those who don’t.
So how do you bridge the gap and begin your own exponential learning journey? Blocmates, of course… this is a one-stop-shop to gaining your crypto-competence.
This article will go through our own process when doing our research around a project. Following this, you will be able to DYOR and decide on whether a coin is a winner or a complete scam.
It is also important to know that even an experienced cryptonaut may overlook a winning project and equally over-expose themselves to scam coins or even rug pulls (developers running off with funds).
So let’s get to it and hopefully, after reading this, you will be a PhD in researching cryptocurrencies and will be more involved in the conversation.
1 – What problem does it solve?
It has to solve a problem. All the best companies and cryptocurrencies in the world solve a difficult issue or provide excellent value to the largest amount of people possible. Solve a problem and add value. The more people. The better.
Current problems being solved are, layer 2 (L2) scaling on Ethereum. The Ethereum blockchain is extremely congested at the minute and the current proof-of-work consensus mechanism won’t scale if they don’t upgrade to proof-of-stake. Companies like Polygon (formerly MATIC), are helping ETH solve this problem. Increased scalability and sustainability for ETH means longevity. Ergo, Polygon = good.
For more on Ethereum head to our article HERE
Another problem could be the oracle problem. How do we connect the blockchain, on-chain world to the off-chain real world? It’s all well and good having all this amazing trustless technology, but if it can’t properly integrate and utilise the sea of data that exists in the real world, what good is it?
Enter, Chainlink. Chainlink (LINK) solved the oracle problem. Not only did they solve it, but they also found a way to verify the data they receive is not corrupt and/pr bias. If this doesn’t make sense read our What is Chainlink article HERE.
Make sure it is solving a problem, the bigger the better.
2 – The team
Have a check out of the team behind the project. Lots of developers is a good sign as a good marketing team aren’t gonna solve cryptographic problems, unfortunately… Another question to ask is, do they even have a public team?
I am completely torn by this. For me, a completely transparent and public team with a past proven record is obviously desirable. But, is it the gold standard? What are you talking about, of course, you need to know who the developers are.
What about Bitcoin? The anonymity of Satoshi Nakamoto remains a mystery and that is the biggest and possibly best cryptocurrency ever made because of it.
That doesn’t necessarily mean that anonymous developers are the best projects. They can, more often than not, mean they are up to something no good.
That being said, the way the internet is, it is becoming increasingly popular to have anonymous devs. There are a few reasons for that. THORChain (RUNE), a project seeking to allow different cross chains to connect and interchange native tokens, quickly and at a low price.
THORChain devs remain anonymous. This project has an awful lot of hype around it and currently has a $778 million market cap! So, not all anonymous projects are ponzis. Some plans are seeking to connect privacy coins such as Monero to RUNE, which would effectively allow people to transact in a completely anonymous way on decentralised exchanges without any signing up to an account at all. Complete anonymity and a complete permissionless system. Big stuff.
Another reason devs may want to remain anonymous is because of doxing. If a project takes a turn for the worse, which can happen to the best of them and the devs have been in the public eye. Those investors who are overexposed and have an overbearing social media presence can get very intimidating. Anonymity allows people to avoid this. Although, for me, you have to take the rough with the smooth.
3 – Tokenomics
This is exactly what we are referring to in the first paragraph of this article. Exclusionary language. Although, tokenomics just rolls off the tongue.
This is how tokens effectively get their value.
Circulating supply is how much of that token is available to buy in the market. Total supply is the hard cap on the coin, meaning, it is written code that there will only ever be that defined amount. So, from that, you will be able to determine the circulating supply vs the total supply.
How and when does the rest of the supply get released? Well, that is the question you need to answer. Tokenomics 101 states, a reduced supply creates a higher demand and consequently a higher price.
What happens if the code is programmed to release the remaining 90% of the total supply the day after you bought a coin? Well, the supply goes up by 90% and the demand goes the opposite way, effectively diluting the price.
This obviously isn’t good for an investor. The beautiful thing is about cryptocurrency, teams will (or should) release a white paper. In this white paper, it will go through how the initial tokens are allocated and when and how the remaining supply will be released.
Devs will most likely keep a small portion of the tokens themselves as a way to fund the project as it grows, like selling their own shares to crowdfund or even as a payment incentive for new investors or developers. If the price per token/coin goes up the more funding they can secure by selling the token.
Devs and founders selling tokens can be seen as a negative thing. It looks sometimes like they don’t believe in the longevity of the project. If they don’t how can you? Although, like with anything, if this is done correctly and in a fully transparent way, it can be a positive.
If they are selling a proportion of their allocation to help fund the project in other areas, that’s fine by me. It’s when it goes under the counter, it starts to raise eyebrows.
Another thing. Just because the price of a coin is less than $0.01, does not mean it is undervalued. Low price per coin often means there is a much larger supply of coins. Don’t assume you are on to a winner if the USD/GBP value of the coin is low.
The best way to determine the value of a coin is the Market cap or MC.
The MC is = price per coin multiplied by the supply of coins.
Example – And this is a real-life example at that.
Yearn Finance (YFI) – Maximum supply 30,000 YFI. No coins held by developers. All YFI has been released.
What does this tell us?
Extremely low supply = high demand and price point.
Devs (Andre Cronje) – Extreme die-hard computer scientist and revolutionary man.
All coins are released, so there aren’t going to be more coins released and diluting the supply and driving the price down. Make sense?
YFI price currently – $35,150
Market cap $ 1,286,997,624
Note – You can always (almost always) buy less than 1 whole coin. You do not, for example, have to fork out $35K to own a portion of YFI. You can have 0.001 YFI if you wanted.
It’s hard to believe how good some projects are from the outside looking in. If you had that level of success in a regular business, a company may be incentivised to allow more supply into the market to increase its overall market cap. In crypto, you can’t do this. Code is law. If there are to be changed to the supply, this is voted for by the holders of that particular coin. This is called governance and it’s brilliant.
4 – Where can you buy it?
This is an obvious one. If it is one a tier 1 exchange like Binance or Coinbase, then that’s great. It gives credit and trust to the project. Although by the time it hits these exchanges, a lot of projects lose their 1000% increase potential. This may seem like a crazy thing to say but, this industry allows for those kinds of gains. And to be honest, they aren’t even rare.
Gaining access to smaller markets, especially, decentralised exchanges (DEX) like Pancake Swap (Binance smart chain tokens) and Uniswap (Ethereum tokens) allows you to get in on the ground floor and if a project does gain traction… buckle up.
Ideally, you want to buy a coin before it hits the tier 1 exchange and then let the volume drive the price up. Early birds catch the worm in this game.
I will be doing a full article on how to access these small-cap coins and how to use DEX this week. If you can’t wait that long get booked in through our website and we will take you through it.
Be careful that the CEX or DEX you get the coin through has enough volume for you to be able to get your coin out of it if it heads south. If the 24-hour volume is around 20-50% of the market cap you should be ok.
5 – How active are they?
Now, everyone can be active on social media. That’s the easy part. To be honest, too much social media looks a little like overcompensation. Justin Sun from Tron is renowned for releasing an announcement of an announcement, to create excitement around his Tron assets. These are often short-lived and annoy people when the actual announcement is underwhelming and drives the price right down. People don’t take to this stuff too lightly, be aware of overactive accounts.
On the other hand, when markets are retracing, have a look at how active your coins social media is. You will tend to see an announcement made when a coin dips or a weekly review will be released to help drive engagement and encourage investors.
The real activity is on GitHub. This is an open-access platform where you can track the project progression of a specific coin. You can see the activity and their latest submissions of their code shown as “commits” If there hasn’t been a lot of activity recently, that is a warning sign. The project is moving ahead.
Communities in cryptocurrency can be awesome but they can also be toxic. Early adopters act like it is their own project, whilst know it all wanna-be devs can create unnecessary FUD when things don’t go there way. FUD = Fear, uncertainty and doubt.
Join their Telegrams, Discords and follow all the top shillers on Twitter. If they seem welcoming this is a good thing. Memes will be thrown around and its a great feeling when a project is doing well and you all do well together.
What I will say is; check-in with yourself. Social media will show you what you want to see. If you like what you see, you will ‘like’ it. This creates a digital profile of yourself, which that platform will then use to tailor specific content and advertisements to your liking… Literally.
This is great and creates a feed specific to your likes and needs but, it also creates an echo chamber. Confirmation bias is when people with the same incentives and living in the same micro-environments can fail to see any other possible outcome. Their reassuring statements about the current position of a project can often lead you blindsided if you are in too deep.
This may be a bad thing as failing to look at your coins from another perspective can lead to maximalism. Be wrong, change your mind and be happy to learn. The people who are never wrong never, are the people who never do anything. Failing is a necessary and fundamental part of learning and developing. Be comfortable failing, just learn to fail less.
If you are still unsure after this join our telegram and ask the group what they think. We are an open bunch, no hostility in there. Everyone is welcome.
Get in touch with us via the Telegram if you need any further information, we are here to help, no strings attached. As always DYOR before any purchase.
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