Research Summary
The report provides a comprehensive guide on how to evaluate potential investments in the crypto market. It outlines an 11-category framework for conducting due diligence on crypto projects, emphasizing the importance of understanding the project’s use case, adoption, revenue, and tokenomics. The report also stresses the need for a systematic approach to investing, rather than relying on speculation or hype.
Key Takeaways
Understanding the Project
- Project Overview: The report emphasizes the importance of understanding the project’s fundamentals. This includes reading the whitepaper and project documents, understanding how the project works, and familiarizing oneself with the protocol.
- Use Case Analysis: The report highlights the need to understand the project’s use case, including the problems it solves, its potential user base, and its growth and scalability potential.
Assessing Adoption and Revenue
- Adoption Metrics: The report suggests looking at fundamental data such as Total Value Locked (TVL) trend, new users, stablecoin inflows, and developer activity to assess whether the project is attracting attention and users.
- Revenue Generation: The report underscores the importance of strong revenue growth for crypto projects, which can be generated through transaction fees, trading fees, and liquidation fees.
Evaluating Tokenomics and Governance
- Tokenomics: The report advises investors to consider key questions about the project’s tokenomics, such as whether the token supply is capped, the number of tokens issued, and the existence of buyback or burn mechanisms.
- Governance: The report stresses the importance of a strong, decentralized, and functional governance process for the long-term success of any project.
Identifying Risks and Scoring the Project
- Risk Assessment: The report recommends understanding the investment risks, including whether the project has been audited, any past exploits, and any red flags.
- Project Scoring: The report suggests scoring each project based on the 11 categories, applying a weighted average to get a quantitative score for the project. This score can help identify top-performing projects.
Actionable Insights
- Adopt a Systematic Approach: The report encourages investors to adopt a systematic approach to investing in crypto projects, rather than relying on speculation or hype.
- Customize the Framework: The report suggests that investors can customize the 11-category framework to suit their investment preferences and priorities.
- Use Available Resources: The report provides links to several resources that can aid in conducting due diligence on crypto projects.
