DYOR: one of the most important principles in crypto

January 11, 2024
3 min read

DYOR, for Do Your Own Research, is not just yet another complicated acronym. In fact, the importance of doing your own research is undeniable. It is common advice to anyone investing, in any asset. Or it could be used as a disclaimer, with which an author of a post first shares their thoughts, but then puts the responsibility back onto the reader. But what are reliable sources, and what can an investor look out for?

In this article, we would like to provide some useful tools and methods for conducting your own research.

Start by reading their white paper

This is an obvious step but is often overlooked by beginners. A whitepaper usually describes a crypto project's basic principles and technical specifications. Usually, a cryptocurrency's whitepaper can be found on its official website. This official website is also the best source to start your research, and much more reliable than social media.

Even for experienced crypto investors, a whitepaper is sometimes difficult to understand. Take Bitcoin's whitepaper, for example. That quickly becomes very technical. Write down things that are not immediately clear, and then look for answers to any open questions you may have. Many projects are run by start-ups and are highly community-oriented. As a result, they are likely to answer any questions, such as through their social media.

Doesn't the project have a white paper or a similar document? That can be a signal for investors. Draw your own conclusion if that's the case.

Use a data-driven approach

A whitepaper explains the basics and plans of a crypto project, but only once the project is operational is it possible to measure success. One of the benefits of public blockchain technology is its transparency and thus accessibility for analysis. Whether that is your analysis or that of a (paid) service that performs analysis. One notable source for analysis is Glassnode.

On-chain analysis is becoming increasingly popular for evaluating the market and the current situation. For example, consider investigating how many addresses of a particular project are actively used, and how many of them hold cryptocurrency.

These are just two sample questions that can provide valuable insights when researching crypto. With a list of specific questions up front, it is easier to work toward a conclusion.

Evaluate marketing versus reality

Almost every crypto project runs marketing campaigns, and in many cases, there is a gap between what the marketing department promises and what a crypto-related product can achieve. It is not only important to recognize this gap, but also to avoid investments where this gap seems too large to be bridged by technology. To put it very ridiculously, if a project promises to solve world hunger next month, that's a red flag. After all, promises must remain realistic.

Check the team

Another crucial factor is the team behind a cryptocurrency or blockchain product. In some cases, developers want to remain anonymous, but in most cases, you can discover who is involved and you can assess their expertise via social media.

Qualifications and titles don't guarantee the success of a crypto project, but they can provide insight into what to expect from the people working on it.

The information provided in our articles is intended solely for general informational purposes and does not constitute (financial) advice.

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