How To Do Your Own Research in DeFi

Decentralized Finance (DeFi) comes with much excitement. Amidst this excitement, it is easy to get lost, make mistakes, invest wrongly, fall for shitcoins or rug pull, and many terrible things that could go wrong.

DeFi is fun and interesting. It offers massive yields that no one could ever have imagined. But the fact is, the better DeFi gets, the higher the chances of anyone being ripped.

Why?

Most people joining DeFi today join because of massive fluctuations in price. So they log in to Twitter, see that people are buying the dip, and join the train only to get burned.

Do you know the worst thing that can happen to you in DeFi? Buying the dip of a shitcoin!

Fact: If all you know about a cryptocurrency is the price of the token/coin, then you still have a lot to learn.

The advent of crypto brought about many other concepts. Such concepts are Shitcoins, rug pulls, and many other terms for other pitfalls that can befall you in the crypto world.

Let’s start with Shitcoins before jumping to the focus of this post. Shitcoins have no identifiable use or objective. The term describes cryptocurrencies with:

1. No use case.
2. No relevance to the crypto community.
3. There is no whitepaper or qualities that should qualify as a cryptocurrency except its price.

With an unstructured purpose like Bitcoin and Ethereum, these Shitcoins have no longevity attached to them. An example is the most shitcoin saga that trended a few days ago — Grimace Coin.

A tweet banter between Elon Musk and MacDonald led to creating a new coin — Grimace Coin. Grimace coin had no team, no whitepaper, no use case, not even a community and within a day, the price skyrocketed by over 6000% in the first few hours of the tweet banter.

But then, just like the nature of shitcoins, the prices crash, leaving the investors with little to nothing to prove they also have crypto assets.

Fact is, as an investor in DeFi, you are not immune to risks that come with the volatile movements in the market. But then, you can be resistant to making not-so-smart decisions. A good example is Mark Cuban, a successful businessman in other niches but got hit terribly in DeFi for making not-so-smart decisions.

In an interview with CNBC, his simple takeaway was “Do your research, “ which brings us to today’s focus:

How to do your research in DeFi.

1. Whitepaper: this is non-negotiable. Every Project deserves to have a whitepaper or a lite paper to prove its validation to an extent. A whitepaper should contain a background of the Project, its use case, the solution it offers, a roadmap, how to mine the coin, and the reward for miners/stakers in the ecosystem. You must also check for plagiarism and broken links. Lastly, where is the whitepaper hosted? If it is hosted on a ‘pay to publish’ site, you should be ready to do more profound research. Going through the whitepaper is the first in identifying the loopholes of a project. Beginners have the option of going through whitepapers of well-established projects like Bitcoin, Ethereum, Cardano, and our very own Surehive.
2. The Project and the developers — it is easy to get carried away with the Project’s price that most people don’t know the solution behind the Project. For example, Grimace was created or used to solve what problem? The answer is nobody knows. If the use case of a project and the solution (either for transactional reasons or as rewards) is not clearly stated, you should take a step back and ask questions.
3. Developers — if you ever meet a developer who isn’t proud of his Project, then you shouldn’t be interested in the Project as well. Most developers are proud of their work, and they are responsive either on Twitter or LinkedIn. Anonymity is the theme of crypto, but it is easy to get ripped by an anonymous developer without any project than by a developer with multiple projects. Cardano, for instance, isn’t Charles Hoskinson’s first Project. So to get started about verifying the developers, Github is a great place to start before researching them on Twitter or LinkedIn.
4. Marketing: Don’t take the word of Youtubers and celebrity endorsements as research. We intentionally saved this for last. This is now a common trend in crypto. And guess what. Most projects that rely on celebrity endorsements result in a rug pull or a failed project. Before nose-diving into a project because of a celebrity, ask yourself, why should Kim Kardashian be interested in Grimace? What does she know about crypto? What has been her previous involvement in crypto? Does she have sound knowledge about the Project, or is she just talking about the token price? These are essential questions to note down for the future.

Wrap up:

Researching in DeFi goes beyond scrolling through Google search results or watching your YouTube videos about price predictions. Also, there is no such thing as asking too many questions about investing your money. So if you must ask, ask.

If you must watch videos, please do.

If you need documents, make the request.

But at any and every point, you must confirm two things —Authenticity and Security.

These are two things we guarantee at the Surehive.

1. We have a secured protocol aimed at making DeFi work better for everyone.
2. We have a great team that can easily be verified online. Documentations that are available online and answer almost all, if not all, questions about Surehive and,
3. Of course, a Twitter account followed by Emurgo. Still not sure what to do? Visit the GBI website here https://blockchaininitiative.org/academy/ to register and listen to our founder, Prof. Edson Pindza teach a budding and growing blockchain community later this month.