How do you research a crypto project?

Researching a crypto project means checking what it claims to do, who is behind it, how its tokens are distributed and whether anyone actually uses it. Most of the evidence is public. None of it can prove a project is safe, and none of it says where the price will go. It can expose the common warning signs.

What do the white paper and team show?

A white paper is the document in which a project sets out the problem it addresses, how its technology works and what its token is for. Many read more like sales brochures. Readers generally look for a plain account of why the project needs a blockchain and a token at all.

Named founders with a work history that can be checked are accountable in a way anonymous ones are not. Anonymity alone does not prove bad intent, since the creator of bitcoin has never been identified. It does mean there is nobody to pursue if the money disappears.

How is the token supply shared out?

A token's tokenomics describe how many tokens exist, how many more will be created and who holds them. The key figures are the share kept by the team and early backers, and the schedule on which their locked tokens become free to sell.

A public block explorer, a website that displays blockchain records, shows whether a few wallets hold most of the supply. Comparing a token's market cap with its fully diluted value shows how much supply is still to come.

Is the project audited, and is it used?

An audit is a review of a project's code by an outside security firm. It matters most for projects built on smart contracts, the programs that hold users' funds. An audit lowers risk. It does not remove it. Audited projects have been hacked, and an audit covers the code only as it stood on one date.

Public data shows how many addresses use a network, how many transactions it handles and how much it earns in fees. These numbers can be inflated by automated accounts, and activity driven only by reward payments tends to fade when the rewards stop.

What are the red flags?

• Guaranteed returns, or returns far above anything available elsewhere.
• Pressure to act quickly, such as countdown timers.
• Rewards that depend on recruiting other people.
• An anonymous team combined with unaudited code and trading funds the developers can withdraw at will, the setup behind a rug pull.
• A token that can be bought but not sold.
• Coordinated hype in chat groups and on social media, a mark of a pump and dump.

The guide to common crypto scams covers these patterns in more detail. A project and its paid promoters have an interest in how it is presented. Regulators' public warning lists and the code itself do not.