Crypto enthusiasts are used to seeing a yearly major hack on a centralized exchange or entity. Or if not that, a rug pull scam designed to lure willing investors before the team behind the scam exit and leave everyone who bought in holding the bag.
You, as a community, deserve much better than this. Projects need to be transparent and have a range of security and safety mechanisms to ensure this doesn’t happen. To make sure there are so many measures in place that no investor could even conceive of it happening.
Remember that publicity does not make a good project on its own. Something can skyrocket in hype and turn out to be a rug pull scam, an issue many will be familiar with after a certain TV-inspired cryptocurrency turned out to be completely bogus.
Savvy investors will want to look at the team behind development and whether they are in it for the long haul. Here you decide whether their experience and know-how warrants investing in their project, but paradoxically in crypto the ability to develop a great project isn’t always an indicator of future price movements.
It is however one of your safer bets.
Advisors are also a key indicator as these are often the people who spend most time inside the space and know the ins and outs. For most of them, they will only lend their expertise and time to a crypto with real potential and their experience and background can be similarly researched.
Another important aspect is to study the whitepaper and content produced before making an investment. Do the tokenomics add up? Will the company realistically launch a product on the roadmap they lay out? There is great promise in a team that can deliver on their goals quickly and provide a tangible platform to be used and explored.
High annual percentage yields (APYs) drive FOMO: a project might offer thousands or tens of thousands percent APY to entice investors and encourage hype. People see others getting massive returns in the short-term and want a piece of the action.
This is unsustainable as a business model and in many cases it has fizzled out. Runaway inflation ends up rewarding those who buy in early and cash out before the crash with the later adopting victims of the hype train footing the cost of their profits.
It’s essential to analyze the business model here. How many tokens are liquid, does the team behind the project own any tokens they can sell? A green flag is if tokens are subject to a staggered release following the public sale. One of your biggest red flags is if the company itself has immediate access to a substantial amount of tokens.
Relatively low inflation rates are a sign of a healthy crypto economy which rewards participants in a sustainable way. A platform should incentivize its users to use their tokens for their utility, to provide liquidity or scarcity and to ultimately contribute to its economic value.
Centralized exchanges and centralized yield aggregators are rife in the space despite being the antithesis of what crypto is meant to be about. There is inherent safety and security in a truly decentralized platform.
While there is a centralized system there is an entry point for hackers not to mention the counterparty risk this entails. The user should own their keys otherwise they may as well not own the coins purported to be held in their wallet.
When it comes to staking, you want decentralized staking to ensure you always have access to the rewards no matter what happens. In terms of using an exchange, your coins should always be transferred directly to either a decentralized exchange or a private wallet.
