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NFT Pit Avoidance Guide: Before you buy, don't forget the Dyor

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"Do your own research" is also commonly known as "DYOR."

How to Research NFT Projects

Originally written by William M. Peaster

0x13, beat BlockBeats

With NFT entering the mainstream, more and more artists and project parties have begun to join the NFT field. OpenSea, the largest NFT trading platform, has seen explosive monthly volume growth since the start of 2021, with new projects such as Meebits, Bored Ape Yacht Club, and GHxsts contributing to the surge.

However, it should be noted that NFT projects emerge in endlessly, but not every one of them can be successful. Most of the projects end up being sold in the primary market without any interest and lack of long-term vitality. Therefore, we need DYOR to do our own research when we purchase NFT.

Bankless author William M. Peaster wrote this article on how to DYOR an NFT to help everyone find better NFT projects and avoid the pitfalls.

Rhythm Blockbeats translates the full text below.

"Do your own research" is also commonly known as "DYOR."

This four-letter acronym is often used in the DEFI field, where the crypto economy is like the Wild West, and ultimately it's up to you to do your own research on crypto projects, figure them out, and put your money where your mouth is.

Recently, I saw a tweet from trader Alex Kruge, where he outlined how to DYOR when it comes to DeFi tokens, as follows:

Recently, I have been researching the DEFI domain and the NFT ecosystem, and these steps have helped me to delve deeper into the DEFI project. Also, my interest was piqued because I thought we could apply Alex Kruge's suggestions to those NFT projects as well. So I made a few changes to the above list to make it easier for you to study the NFT project.

And I should add that these research steps help you understand new NFT projects, which is more productive and necessary, and that you can use this model for older projects as well.

Specific operation steps

(1) Check the project's Twitter and website.

For crypto projects, Twitter is a battleground. Almost all good projects manage their Twitter feed carefully, regardless of whether they're old or new, and by doing so, they're more likely to get access to some of the better sources. Also, you need to check out their official websites, which is where most of your interactions with dApps will take place, so you need to check carefully.

(2) Analyze the project team.

Some NFT projects make their team members public, but others remain anonymous, and some even make part of the project public and part anonymous. There are no criteria for analyzing the team, it depends on how well you know the people, their reputation, what projects they've done before, etc.

(3) Determine the degree of NFT loading.

You need to understand how the project's NFT is stored. Is it fully upchain storage, decentralized storage through IPFS, Arweave, etc., or completely off-chain storage of its metadata? This is related to the security of your NFT. If a project uses full off-chain storage, you can only trust the project party not to do evil if you want to collect it, which is very dangerous.

(4) Check the chat logs of Discord and Telegram.

Typically, NFT projects have a Discord or Telegram group, and when you want to learn about the project, joining one of these groups is a great way to feel the pulse, mood, and energy of the entire project community. Moreover, these communities are also good places to negotiate secondary market transactions later.

(5) Pay attention to what other NFT holders say.

While it is important to understand that one person's own opinion may be partial, and you do not need to rely too heavily on one person's opinion, nor do you need to be too mystically critical of one person, it is necessary to simply communicate with these NFT holders or pay attention to their opinions in order to gain a more complete understanding of the project. You can search through Twitter hashtags or Reddit.

(6) Analyze on-chain activities.

You can use tools like OpenSea's ranking page and the Market History Center at NonFungible to track trading activity for NFT projects. You can use this data to get a sense of how these projects have performed over the recent and historical period.

In addition, if the NFT project you're working on has its own native token, you can better understand the basics of NFT-centric assets by following these steps.

(1) Search for tokens in Coingecko.

Coingecko is a great cryptocurrency market data dashboard that makes it easy to find a variety of basic indicators about tokens. In addition, it has a strong focus on tokens for new projects, so you can find almost everything you want to know about tokens on this site.

(2) Study market value, full market value and trading volume.

Market capitalization refers to the value of tokens in circulation for a project. Full tradable market capitalization refers to the total value of all tokens in circulation for the project. Trading volume refers to the amount of money traded through these assets in any given day, week, month, etc. These are some of the core metrics you need to look at when understanding any crypto asset.

(3) Study the information of token economy and pre-sale.

What can the NFT project's native tokens do in the NFT ecosystem? Pledge, governance or anything else? How many investors have invested in the tokens and what is their cost? These questions can help you better weigh whether or not you should put your money into the project.

conclusion

You'll need to do your own research to find the right path through these waters of uncharted treasure and danger. The good news is that much of this information is freely available on the web, and anyone can become a leading NFT researcher by exploring and sharing their knowledge.