Article contributed by Ren & Heinrich. Follow them on Medium here.
1. No Whitepaper
It’s hard to believe, but there are actually some crypto projects that don’t have a whitepaper when they launch. When there is no whitepaper it can only have three reasons:
a) It is a hastily cobbled together and therefore immature project, which poses a very high risk for your investment.
b) The people behind the project are amateurs.
c) It’s a scam.
Not much to say here except: stay away!
2. Bad Website & Whitepaper
A crypto project’s website and whitepaper are the most important points of contact and information for people new to the project. Accordingly, a lot of care should flow into their creation. That means:
- no copy & paste parts
- good grammar and no spelling mistakes
- neat layout
A pretty bad crypto whitepaper.
3. No Road Map
A project without a road map is a project without a plan and without objectives. The road map not only provides information about what a project has planned for the future. It also serves as a yardstick for whether the developers have achieved their past goals.
4. No Background Info on the Team
Ok, this is a tricky one. There are many crypto projects that attach great importance to anonymity — and the same applies to the developers. Still, a lack of information about the people behind a cryptocurrency or token should raise your suspicions.
5. No Clearly Defined Target Groups
Who are the people who are supposed to use a coin or a token? This is not clear for some projects. And if the target groups are not defined, they cannot be properly addressed. What you want are projects that razor sharply targets their audience.
6. No Clearly Defined Use Case
Why should people use a particular coin or token? How do they benefit? What specific problems do they solve? Many projects do not find a clear answer to this.
7. Too Much Hype, Too Little Content
Sure, good marketing is part of every successful crypto project — in fact, it is one of the basic requirements for its success. But if a crypto project only talks about how great it is, how it will revolutionize the world and how much money investors will make from it, you should become very careful. Stay away from projects that keep announcing the next big thing without providing any concrete content.
8. Outsourced Developers
A successful project requires in-house manpower to achieve its goals. Anyone who outsources important areas such as development to other companies is either saving in the wrong place or is finding it difficult to convince capable people.
9. Bad Tokenomics
Bad tokenomics can permanently damage a great project. Some things to look out for:
- Too short vesting periods for the team (< 18 to 24 months).
- Big unlocks in the first few months ( < 6 to 12 months).
- Start a token before the actual product is ready in the alpha version.
- Poor token distribution.
- Too high max. supply.
This crypto project got crushed by dilution — the supply of several billion tokens is too high and pushes prices down
10. Bad Optics on Social Media
Social media are important channels for communication with (potential) users. That’s why what happens there is important. Here is what you do not want to see when checking out a project’s channels:
- 24/7 hype — promotion is fine, but if everything is just about the price then something’s off. You want a good mix of news, insights, and other content.
- Little activity which is often a sign that the community is dead or that the project is experiencing problems.
- Toxic community — it’s a warning sign when there are a lot of trolls or when people asking questions are attacked.
- Negative sentiment — usually a sign that things are not going as planned or promised. Dig deeper to find out why people are unhappy with how things are going and what the project team is doing to address these issues.