Crypto: Before You Buy
Updated: May 24, 2021
I'm often asked how I decide if a coin is legit. This was my first question as I learned about crypto too.
Here's the framework which I've found works best - looking for answers to four categories of questions:
1. About the Project
> What problem is it trying to solve?
> How can you actually use the tokens, either now or in the future?
Every crypto project publishes a white paper. That should be your first stop. There will be a fair amount of jargon, but don't let that faze you. Read until you have a sense of what the project is trying to accomplish.
These are the questions you need to be looking for answers to when I ask you to explain the project to yourself.
2. About the Developers
> Who are the people working on the project?
> What makes them the right people to solve the problem?
Social media numbers are fool's gold - it's surprisingly easy to buy your way to a 10K+ follower count.
Look for past projects, or Github repos. And look for how frequently those repos have been updated.
3. About the Community
> Does the project have a strong presence on social media?
> What are people saying about them?
> Are people happy/sad/frustrated with their investment?
4. About the Trading Activity
> How frequently do people trade this token?
> Is the supply of this token spread across the market evenly? Or is it concentrated in the hands of a few people?
With Bitcoin, for example - more than half the wallets in existence combine to hold about 0.01% of the total circulating supply.