NFT Pitfall Guide: Please keep this research on the operational process of NFT projects

Original Title: "NFT Pitfall Guide: Before You Buy, Don't Forget to DYOR", Author: William M. Peaster, Translator: BlockBeats

As NFTs enter the mainstream, more and more artists and project teams are joining the NFT space. Since the beginning of 2021, the monthly trading volume on the largest NFT trading platform, OpenSea, has seen explosive growth, with the popularity of new projects like Meebits, Bored Ape Yacht Club, and Ghxsts being one of the main reasons for the significant increase in trading volume.

However, it is important to note that while NFT projects are emerging one after another, not every project will succeed. The vast majority of projects end up being ignored after their primary market sales, lacking long-term viability. Therefore, when we purchase NFTs, we need to DYOR and conduct our own research.

This article, written by Bankless author William M. Peaster, aims to help everyone find higher-quality NFT projects and avoid pitfalls.

BlockBeats translates the full text as follows.

"Do your own research" is often referred to as "DYOR."

This four-letter acronym is commonly used in the DeFi space, where the crypto economy resembles a wild western frontier, and ultimately, you can only rely on yourself to research the projects in the crypto space, understand their background, and then invest your funds.

Recently, I came across a tweet from trader Alex Krüge, in which he outlined a process for DYOR when it comes to DeFi tokens, as follows:

Lately, I have been researching the DeFi space and the NFT ecosystem, and these steps have helped me delve deeper into DeFi projects. Moreover, my interest has been sparked because I believe we can also apply Alex Krüge's suggestions to research NFT projects. Therefore, to facilitate everyone's research on NFT projects, I have made some modifications to the above list of suggestions.

Additionally, I would like to add that these research steps can help everyone understand newly born NFT projects, which is more effective and necessary. Furthermore, for those projects that have been around for a longer time, you can also use this model to study them.

Specific Steps

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

For projects in the crypto space, Twitter is a battleground. Regardless of whether they are new or old, almost all quality projects will carefully manage their Twitter accounts, and by doing so, they can more easily connect with better resources. Additionally, you need to check their official website, as in most cases, your interaction with the DApp will take place on the official site, so you need to examine it carefully.

(2) Analyze the project team.

Some NFT projects will publicly disclose their team members, while others may remain anonymous, and some may disclose part of their team while keeping part anonymous. There are no reference standards for analyzing the team; it mainly depends on whether you are familiar with these individuals, their reputations, and what projects they have worked on previously.

(3) Determine the degree of on-chain storage of the NFT.

You need to understand how the project's NFTs are stored. Are they fully on-chain, or are they stored in a decentralized manner through IPFS, Arweave, etc., or is their metadata stored entirely off-chain? This relates to the security of your NFTs; if a project uses completely off-chain storage, you can only trust that the project team will not act maliciously, which is quite risky.

(4) Review the project's Discord and Telegram chat records.

Generally, NFT projects will establish a Discord or Telegram group, and when you want to learn about a project, joining these groups is an excellent way to feel the pulse, emotions, and vitality of the entire project community. Moreover, these communities are also great places for negotiating secondary market trades later on.

(5) Pay attention to the opinions of other NFT holders.

While you should know that an individual's viewpoint may be biased, you don't need to overly rely on anyone's opinion or excessively idolize a particular person. However, to gain a more comprehensive understanding of the project, it is essential to communicate simply with these NFT holders or pay attention to their views. You can search through Twitter hashtags or Reddit.

(6) Analyze on-chain activity.

You can use tools like OpenSea's ranking page and NonFungible's market history center to track the trading activity of NFT projects. Through this data, you can understand how these projects have performed recently and historically.

Additionally, if the NFT project you are researching has its native token, you can follow these steps to better understand the fundamentals of NFT-centered assets.

(1) Search for the token on CoinGecko.

CoinGecko is a fantastic cryptocurrency market data dashboard where you can easily find various basic metrics about tokens. Moreover, it pays close attention to new project tokens, so you can generally find the tokens you want to learn about on this site.

(2) Research market cap, fully diluted market cap, and trading volume.

Market cap refers to the value of the tokens currently in circulation for a project, while fully diluted market cap refers to the total value of all tokens once fully circulated. Trading volume refers to the amount of funds traded through these assets over any given day, week, month, etc. These are some core metrics you need to pay attention to when understanding any crypto asset.

(3) Research tokenomics and presale information.

What can the native token of the NFT project do within the NFT ecosystem? Staking, governance, or something else? How many investors have already invested in purchasing the token, and what are their costs? These questions can help you better assess whether you should invest your funds in this project.

Conclusion

You need to do your own research to find the right path in this sea filled with unknown treasures and dangers. The good news is that the above information can generally be found for free online, and anyone can become a top-notch NFT researcher by exploring deeply and sharing their knowledge.