How to research a project

"Do your own research" is common advice in crypto and is rarely explained. This lesson turns it into seven questions. If you cannot answer them, you are not ready to buy.

1. What does it do?

Describe the project in one plain sentence. Who uses it, and for what? If the only answer is that the price will go up, there is no project to research.

2. Who is behind it?

Look for named people with a history you can check. Anonymous teams are not always dishonest, since Bitcoin's creator is unknown. But an anonymous team that controls the money and the code is asking for a great deal of trust.

3. How does the token work?

How many exist now, and what is the maximum? See Lesson 17.
Who holds them? A block explorer shows the largest holders of any token.
How much is reserved for the team and early backers, and when can they sell?
Can someone create more?

A token where a few addresses hold most of the supply can be crashed by one seller.

4. Where does the return come from?

If a project pays a yield, ask who is paying it and why. Real yield comes from fees or interest paid by real users. If it comes from newly created tokens or from new depositors' money, it stops when growth stops.

5. Has the code been checked?

Look for open-source code and published audits from independent firms. Read the summary: what was found, and was it fixed? An audit lowers the risk. It is not a guarantee.

6. Can you get out?

Check where the token trades and how much trades each day. A token on one small exchange with thin volume may be easy to buy and hard to sell.

7. What do official sources say?

Check your regulator's warning list for the project and the platform selling it.
In the EU, issuers must publish a white paper under MiCA rules. ESMA notes that white papers in its register have not been reviewed or approved by any authority.
In the US, the SEC warns investors to beware of claims that it has approved an offering. A filing with the SEC is not approval.

A white paper is the project's own sales document. Read it for facts you can check elsewhere.

Whose word are you taking?

Much crypto content is marketing. Influencers are often paid, in money or tokens, to promote what they discuss. Give more weight to sources with nothing to sell: the code, the blockchain's own data, regulators and independent reporting.

Red flags

Guaranteed or unusually high returns
Pressure to buy before a deadline
No clear answer to who controls the contract
Rewards for recruiting other buyers
Hostility towards anyone asking questions

Research lowers your risk. It cannot remove it, and many well-researched projects still fail. That is why Lesson 20 is about how much to put in.