How to Evaluate a New DeFi Project (DYOR Framework)

Detailed Instructions

Start by verifying the project's legitimacy through its public-facing information. A credible team is the cornerstone of any trustworthy project.

• Sub-step 1: Research the Team: Use LinkedIn, GitHub, and professional networks to verify the identities and experience of core team members and advisors. Be wary of anonymous teams or those with fabricated profiles.
• Sub-step 2: Audit the Documentation: Thoroughly read the whitepaper, litepaper, and technical documentation. Look for a clear problem statement, innovative solution, and detailed technical architecture. Check for plagiarism using online tools.
• Sub-step 3: Review the Roadmap: Assess the project's roadmap and past milestones. A realistic, time-bound roadmap with regular, verifiable updates (e.g., GitHub commits) indicates active development.

Tip: Search for the team's names alongside keywords like "scam" or "fraud" on crypto forums. A lack of a public audit trail for anonymous teams is a major red flag.

Detailed Instructions

This step focuses on the project's technical backbone. Even with a great idea, vulnerable code can lead to catastrophic losses.

• Sub-step 1: Locate the Source Code: Find the project's official repositories on GitHub or GitLab. Verify the organization or user account is linked from the project's official website.
• Sub-step 2: Check for Audits: Look for third-party security audit reports from reputable firms like CertiK, OpenZeppelin, or Trail of Bits. Read the reports thoroughly, paying attention to the severity of findings and whether they have been resolved. For example, check if a contract address 0x742d35Cc6634C0532925a3b844Bc9e has a public audit.
• Sub-step 3: Review Code Activity: Analyze the repository's activity. Look for frequent commits, multiple contributors, and recent updates. A dormant GitHub is a warning sign.

codeCopy
// Example command to clone and examine a repo
$ git clone https://github.com/ExampleProject/contracts.git
$ cd contracts
$ grep -r "onlyOwner" . // Search for privileged functions

Tip: Use tools like Dedaub or Etherscan's Contract Tab to visualize contract inheritance and function calls without deep coding knowledge.

Detailed Instructions

Tokenomics determines the long-term viability and potential value accrual of the project's native token. Poor design often leads to hyperinflation and dumping.

• Sub-step 1: Examine Token Distribution: Find the breakdown of the total supply allocation (e.g., Team, Investors, Treasury, Community). A fair launch with a large public allocation is generally healthier than one where insiders control >40%.
• Sub-step 2: Analyze Vesting Schedules: Check vesting schedules for team and investor tokens. Long, linear vesting (e.g., 3-4 years) aligns long-term interests. Use a block explorer to see locked contract addresses, like 0x5a6A4D54456819380173272A5E8E9B9904BdF41B for a Curve vesting contract.
• Sub-step 3: Understand Utility and Inflation: Determine the token's use cases (governance, staking, fees) and its emission/inflation rate. Calculate the fully diluted valuation (FDV) and compare it to the market cap.

Tip: Use platforms like TokenUnlocks.app or CryptoRank.io to visualize upcoming token unlocks, which can create significant sell pressure.

Detailed Instructions

Move beyond promises and verify real-world adoption and financial health using immutable on-chain data.

• Sub-step 1: Analyze Liquidity and Volume: Use DeFiLlama or DEX Screener to check Total Value Locked (TVL), liquidity pool depth, and 24-hour trading volume. Deep liquidity on a major DEX like Uniswap V3 is crucial. Be skeptical of pools with low liquidity relative to market cap.
• Sub-step 2: Track Holder Distribution: On Etherscan or BscScan, examine the token holder distribution. A highly concentrated top 10 holders (>60% of supply) poses a centralization and manipulation risk.
• Sub-step 3: Gauge Community Health: Monitor the project's Discord, Telegram, and Twitter for developer engagement, quality of support, and overall sentiment. Look for organic growth, not paid shilling.

codeCopy
// Example SQL-like query for Dune Analytics to get holder stats
SELECT
    holder_address,
    SUM(value) as balance
FROM erc20_ethereum.ez_token_transfers
WHERE contract_address = '0x1f9840a85d5af5bf1d1762f925bdaddc4201f984' -- UNI token example
GROUP BY 1
ORDER BY 2 DESC
LIMIT 10;

Tip: A sudden, massive spike in TVL or social followers can be a sign of a short-term farming incentive or even a bot attack, not organic growth.