To the chagrin of cryptocurrency supporters who call for the immediate mass adoption of blockchain technology, there are many “digital mines” in the crypto ecosystem, such as Carpet pull And protocol hackers that can let new users experience getting lost at sea.

Investment is more than just technical analysis and intuition. In the past year, some blockchain analysis platforms have launched dashboards with indicators that help to gain a deeper understanding of the fundamentals of supporting or lacking cryptocurrency projects.

When evaluating whether an altcoin or decentralized finance (DeFi) project is a reliable investment, three key factors need to be considered.

Check the project’s community and developer activities

One of the basic ways to understand the project is to view statistics that show the activity level of the platform’s user base and developer community.

Many of the top protocols in the field provide analytics that track the growth of active users over time.On-chain dashboards such as Dune Analytics provide more detailed insights into this metric, as shown in the figure below show Daily new users of the Olympus Agreement.

Olympus daily new users.Source: Sand Dune Analysis

Other relevant data points to consider when evaluating community activities include Average number of active wallets Daily, weekly and monthly. Investors should also look at the number and volume of transactions on the agreement, as well as social media indicators, as mentioned by Twitter, which help gauge investor sentiment for a particular project.

Alarm system such as Cointelegraph Markets Pro Provide the latest notification on the project’s Twitter mentioning abnormal changes in trading volume and trading volume, which may be an early sign that cryptocurrencies are turning bullish or bearish.

CT Markets Pro Twitter and trading volume dashboard. source: Cointelegraph Markets Pro

Regarding project development and developer activities, GitHub has always been the place of choice to learn about upcoming upgrades, integrations, and where the project is on its roadmap.

If an agreement touts a “coming soon” feature, but rarely shows ongoing development or submitted submissions, this may be a signal until the activity is better aligned with the announcement.

On the other hand, found a Low-key and mysterious Projects with stable development activities and a loyal user base may be a positive sign.

Looking for stable growth that locks in total value

The second indicator to be considered when evaluating the overall strength of the project is the sum of all assets deposited on the agreement, also known as the total locked value (TVL).

For example, data from Defi Llama shows that the total value locked on the DeFi protocol De???????? rise Recently, after a major agreement upgrade, TVL has set a record high in the days so far in December. This shows that motivation and interest in the project is increasing.

The total value locked on DeFiChain. Source: Defi Llama

DeFi aggregators (such as Defi Llama and DappRadar) allow users to delve into data and view statistics on different blockchain networks (such as TVL or Binance Smartchain on the Ethereum network) and individual projects such as Curve and Trader Joe.

Protocols with higher TVL tend to be safer and more trusted by the community, while projects that rank lower on the list are generally more risky and have lower community activity.

related: No return?Crypto investment products may be the key to mass adoption

Determine who is the majority of token holders

Other factors that need to be considered are the benefits that token holders gain from holding and being active in the community. Investors should also study how tokens are issued and the current major token holders.

For example, SushiSwap allows users to pledge the native token SUSHI on the platform to collect part of the transaction fees generated, while Uniswap, the top decentralized exchange (DEX) in DeFi, currently does not provide such functions.

Although other factors such as trading volume and daily users make Uniswap a legitimate investment for many holders, some traders prefer to hold SUSHI because of its revenue sharing model and Multi-chain transaction capabilities.

On the other hand, when providing excessive returns for agreements with low liquidity, anonymous operation and few community activities, one needs to be cautious, as this may be the perfect setting for catastrophic losses. In DeFi, these are called rug pulls and usually occur after depositing large amounts of funds into a smart contract controlled by a single anonymous party.

an examination Token distribution of the agreement, And paying close attention to the percentages of tokens allocated to developers and founders and tokens held by the community can provide some useful signals as to whether the platform may become a victim of carpet-pull or whimsical hiring of capital.

If most of the available supply is held by creators and backers, then if early investors choose to exit the position, these tokens will always be sold at market prices in the future.

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The views and opinions expressed here only represent the views of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading action involves risk, and you should conduct your own research when making a decision.