How to evaluate whether a project is reliable?

This article comes from The DeFi Edge Newsletter, compiled and organized by The Way of DeFi:

How to evaluate whether a project is reliable?

What is your basic process for evaluating projects?

I’ve talked about this topic with others, and it’s nothing more than the following:

  • There is no process, just look at other people’s analysis. This has led to many people being exploited to become pickers.
  • Rely on your own intuition. There may be value in this approach, but you may fall victim to all kinds of cognitive biases. Because you need a lot of experience before your intuition becomes reliable .
  • Or maybe they have an assessment checklist of their own.

A long time ago, I heard a saying that I thought made a lot of sense.

“The process of making a decision is more important than the decision itself”.

If you have a sound system, you can analyze what went wrong with your decisions.

I’d like to introduce a tool I’ve been using for the past few years – it’s really helped me become a better investor.

This tool is the Weighted Decision Matrix .

Here is a simple example:

How to evaluate whether a project is reliable?

How to evaluate whether a project is reliable?

This method is handy when you are directly comparing two similar protocols.

what are you going to do:

  • Figure out all the main criteria for evaluating a project. You should consider token economics, team, competitiveness, narrative, roadmap, etc. Keep standards as simple as possible. After you gain more experience, you can go into detail.
  • Metrics. Does the founder’s track record matter? Yes. Does the established partnership matter? Yes. But their importance is not the same. In my opinion, I value the founder’s experience more than the partnership. So, you can measure the standard according to your own thoughts.
  • Rate the item. Score each item, then multiply the score by the weight. Add it all up. The higher the total, the winner.
  • iterate. DeFi is more than two years old, and it is still innovating. Over time, you will have to adjust your system as you learn more.

Imagine if you refer to this method when evaluating your next project, and it ultimately fails. Then you have a detailed record of how you made your decision. You can make adjustments and become a better investor later.

Frequently Asked Questions:

“How to practice this method in NFT?”

I don’t invest in NFTs, but I don’t think it’s different from other projects. Just establish a set of standards, such as applications, teams, communities, roadmaps, etc.

“Are your weights based on personal experience or what metrics? How do you know what weights to assign.”

Experience and constant iteration.

For example, I used to weight VC investments at 9. If the VC’s invested, they’re probably smarter than me and have access to more resources. There are quite a few protocols that I like that don’t perform well even with VC funding. There are also some projects that I like that have performed well despite not being funded by any VCs.

So I adjusted the “weight” from 9 to 7.

“Would you rate an anonymous team 0?”

Not all anonymous teams are the same.

0 points I’ll give to those who don’t know where it came from. No reputation in the community. No partnerships or venture capital. Because it sounds suspicious.

I can give an anonymous team a higher score in the following situations.

  • There is a product available
  • Recognized in the community
  • They have created a successful project in the past
  • There are outstanding seed or VC investments or ecological grants.

Give this a try and let me know what you think.

I know it’s hard. But think of it as a sign that you haven’t thought enough about the investment process, and see it as an opportunity.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/how-to-evaluate-whether-a-project-is-reliable/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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