Welcome back to Lobster Academy! In todayâs guide, we'll dive deep into the essential skill of conducting your own research before investing in any project.
The principle of "Do Your Own Research" (DYOR) is paramount in Web3 and the broader investment landscape, empowering you to make informed decisions and navigate the complex world of investments with confidence. Remember, this guide is for educational purposes and should not be taken as financial advice.
DYOR stands for "Do Your Own Research," a mantra in the investment community emphasizing the importance of personal due diligence. While it doesn't guarantee investment success, it significantly mitigates risks, including scams, enabling you to identify potentially rewarding opportunities.
The first important thing to have in mind when doing your own research is to find a trustworthy source of information. Donât trust what you see on X (formerly Twitter) or on YouTube. As we say in crypto: Donât trust, verify.
Whether it's a whitepaper or a Gitbook, the best source of information is the documentation and website of the project.
Now, we are going to explore the different pieces of information you need to look at:
A project's potential for success is often tied to the caliber of its team. Key aspects to investigate include:
Now letâs take an example, mmmh, let me guess, LOBSTER!
At Lobster, the team is fully public. You can find them on the âabout usâ page on our website. You can also find their LinkedIn accounts and see that they have a good number of followers.
On LinkedIn, you can find that they also have worked on multiple projects before Lobster, such as Cuzco or Rvest.
When you go on the Lobsterâs website, you can already launch the app and invest by yourself. The product is live and working!
In terms of questions and queries, you can only test it by yourself. Hop in our Discord or Telegram and ask any question you have in mind! For example, you can try : How can I eat lobsters? And a team member will answer you shortly.
Now that you know how to analyze the team, letâs take a look at the fundamentals!
Fundamental analysis is a complex topic that requires a good understanding of the industry and the various challenges it faces.
The first thing you want to do when doing fundamental analysis is going straight to the source, analyzing the whitepaper or the documentation of the project. A whitepaper is the official document released by the project to explain what they do, how they do it, why they do it, and what theyâre planning to achieve.
What questions should you answer to conduct a fundamental analysis:
Lobster's mission is to democratize access to complex DeFi strategies, making them accessible to a wider audience. It automates DeFi strategies on the most trusted protocols, thereby addressing significant barriers in DeFi investment, such as the need for constant manual monitoring and in-depth technical knowledge.
Lobster business model relies on charging a 0.45% deposit fee and a 3% management fee, making Lobster sustainable when a certain level of TVL is reached.
After studying the fundamentals of a project, another very important aspect to look out are the tokenomics.
The tokenomics of a project is the economy around a token's project. It is a complex topic that would need a complete article to fully understand. We will only focus on key elements that you should consider.
The total supply refers to the maximum number of tokens that will ever exist for a particular cryptocurrency. This aspect is crucial because it introduces the concept of scarcity, like Bitcoin, which has a maximum supply of 21 million.
Is it for governance? Usable to pay transaction fees? Needed to access the service? These are answers you should find.
There are multiple strategies used by projects for a token to increase in value.
Buy-back and burn: This method consists of the company buying tokens from the market and burning them to reduce the circulating supply. This causes a supply shock and drives the price up.
Staking: This method consists of locking tokens in a pool and rewarding users with yield from this lock. This causes a reduction of the circulating supply thus could cause an increase in the price.
There are more, but to keep this article short, we will explain them in another article.
When analyzing, you should consider how the token is shared through the actors of the ecosystem. If the projects raised a lot of funds, it could be possible that the portion for private investors is large and could put you in trouble.
Vesting refers to the time that the different stakeholders need to wait until they can have access to tokens they bought during previous round of funding. It looks like this.
When stakeholders have access to their tokens, it means an increase in the circulating supply, and sometimes if the demand is not high enough, creates sell pressure on the token. IMX has risen by 660% (at the time of writing) since January 2023, showing that an increase in circulating supply doesn't necessarily mean a drop in price .
Sentiment analysis refers to the engagement of the projectâs community. A vibrant and engaged community often signifies strong support and belief in the project's mission.
Is the Discord active? Are people talking? Is the project active on their social networks?
If a project is not active, it often shows a bad sign.
Analyzing the X (formerly Twitter) account growth can be a useful piece of information to know if a project is gaining traction!
DYOR is an ongoing process that blends analytical skills with a cautious approach to investment. By following this guide, you're equipped to make more informed decisions, but remember, continuous learning and adaptation are key to navigating the investment landscape successfully. Join community discussions, seek out further resources, and consider every investment as a step in your broader financial journey.
If you have any questions about this article or Lobster in general, please come into our Discord community!
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