The Good vs. The Bad – Questions to ask yourself when evaluating projects and potential partners in web3
As an evangelist for web3 social impact, I often find myself speaking with non-profits and community leaders about the value of crypto and blockchain for social good. Many of them are intrigued about the potential use cases, and want to engage with the space, but are hesitant to get involved due to a real fear about the bad actors in the space. Despite all the amazing good being done in web3 ecosystem, there are still plenty of bad actors looking to take advantage of newcomers to make a quick buck, even for projects under the guise of social impact.
Those working in social impact, especially non-profits, have a duty as stewards of donor funds and trust, and thus, may not be willing to take any risks and engage with the space. This, as a result, can be a real hindrance to progress, as this fear of scams and bad actors can be a gatekeeper for non-profits, collectives, community leaders, and social movements that could really benefit from web3 and bring a lot of talent to the community.
So, if you’re interested in engaging with cryptocurrency, blockchain, and web3, but are scared of potential scams or partnering with bad actors, here are some questions you can ask yourself when evaluating projects and potential partners, whether it be an NFT collective, a DAO, or any type of project.
Is there a white paper or guiding documentation for the project?
A good first step when evaluating a project is to see if they have a white paper, or any guiding documentation for their project. A solid whitepaper will highlight the strategic direction of the project, the risks and opportunities associated with it, and the plan for scaling and implementation, at the very least. If the white paper does not include this, is overly simplistic, is riddled with spelling mistakes, or doesn’t exist, this could be a red flag.
The web3 space is built around transparency, and if the project doesn’t embrace this, and is not upfront about its values, mission, and long-term vision, or doesn’t have a clear roadmap in place, then it may be best to steer clear.
Who are the developers?
One of the first things you should do when evaluating any project is look at the team behind it. A potential red flag is if the team is anonymous or operates behind pseudonyms. To be fair, there could be good reason for individuals to operate anonymously. For example, let’s say there is a blockchain-based open journalism collective operating in a country with an authoritarian government. In this case, it would make sense to operate behind pseudonyms, as it may be unsafe to share their identity. However, if a team is anonymous, there is a greater potential for malicious behaviour. After all, it is a lot easier to get away with a scam if nobody knows who is behind it. That being said, if key team members are operating behind pseudonyms, you should evaluate the pseudonymous individual’s social media activity to see how long they’ve been around for, what projects they’ve been a part of, and who else they are associated with in the space.
It is also helpful to search the team members online to learn more about their backgrounds. Another red flag is if the developers have a small or no online footprint. This could indicate that they have little experience or clout in the space, or that the names and profiles they shared are fake or embellished.
Who are they partnering with?
A good indicator of the legitimacy of a project is who they are partnering with. If a web3 project has the backing of a foundation, non-profit organization, start up, or reputable community leaders, it is a positive indication, as these organizations and individuals have likely conducted their own due diligence. However, it is important to make sure that, if a project claims to be partnering with X Foundation, that this can be verified, and that there is some sort of documentation or social media post from X Foundation backing this up.
How long has the project been around?
It is common for scams or bad faith projects to come out of nowhere, usually during the euphoric height of bull markets or piggybacking on the success of other projects. Good, legitimate projects will have a community behind then and a trail usually involving research, consultation, and community input, and won’t just pop up out of nowhere one day.
What’s the social media activity like around the project?
It can be helpful to dig into the social media and communications activity of the project to look for concerning patterns. If the project has a massive amount of support from accounts that have been created in the last couple days, went from 100 to 10,000 followers overnight with barely any social media activity, or is pushing unsupported or dubious claims, this should set off alarm bells. It’s important to closely evaluate the social media activity around specific projects, and if you notice a high quantity of posts that are almost all the same across various platforms, it could indicate that the project is using bots to increase its social media activity.
There have recently been scams associated with celebrity endorsements as well. Always be cautious of celebrity endorsements involving individuals who have nothing to do with the crypto space. It’s super easy to pay an Instagram influencer to pump a project, but this in no way lends any legitimacy to it. Legitimate projects don’t need some random influencer to pump it up, and this is a clear red flag of a potential scam.
What’s the value proposition?
Finally, when reading the white paper and researching the project, there should be a clear value proposition that differentiates the projects from others. If the value proposition is overly simplistic, unrealistic, unfounded, not backed by research, or doesn’t offer anything new, it could be an indicator that there hasn’t been a lot of thought put into the project, or that it was hastily thrown together.
Unfortunately, there is no formula for determining with 100% certainty whether a project is operating in good faith, as there have been many seemingly credible projects in the past that have ended up being scams. However, if you ask yourself the six questions highlighted in this post, it will increase your likelihood of weeding out bad actors, and partnering with legitimate projects.
