What is the concept of DYOR? How to research the digital currency market?

The world of digital currencies is full of buzzwords and catchy terms. If you visit “Comprehensive dictionary of official, famous and funny digital currency terms!” You will get to know a lot of these terms. However, common terms in the crypto world are not limited to these. One of the famous keywords in the crypto world is DYOR, which you have probably heard; But what is DYOR and what exactly does it mean?

In this article, we answer this question. By reading this article, you will understand what DYOR is and why it is important. You will also find out how to do it in the best way; So stay with us until the end.

What is DYOR and why is it important?

Of course, the first step to explaining what DYOR is is to say what this keyword stands for. DYOR stands for Do Your Own Research. This English phrase literally means “do your own research”. In simpler terms: “Do your own research”.

The term DYOR is not limited to financial markets; But it has a lot of use in this space. The main concept behind this term is to do enough research before putting your capital at risk.

DYOR and digital currency market

DYOR aims to reduce the number of unsuspecting victims and investors; Therefore, the importance of the DYOR concept in the digital currency market increases due to the newer nature of this market. The crypto market is full of new projects, shocking price fluctuations, astronomical promises and new scams.

Also, due to the nascent nature of this market, the general public has little information about it, and profit seekers are counting on this very issue.

DYOR encourages members of the crypto community to do enough research before investing in any project to be able to defend it.

If we think a little more about this issue, we will better understand its importance. Before investing in a digital currency, how many of us research it enough to know everything related to it and be able to defend it? How much time do we spend reading about the project’s goals, its technical features, its developers, or its token economy? In other words, how fundamentally do we examine the project?

Read more: The most comprehensive tutorial on fundamental analysis of digital currencies + video

Of course, we should mention that there are many projects that have nothing to say in terms of fundametal, but are experiencing significant success for other reasons, and vice versa. However, doing enough research allows you to take responsibility for your choices and not beat yourself up for relying on other people’s advice if you fail.

Also, one of the factors that doubles the importance of DYOR in the crypto market is that this market is still unregulated.

This means that you and you alone are responsible for your investment decisions.

Functions and benefits of DYOR in the digital currency market

Here we have a general understanding of what the purpose of DYOR is and why it is important. In this section, we are going to take a quick look at the functions of DYOR in the crypto market, and then get to the method of applying it in this market.

Reducing investment and trading risk

It is clear that the first function of DYOR is to reduce investment and trading risk. A decision rooted in thorough research and fundamental analysis is arguably more defensible than one based on fomo, fear, uncertainty, and doubt (FUD), recommendations from Instagram influencers, or general excitement.

Read more: What is FOMO in the market and how to avoid it?

Fundamental analysis allows you to find out the growth potential of a project and detect danger signs. Of course, we mentioned earlier and we emphasize again that the reverse of all these conditions may also happen.

A project may meet all the fundamental criteria and fail for other reasons. It is also possible that a project does not meet any of the fundamental criteria for success and suddenly faces an unimaginable increase in value.

In such a situation, you should remember three points:

• Such events are rare and are not supposed to be repeated every day and for every new project;
• Such projects are mostly unpredictable and their risk is equally high. Therefore, you must be both prepared for profit and prepared for loss;
• Even if you invest in a strong project and don’t make as much profit as you expected, and vice versa, at least you are sure that you have made this decision with knowledge. Therefore, you will experience less regret.

Diversification of the capital portfolio

Another result of following DYOR in the digital currency market is the diversification of the capital portfolio. Diversification of the capital portfolio means the distribution of capital among different assets, instead of allocating the total capital to one asset. This strategy is, in fact, the objectivity of the famous saying “don’t put all your eggs in one basket”.

DYOR allows you to have a broader view and see different projects with different potential instead of just one project.

Avoiding criminal activity and fraud

New methods of fraud are always found in the digital world, and the world of digital currency is no exception. Ponzi schemes, pyramid schemes, phishing attacks, invalid exchanges and deliberate pump and dumps are just a few of these methods.

The more time you spend researching, the easier it will be to spot these scams.

It can be said that the most common types of scams are Ponzi schemes and pyramid schemes. Unfortunately, in our own country, Iran, there are not a few people who are easily deceived by astronomical promises and even recommend it to others.

The reason most of these people trust such plans is that the project has been in operation for a long time. Moreover, it has paid good profits to its users during its lifetime.

However, if you do your own research, you will realize that the nature of these plans is that they will stop one day and they have no choice but to do so.

Read more: types of fraud in the field of digital currencies; How not to become a victim? + Video

How to best apply DYOR in the digital currency market?

Now that we understand what DYOR is and why it is important, we can get to the methods of applying it to the digital currency market. In the following, we have tried to have a list of the most important factors that are important for researching a digital currency project.

White paper

The white paper of any project is the first and most important document that you should refer to to check what it is and its potential. You know that the white paper is actually prepared by the project developers and its purpose is to present the project in the best possible way.

If the white paper of a project is not good enough, it is hard to trust the project. Therefore, be careful in reading the white paper. The things that you should pay attention to in reviewing the white paper are as follows:

• Make sure developers avoid generalizations;
• Make sure that the problem that the project aims to solve is accurately stated;
• Make sure developers clearly articulate their proposed solution;
• Make sure the technical aspects are adequately addressed;
• Make sure that the statistics and data presented in the white paper are accurate and correct;
• Make sure that the white paper has the necessary quality in terms of writing and even spelling.

Read more: What is a White Paper and how to read it?

Actual function

We must point out that despite the importance of the white paper, this document was prepared by the project team and is not reliable on its own. In other words, reading the white paper is necessary, but not sufficient.

We suggest that you research the actual functioning of the project by yourself; Because it is one of the most important factors of a good project.

Competitors and differentiation

Another thing that you should pay attention to is the competitors of the project and its distinction. A project may have a real and very important function, but have a competitor or competitors who have provided the same function before.

In this situation, you should ask yourself what is the difference between this project that will make it superior to its competitors? If you can’t find a good answer to this question, you might want to reconsider investing in it.

Technology

Reviewing the project may not be technically possible for all users; But it is very important. Therefore, if you are not a developer or have no interest in programming topics, we suggest you get help from experts.

Perhaps the first and easiest thing to check is whether the project code is open source or not. Open source project code allows other developers to check the code and find possible bugs and report them to others.

Tokonomics

One of the most important factors that determine the growth or decline of a project’s token value in the future is its toconomics.

Tokennomics or the token economy refers to the way and timing of the supply of tokens and how to manage supply and demand. You must know how important supply and demand management is in digital currency projects.

Therefore, make sure that the project team has a clear and specific plan regarding its tokonomics. Here are some things you can check:

• What is the consensus algorithm of the project and what is its plan to distribute its tokens;
• Whether the project has set a ceiling for the number of available tokens or not;
• Does the project have a plan for token burning, and if so, what is the plan;
• What is the status of project incentive programs (including cash extraction or profit cultivation).

Read more: Investing, profit cultivation and liquidity extraction; Three popular methods of earning profit in DeFi

Team and community

The developer or developers of the project is another factor that checking can help you. Whether the development team has worked in crypto before, how reputable they are in the field, how successful their previous projects have been, and so on can give you more confidence in the project.

Another important factor is the target project community. How active the project community is and how much it supports it greatly affects its value.

Dogecoin and Shiba Inu are perhaps the best examples to show this importance among digital currency projects. Both of these projects had a strong community that supported them well. We recommend that you definitely check the social networks of the project, and observe the approach of users as well as the interaction between developers and users.

Exceptions

Finally, we have to admit that none of the above steps can guarantee the security of your investment 100%. All these steps are to reduce the investment risk, not to guarantee its safety.

Now we know the importance of DYOR and why we should do it; But we should also know that under any circumstances, investment is associated with a certain amount of risk.

Take Terra, for example. This project may have all the necessary fundamental criteria; But in the end, it failed and caused its users a heavy loss.

It was almost impossible to predict this happening based on fundamental criteria. This is what makes the world of crypto a world full of opportunity, and at the same time full of danger.