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There are many opportunities in Web3, but as the industry continues to grow and transition into the mainstream, so does the level of competition. From Starbucks to Gucci and Nike, there is no shortage of established brands as well as established investors and celebrities who are turning to this new gold rush.
But for those looking to invest, launch, or just get involved with Web3, determining which projects have the qualities and characteristics of success is easier said than done. So, before you start, you need to consider the following points.
Related: Here’s What Content Creators and Entrepreneurs Need to Know About Web3
View Communities
One of the most important aspects of Web3 is the community. There is no benefit to keeping a secret. Even if you think you have the best project in the world, no one will use your product if no one knows about you.
That’s why it’s crucial to check the engagement of your Discord or Telegram community. A large, vibrant and engaged community is obviously ideal, but even a small and highly engaged community can be an early sign of success — especially for new projects.
Also, projects sometimes artificially inflate their social media follower counts, so it’s important to be discriminating when checking for true engagement (whether it’s likes, comments, retweets, or subscribers).
Marketing and Product Development and Construction
Marketing, including public relations, is important for brand awareness. However, a successful and legitimate Web3 project will also focus on product development, and it is critical to strike the right balance between these two elements.
When it comes to product development, a transparent community that provides regular progress updates is best. If the developer is not “anonymous”, it’s always a good idea to check their background, experience, and other projects they’ve worked on. If they are “anonymous” then some of this information can still be found, but you may have to dig around on #crypto Twitter, Discord or Telegram.
Also, Web3 projects that continue to build their products and products during a market downturn can also be a good indicator, as it shows their commitment to the job — not just building to make money in a frothy market. For the more tech-savvy, you can also check the progress of the work by checking the number of “commits” on Github.
In terms of marketing, checking third-party news stories can be a good filter for validating projects. Often, the editorial teams of these publications do their own analysis before deciding to publish or run a story. However, this should not always be assumed.
Untrustworthy marketing tactics—including fake endorsements, unsolicited Discord messages, shady influencers, and pump-and-dump groups—are clearly red flags. Also, projects that focus purely on marketing rather than product development are also major red flags.
Related: Why more and more companies are embracing Web 3.0
Due Diligence for Founders and Investors
It is also important to have a clear understanding of the people behind the project. This includes founders and investors. Checking their background, experience, and other projects they’ve worked on is key. Specifically, for investors, big names provide instant credibility, but even smaller investors, depending on their tenure and credibility, can provide useful insights and clues about a project’s future potential.
Token Economics
Token incentives are important in Web3, so it is critical to understand how the mechanics behind the project work. It might get a little technical, but it’s important to study the vesting period and the distribution and distribution of tokens.
Most Web3 projects have pre-mined tokens that are allocated to proprietary addresses, usually to team members and investors, before going public. It’s important to understand how many bags hold the available token supply and whether the distribution is too concentrated, as this creates the risk of whales dumping their holdings and crashing the token price at launch.
Web3 is undoubtedly becoming more mainstream, but there are still many risks when investing in and getting into the space. This is why it is important for investors and market participants to do their own research and perform due diligence before starting.
