The crypto world is full of numerous and sometimes confusing acronyms and initialisms. But, perhaps one of the most sage of them all is DYOR – Do Your Own Research. Following this advice can help keep you safe when trading, and avoid nasty tricks from bad actors or careless promoters.

DYOR is a popular term used in crypto, encouraging people to take control of their own money whilst taking care of what they invest in. It also urges people to do their own research into NFT projects, so they don’t get scammed. Learn why it’s so important to do your own research in the NFT world here.

If you delve into the communities attached to crypto and NFTs, you’ll notice some recurring themes and attitudes. There’s a lot of positivity and optimism, with people shooting for the moon and declaring that they’re all going to make it. Adding balance to proceedings, community members will also implore others to err on the side of caution…

Table of Contents

DYOR
Why Should You Do Your Own Research?
False Celebrity Endorsements
Spotting Fake Endorsements
To Wrap Up

DYOR

Sadly, the NFT and crypto community is filled with plenty of jaded and burned members. Those who have fallen victim to scams, or have simply witnessed too many, are eager to warn others to be cautious. As a result, you’ll see a lot of people online saying “DYOR” – Do Your Own Research.

Free thinking and due diligence are themes that pop up a lot. People are urged to thoroughly check over a project before investing in it. A core ethos of crypto is “don’t trust, verify”, and DYOR reflects this perfectly.

Before investing in an NFT or crypto, you should be able to answer questions like:

• Why exactly are you buying into this project?
• What is the project’s roadmap?
• Does the community engagement seem legitimate?
• Are there any previous successes/failures attached to the project’s creators?

Gathering as much information as possible on a project can help detect whether it’s a rug pull or other type of scam. Particularly where larger sums of money are involved, due diligence and comprehensive research are imperative.

You’d be right in thinking that DYOR is a phrase most commonly shelled out from collector to fellow collector. However, it’s also used by people attached to projects as a disclaimer. For instance, if a project marketer shares positive growth statistics, they might suggest people do their own research as well. Whether this comes from a genuine place of goodness, or simply as a way to disavow themselves from any negative outcomes, is sometimes difficult to decipher.

Why Should You Do Your Own Research?

It might seem obvious. Doing your own research means you’re better informed, and less likely to become a victim. But, a victim of what?

Understanding the common ways in which bad actors trick people out of their money can be a great tool for avoiding it altogether. Putting money into something you haven’t researched is tantamount to gambling. There are enough creators out there chancing their arm and hoping to catch people off guard, that there is a very real need for doing your own research.

Bad Investment Triggers

Carrying out proper research can help you, as an investor, dodge triggers that could cause you to make a bad investment. It’s important to separate emotion and your business brain here. Scammers recognise that money and emotional reactions are strongly linked for a lot of people. That’s why you’ll see the likes of “FUD” and “FOMO” being used online in crypto spaces.

FUD – Fear, Uncertainty & Doubt
FOMO – Fear of Missing Out

When a market is going up, some investors can become caught up in the hype, and invest quickly so that they don’t miss out. The lack of research here can mean investors end up losing money when the market goes back down, having bought in at an elevated rate.

FUD can trigger the opposite reaction. If commentators on social media, like high profile influencers, start talking negatively about a project, it can make investors sell quickly. Without weighing up the reality of the situation, investors could sell at lower prices for fear of losing everything. This negative market sentiment may be baseless, meaning investors sold at a near loss for no real reason.

Sybil Attacks

Following the advice of DYOR can help you to steer clear of Sybil attacks. This kind of attack refers to one person taking over a network by creating multiple accounts or nodes. A common example of this is where a person uses multiple nodes to take control of a blockchain network. But, it can be a case of someone creating numerous social media accounts posing as different people.

That last example might seem a little childish and silly, but it can be surprisingly dangerous. A significant aspect of investing in an NFT is the community. Checking out a community can help you decide whether it’s the kind of project you could get on board with, but also decide whether it’s legitimate.

If a community is made up of fake social media accounts, controlled by bad actors who have created the project, you could be fooled into parting with your money. This is how a lot of rug pull scams get started. Bought followers and fake accounts serve to “pump” a project (hype it up), before it’s “dumped” (creators pull out, selling tokens or draining liquidity pools, forcing the project’s value right down).

To protect yourself, you can look closely at the followers of a project’s social media accounts. Notice the number of followers, but look beyond that. How do they interact with the project, and one another? If the post engagement is wildly lower than you’d expect for an account with that many followers, that’s a sure red flag.

False Celebrity Endorsements

We’ve all come across celebrity influencers. They’re plastered across our social media feeds and on television. Ads on Instagram promoting health and lifestyle products, or brand partnerships between high profile music artists and clothing lines.

These types of marketing tactics work because they utilise the brand power of someone’s good name. People think, “if it’s good enough for ‘so-and-so’, it’s good enough for me”. There’s also the assumption that if someone high profile has attached their reputation to a product, it must be trustworthy and legitimate.

Doing your own research is still crucial, even if your favourite celebrity has endorsed a project. Scammers can be incredibly convincing, and there’s nothing to say they haven’t tricked someone high profile into getting involved. In other cases, some endorsers themselves may be untrustworthy. Assuming that every high profile promoter carries out due diligence and research before hyping up a project would be a mistake. Although it seems like a cynical viewpoint, a lot of people are only interested in getting paid.

Take this example of Dillon Danis promoting a completely fake NFT project, designed to expose the fact he frequently hypes projects without checking their legitimacy first.

All the information and warning signs were there in the terms of the agreement. Information provided around the project was clear: this is a scam and a fake project designed to prove you’re untrustworthy. Predictably and sadly, Dannis failed to read any of the info surrounding the project, and went ahead and promoted it anyway as soon as he knew he’d get paid.

Spotting Fake Endorsements

It can be difficult to know whether a celebrity endorsement is real or not.

In fact, a class action lawsuit against numerous celebrities was filed recently. The likes of Justin Bieber, Jimmy Fallon, and Madonna have been blamed for a conspiracy to defraud investors by misleading them into buying into NFT projects – namely Bored Ape Yacht Club.

A similar lawsuit against Kim Kardashian was dismissed by a federal judge. In his dismissal, judge Michael Fitzgerald reminded people, “While the law certainly places limits on those advertisers, it also expects investors to act reasonably before basing their bets on the zeitgeist of the moment.”

Essentially, a federal judge is telling you to DYOR.

To Wrap Up

Both crypto and NFTs can be unpredictable and volatile. These ever-changing markets can be a breeding ground for snap decisions and irrational investment moves. Thorough and careful research is crucial for successful and safe investment. By checking all aspects of a project first, investors can reduce risk and feel assured they know what they’re putting their money into.

In the spirit of verifying over trusting, don’t be blinded by high profile endorsements, or the buzz of a community. Sure, you can get excited by these things. But, invest with a level head and DYOR!