Follow the Money to check the lgitimacy of projects on Hive
In the crypto world, I always hear the same words being spoken: „before you invest, make sure to do your due diligence“. These are nice words but how do you technically do that?
I always try to start with the information provided in a white paper or a post. These are however only promises and how can you check whether these promises are actually kept?
One way of checking out the legitimacy of a project, especially on hive, is to follow the money. What happens with my investment? Where does the money go?
Before I invest somewhere, I have learned to follow the money by going step by step, transaction by transaction until the money is staked somewhere or it disapears. Also, I try to do the same on the other side. I try to track the money that is given to me and figure out where it came from. Has the token I receive been bought on the market or has it been issued from thin air?
On Hive, we are pretty lucky to have all the necessary tools to figure that out. I use my peakd.com wallet for that. I can check all transaction for hive, hbd and also all transactions for hive-engine tokens. For more details regarding HE tokens, I use the Hive-Engine Explorer that allows me to look at all transactions by an account for a certain currency.
Following the money often allowed me to find things that didn't match or that raised some red flags. It's a good exercise and it can be time consuming but it's definitely worth doing it.
How do you do your due diligence when checking a project or a token?
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