DeFi’s vocabulary is made up of terms familiar to the average user of traditional finance (TradFi), technical jargon for blockchain, and community-created terms such as HODL.
If finances were hard to get before, DeFi challenges users to deal with geek-speak. New users—and not-so-new ones—wonder how they can cross this linguistic bridge to evaluate the technical side of a DeFi investment opportunity.
That is indeed not an easy task, neither in TradFi nor in DeFi, but Pillar makes it a less daunting one.
When in Tech Do as Developers Do
A DeFi project is fundamentally software-based enterprise but software without a community of users and/or developers behind may quickly become quite hollow. Keeping this in mind will be the first step to start its evaluation.
In a nutshell, it’s important to check if the code is well maintained and the community concerns are properly addressed.
For projects that aren’t open-source, the former may be a tricky one to assess. What we can say is that, more often than not, the best projects in DeFi are open-source, including Pillar—but let’s not get hung up on that now.
Generally, a DeFi project that wants to make its code available to the community will provide stable versions of the software on the official website. However, pilot versions with new features or changes needing further testing, are often found within online resources such as GitHub. Code on Github is stored in publicly available repositories developers can subscribe to and test.
But it’s not enough just to be present there—frequent activity on the DeFi project’s GitHub is a good sign. It means the project is alive and evolving. GitHub provides a limited incident management tool where you can check if there are any lingering problems. By looking at the interactions in the incident threads, you can estimate the effectiveness of the technical team to solve issues.
Code is not the only element you should consider. Community engagement is an aspect that can speak for a project’s commitment. For instance, activity on channels like Twitter, Telegram, or Discord can reveal
if the project is delivering what it promises.
As for a project’s reliability, there are several sources of information that help you assess where the project stands within the DeFi industry. The following sites are worth checking out as they list only projects that comply with criteria aimed to prove their legitimacy.
- Initial offering metrics: Finding data about the early stages of a project is mainly done on white papers from the project. Information about funding stages, capital required, token volumes, prices, shares, utility and convertibility are good indicators of the possible risks that a project may have.
- Trading pairs: Thanks to DeFi’s development, projects can be publicly listed on DEXes as well as centralized exchanges.
- Token listings: sites like CoinGecko offer information provided by project managers and an overview of the data needed for technical analyses.
Finally, it is worth evaluating the platform the DeFi developer has built their project on. Blockchains have their own characteristics that make them suitable for different purposes. This is why we have crafted our Pillar wallet as versatile as possible, with multichain compatibility that gives you access to several chains from just one dashboard.
With this in mind, you can handle the less familiar aspects of DeFi investment. You only need to open a Pillar wallet and manage all your investments from one place.