This mindset is important in the blockchain industry, as the amount of new projects created increases each day.
The Cryptoodle team understands that the average person does not possess the technical knowledge to understand a token's smart contract code deployed within the blockchain.
We've created this small section for users to use as a starting point in order to do your own research, and to learn how to trust, but verify.
Types of Questions to Ask
We can group questions about a project into technical and economical categories. Being able to ask simple technical and economical questions about a project may help uncover signs of a scam.
From a technical perspective, ask yourself what a smart contract can and can't do once deployed in the blockchain. If the dev team does not disclose that the smart contract was built using the Proxy design pattern, the smart contract code has the functionality to be updated even after being deployed into the blockchain.
From an economical perspective, gain an understanding of how and where the token's are distributed. If 30% of the tokens are sold, but 70% of the tokens are kept by the dev team in an unlocked wallet, then the project may be set up for a rug pull.
In this set up, Once 30% of the tokens are sold, the dev team has the ability to dump up to 70% of the tokens into circulation which could drastically decrease the token's price.
Simple Technical Questions to Ask
Can the token's smart contract code be updated after being deployed into the blockchain?
Does the token have a backdoor minting function that the dev team can use to mint unlimited tokens?
Can token transfers be paused and unpaused?
Simple Economical Questions to Ask
What % of the tokens does the dev team hold?
Are the smart contracts that hold majority of the coins in a locked or unlocked contract?