Crypto Trust 101: Audits Are A Must
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INTRODUCTION A great number of new investors with limited financial resources often gravitate towards smaller projects when deciding on investment options, as these investments typically offer a bigger return in comparison to their well-established, larger counterparts. Of course, such investments exposes them to greater financial risks. Many small projects don't make it past the proof-of-concept stage, and some, which are the subject of this post, are not entirely honest with early adopters. Often, small projects might hide details about their technology behind their blockchain or smart projects, or financial details that are sensitive yet important for investors to know. WHAT IS AN AUDIT As such, a very important matter to point out for beginners in the space that I don't see being discussed very often are audits. Traditionally, the term "audit" refers to the examination of a company's financial statements and related operations to ensure accuracy and compliance with accounting standards and regulations. An audit, therefore, serves as a vital tool for ensuring transparency and fostering trust between a business and its stakeholders. However, in the case of tech and crypto, the focus might not be as much on the financial side of things; rather, it focuses on the underlying technology behind the blockchain and/or smart contract of the token. SIMPLE TOOL AT OUR DISPOSAL A simple and yet very underused way of checking the audits of a project is by searching them on the website of the project you are trying to research. My personal favorite is simply looking it up on coinmarketcap right under the social media and rating sections. Additionally, there are many other online resources and platforms that provide audit services and reports for crypto projects. This is a very simple way of fast checking promising projects. Most of these auditors provide a range of information, from detailed technical data about the cybersecurity of the project for tech enthusiasts to language that you and I can understand. I find myself using CertiK the most as it provides both and more. You can visualize on-chain metrics, tokenomics, and a few other things. CONCLUSION In conclusion, while this post has focused on the importance of audits and the tools at our disposal for checking them, it is merely the tip of the iceberg in the vast sea one must navigate when investing in crypto. Audits are crucial for uncovering hidden details and fostering trust. However, there are many other facets to consider, such as the project's team, its whitepaper, community support, and its potential to solve real-world problems. Therefore, while always checking the audits of a project before investing is essential, it is just one of many critical steps in the comprehensive research and due diligence process necessary for any investor. Stay curious, stay vigilant, and DYOR. submitted by /u/mazukuistheman |
