RugDoc is a site that applies risk ratings to DeFi sites. This site looks pretty interesting. It goes without saying that each person should do a certain amount of due diligence on any site that they invest their crypto with, but do most people know how to do due diligence?
Here are some ideas to get you started:
- Check out the background of the developers (prior projects or experience)
- Read the whitepaper and/or docs
- Read about the tokenomics (is there a max supply, how much has been issued so far)
- Check out the code on Github (how many people are working on it, when was it last updated, etc.)
- Check out the market cap of the project and see how it compares to similar projects
RugDoc issues ratings such as Low Risk or Medium Risk to DeFi projects based on the code reviews, audits, KYC, and other metrics they use. Here is a screen shot of their lower risk categories:
Then you have the High Risk category that you should never invest in:
They have a final category that they call Not Eligible for when the code is just too complex to understand. This is where you really have to DYOR.
RugDoc has a nice search feature so you can quickly check in on your project of interest:
Not every project is listed, but it unbelievable how many projects are there, mostly ones that I have never ever heard of. I search up one of my favorites, Curve Finance. I expected it would have a good rating since it is one of the oldest and top ranked projects based on total locked value. Nevertheless, I was happy to see it listed as Least Risk.
That’s all for today. Just a short, but important, post to help you determine the riskiness of your next DeFi adventure. I hope this information helps everyone stay safe in the world of crypto lending and borrowing.
These posts are for informational and educational purposes only and should not be construed as investment advice or a recommendation to buy or sell any tokens. In this series I am just outlining what I am doing to learn more about the crypto space. Just because I am comfortable doing this, that does not necessarily mean these activities are suitable for you. I have not received any compensation from any of the products or services mentioned herein. Please do your own research and stay skeptical. These markets are not normal.