Assessing project feasibility! How to evaluate whether the protocol vision can be realized? A detailed review of the Wonderland scandal event

The DeFi Edge research team provides several tips in the article to help investors better assess the actual feasibility of cryptocurrency projects. Behind the grand visions of each project, can they truly achieve their goals?

Original article link: https://www.thedefiedge.com/execution/

Cryptocurrency Investment Is Harder Than Traditional Finance

It's easy to hype a project, but determining whether developers can execute their vision is difficult. The DeFi Edge mentioned that as an angel investor in the past, they could ask about development plans and relevant knowledge face-to-face with the founders, and under legal regulations, project parties couldn't just make their money disappear like that.

The cryptocurrency field is different, like a poker game or the fog of war in StarCraft, investors must make judgments with limited information; development teams could disappear with millions of dollars after extensive promotion and fundraising. They pointed out:

You invest because you fall in love with the vision the project offers, but have you spent time thinking about whether the team can achieve the vision?

Pain Points in Project Execution

They highlighted common pain points encountered by startups:

1. Lack of Experience. Experience is not a necessary condition, but it is very beneficial to entrepreneurship. They pointed out that some DeFi protocols running millions of dollars may have team members as young as 19 years old with no work experience, and it takes several years to develop the emotional intelligence needed to manage employees and communicate effectively.

2. Bright Shiny Object Syndrome. Founders usually have vision and ideas and may want to start new projects, but not everyone is Elon Musk. Therefore, these founders are not 100% focused on developing the project you invested in, but start to divert their focus.

3. Tricky Environment. Similar to video games, new opponents/projects join every day, the features of your project are copied by competitors, token prices drop, a partner gets hacked, there's a war in Ukraine, everyone is complaining about prices, founders need to be vigilant at all times.

4. Gap Between Founders and CEOs. Some people may be top developers but lack the ability to run a company. This explains why many Silicon Valley founders are replaced by more experienced CEOs, with Meta's Mark Zuckerberg being an exception rather than the norm.

How to Evaluate Protocols Before Launch?

They used Harmony founder Stephen Tse as an example. This doesn't guarantee Harmony's success but at least gives it a better chance:

• Ph.D. in Cryptography from the University of Pennsylvania.
• Worked at Google and Apple.
• Started a business and was acquired by Apple.

Evaluating Anonymous Projects

They openly expressed their fondness for the Hundred.Finance project. Although the founder vFat is anonymous, the previous launch of vfat.tools had a good track record. Other evaluation criteria include:

• Audit.
• Early investors: Who got in earlier than you? Venture capitalists have developed a habit of selling off.
• View documents/code/websites: The attitude towards handling one thing is the same as handling anything; check for copy-paste and rampant misspellings.
• Clarity of vision: The roadmap provides details on how the project strategizes.

They used Platypus.finance as an example. They invested in Platypus immediately upon protocol launch. They were unsure who the founder Mr. Duckbill was, but investments from Avalabs made them believe the founder and team were legitimate because venture capitalists can conduct due diligence that retail investors cannot reach.

Post-Launch Project Considerations

Observe carefully whether the project fulfills its promises; this is what a solid roadmap should look like.

They highlighted key observations:

1. Quality of Work. They mentioned being a loyal fan of Pancakeswap but have sold all their positions because Pancake copied Uniswap's code, and the anticipated market was their first unique feature, but Pancake failed to deliver this simple feature, leading to a loss of confidence in the protocol.

2. How the Project Deals with Setbacks. DeFi has a series of mishaps; what's important is whether the team reflects professionalism or emotions. Do they have a clear plan? Are they just blaming FUD and deluding themselves?

3. Transparency. The team may claim to be busy building the protocol, but a tweet takes only a few minutes. They might be playing with your money on the beach.

4. What Founders Are Up To. Some people can't handle success; suddenly thrust into the limelight, with a lot of funds and a fan base. They often see similar events in e-commerce, where founders, after achieving their initial goals, start enjoying the fruits, preferring to make YouTube videos rather than building protocols.

5. Lack of Focus. When the team changes strategies every few weeks, it should be seen as a danger signal; they are just applying band-aids to a dead horse.

Other clues include:

• Blocking critics.
• No updates on GITHUB.
• Founders are very emotional.
• Constantly delaying platform releases.
• Founders making inappropriate tweets about women.

Evaluating the Wonderland Event from This Article

The DeFi Edge sold related tokens and engaged in self-reflection after the Wonderland scandal broke out. They were deeply attracted to this project for two main reasons:

1. They were very fascinated by the vision the project offered: Rebase mechanism, liquidity mining, and a large treasury.
2. Co-founder Daniele Sestagalli is a hot developer in the DeFi field.

Using the techniques provided in this article to evaluate Wonderland, what are the danger signals?

1. Lack of Document Updates.

2. Constant Delays. "wen airdrop" has become a meme.

3. Unaudited.

4. Constant Strategy Changes.

5. Lack of Transparency. No roadmap, unaudited treasury.

6. Co-founder Daniele launches new projects every month. Daniele believes Solana should have a meme coin, is collaborating with Andre on ve3,3, became a leader in SushiSwap. None of these are related to Abracadabra, Popsicle Finance, or Wonderland.

7. Poor Communication. Everyone asked them to hire a community manager, but they refused, citing a desire to cut operating costs, which makes no sense for a billion-dollar project.

Overall, the author had a foreboding feeling but did not take action, including the following factors:

1. Authority Bias. Daniele as a developer has an impressive track record, including the powerful Abradacabra project and saving Popsicle Finance.

2. Community Bias. All crypto communities speak for Daniele; the whale Tetranode works closely with Daniele, launched ve3,3 with Andre Cronje, and even the SushiSwap community chose him as a new leader.

3. Sympathy for Developers.

In hindsight, the author overlooked their own standards, like dating someone super hot who bombards you with messages, which you know is not normal, but you choose to ignore.

They could easily blame Daniele and Wonderland's CFO 0xsifu for the failure, but that wouldn't help. As an investor, can you do better? What can you control? Investment cannot be 100% successful, so the author urges reflection in case of failure. The cryptocurrency field is an information-asymmetric casino, where investors must make the best decisions with limited information.

They hope everyone reflects on past investments, how many failed because the team couldn't deliver, and during the review, did they find any danger signals in the project's history?