Key takeaways:
Builders: Seek active repositories, consistent commits, and external validation to ensure tangible progress.
Usage: Fees and retained revenue are more critical than hype — utilize clear, standardized definitions.
Liquidity: The depth and spread across platforms indicate true tradability, not inflated volumes.
Token design: Examine float, fully diluted valuation, and unlock cliffs to identify supply overhang.
Security: Audits alone aren’t sufficient — assess who performed them, when, and how upgrades are managed.
Being early means recognizing genuine progress before the masses: teams deploying valuable code, users engaging with the product, and designs resilient against the first unlock or exploit.
A vast array of projects is emerging. Developers are delivering across thousands of repositories, and new layer 2s, appchains, and protocols debut weekly.
This guide presents five straightforward evaluations — builders, usage, liquidity, token design and unlocks, and security — to aid in distinguishing real early momentum from a facade.
1) Builders: Who’s shipping and where
Begin with the team and the code. A significant early indicator is a team consistently releasing meaningful updates publicly: multiple active maintainers, recent merges, tests, and documentation that align with new features and recognition in grants or hackathons.
Consider developer resources like Electric Capital for overarching trends, a project’s GitHub for commit activity and issue engagement, hackathon showcases such as ETHGlobal, and public grant information like Optimism RetroPGF or Arbitrum.
Consistent progress is preferable to sudden “big drops,” and builders receiving funding or accolades from programs with transparent criteria and public outcomes stand out. Visible work combined with external validation helps weed out empty projects.
Did you know? Over 18,000 developers contribute monthly to open-source Web3 and blockchain initiatives; Ethereum alone boasts more than 5,000 active developers each month.
2) Usage: Are real users doing valuable things?
Once builders check out, ensure users are genuinely paying to access the product. Two crucial metrics are fees (what users spend to utilize the protocol) and revenue (what the protocol retains after compensating participants like validators or LPs).
Utilize standardized definitions from platforms such as Token Terminal to avoid conflating fees paid to liquidity providers (LPs) or miners with the protocol’s retained take rate. Robust usage is reflected in growing fees per user and increasing profits alongside stable daily or weekly active wallets — not just fleeting spikes from incentive schemes.
Cross-reference metrics with independent resources like Messari or Token Terminal to steer clear of vanity statistics and superficial volume. When assessing total value locked (TVL), inquire whether deposits are authentic and active or merely chasing rewards. Favor projects where paid utilization, retention, and take rate rise in tandem, and be wary of those that lose momentum once incentives expire.
3) Liquidity: Can you get in and out without moving the market?
Don’t rely solely on trading volume. What truly matters is order-book depth and stable spreads (the amount of capital sitting on the books and how consistent it remains amidst volatility).
Research by firms like Kaiko indicates that depth is a more reliable measure than raw volume, which can be manipulated through wash trading.
Look for expanding depth across multiple credible venues and for spreads that remain tight even during peak hours. If most liquidity is concentrated in a single pool or exchange, or if reported volumes greatly exceed actual depth, it signals shallow liquidity and heightened slippage risk.
4) Token design and unlocks: Don’t ignore the supply curve
Many supposedly promising projects fail not due to product deficiencies, but because their token design leads to failure.
A classic pitfall is low float combined with a high fully diluted valuation (FDV): Only a small percentage of tokens circulates, while pricing assumes extensive future growth. As vesting cliffs arrive, a surge in supply can outstrip demand and push prices down.
Always examine the unlock schedule first. What is the circulating supply today? How significant are the cliffs? Will future releases overshadow average daily liquidity?
Research highlights the detrimental impact of supply overhang, especially when insiders hold sizable allocations. Successful projects typically disclose clear, gradual unlock schedules with defined budgets for the community and liquidity — not vague “ecosystem” pools that lack transparency.
5) Security and upgrade path: Audits aren’t the finish line
Security is where many early investors incur losses. An audit badge carries weight only if you know who conducted it, what aspects were examined, when it took place, and whether identified issues were addressed. Scrutinize the scope and severity of findings, then analyze governance: Can the code be upgraded, and who possesses that authority?
Proxies, pause functions, and admin keys are standard, but if a single individual controls them, the entire protocol might be modified overnight. Ethereum’s own guidance, along with companies like Trail of Bits, underscores that audits can mitigate risk but cannot eliminate it entirely.
Strong indicators include multiple recent reviews, upgrades managed by timelocks and multisigs, and transparent reporting of historical bugs and remedies. Anything less leaves you vulnerable to mishaps or outright exploits.
A note on airdrops and points: Use momentum and don’t become exit liquidity
Points and airdrops are valuable for measuring early momentum, but they don’t ensure long-term sustainability. Consider them an early-user survey: They demonstrate where builders and communities are concentrating their efforts, but the real challenge emerges once the token launches and incentives face actual usage.
Recent examples reveal the trend. EigenLayer’s Season 1 “stakedrop” imposed clear rules and a modest initial supply share; it was transparent, but continued activity was crucial after claims opened.
Blast transitioned from non-transferable points to liquid Blast (BLAST) incentives, directing attention towards on-chain activity and mobile onboarding. Ethena’s campaign ignited a wave of short-term growth — beneficial for discovery but necessitating a stickiness assessment post-rewards.
For any campaign, consult the official documentation for eligibility, supply share, and timing. Then, in the month following claims, monitor fees, user retention, and liquidity depth to assess whether activity persists.
Did you know? In numerous historically studied open-source projects, a project can be deemed “abandoned” if core developers exit. However, in 41% of those instances, new core developers emerged and revived it.
Trust in the process
Consider “early” as a process, not a conjecture. Start with builders and code you can validate, then verify real usage via clear fee and revenue data to avoid mistaking incentives for product-market fit. Finally, evaluate liquidity based on actual order book depth to ensure trades can occur without influencing the market.
When those indicators align — and token unlocks, upgrade controls, and admin powers appear solid — you’ve earned the chance to keep observing or to position yourself strategically.
Discipline is paramount. Risks remain high, and a single incident can obliterate robust fundamentals overnight.
Develop a straightforward gem-scan checklist, document your assumptions, size positions considering smart contract and counterparty risks, and be prepared to withdraw frequently. Ultimately, process compounds — fear of missing out (FOMO) never does.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
