The Importance of Due Diligence When Evaluating Web3 Projects

Today, I am speaking with Cecilia Hsueh, the co-founder and CEO of Morph, and we'll discuss practical strategies for assessing Web3 projects, emphasizing the importance of looking beyond surface-level hype to understand a project's technical strengths, team capabilities, and community engagement. We'll also look at the factors that influenced Morph and how this partnership aims to enhance blockchain adoption and market presence for both entities.

Please introduce yourself and tell us what you do

I'm Cecilia Hsueh, co-founder and CEO of Morph, a scalable, efficient, and user-friendly Ethereum Layer 2 solution aiming to create a consumer-centric blockchain. We focus on the type of real-world utility and value that anyone can benefit from rather than complicated niche finance use cases.

Could you provide some practical tips or techniques for effectively evaluating the potential of a Web3 project?

When evaluating Web3 projects, look beyond the hype. Investigate the team's track record, the project's technical merit, and its community engagement. Review their whitepaper to assess the longevity of their tech and check for code audits and transparency in their development process.

What prompted Bitget to invest in Morph, and how does this partnership benefit both entities?

Bitget's investment was driven by our aligned vision of fostering mainstream blockchain adoption. They recognized Morph's contributions in innovating Layer 2 solutions This partnership strengthens both entities by combining our technological innovation with their expansive market reach.

What are this investment's expected outcomes or goals for both Bitget and Morph?

The investment aims to accelerate the development of Morph's Layer 2 solutions and expand our market presence. For Bitget, it promises to expand their investment footprint in pioneering blockchain solutions primed for consumer-centric applications, solidifying their position as leaders in Web3 innovation.

Can you describe the synergies between Bitget and Morph, particularly regarding technology and market positioning?

The synergy between Bitget and Morph lies in the mutual vision of democratizing blockchain technology. Bitget’s expansive user base and market know-how complement Morph’s modular design and optimized rollup solutions, enhancing the overall value proposition to users. Together, we're positioned to break new ground in blockchain’s usability and adoption, forging a pathway for real-world applications on-chain, or as we call it, a true consumer blockchain.

What tools or resources do you recommend for investors conducting due diligence on Web3 projects?

For thorough due diligence, investors should utilize DeFi Pulse to monitor and analyze trends within the DeFi space, Etherscan to track transactions and smart contracts on the Ethereum blockchain for transparency, and something like CryptoMiso to assess the development activity of a project. 

These tools will offer data-driven insights, but much of due diligence relies on the critical analysis of a project's whitepaper and the long-term vision it presents. It's vital to discern whether a project is chasing passing trends or if it has the potential to offer enduring value and relevance in the blockchain ecosystem. Always look for solutions that address current challenges with foresight into future adaptability and sustainability. Has this project answered why it will remain relevant in the next 5 or even 10 years?

What emerging trends in Web3 do you believe are most relevant for investors?

Investors should keep an eye on interoperability initiatives that enable seamless experiences across various blockchains, as I believe this is crucial for the next wave of adoption. Decentralized identity and verifiable credentials are also gaining traction, as they empower users with control over their digital identities. Many of these trends align with Morph’s vision of a consumer-centric ecosystem, where blockchain becomes a transparent layer enhancing user interactions without complexity.

Can you discuss the strategic partnership with Foresight Ventures and its potential impact on Morph's growth?

Our partnership with Foresight Ventures is more than just marketing; it's about aligning with a thought leader in the blockchain news and investment space. Their strategic vision into market trends will help steer Morph’s development trajectory. We aim to enhance our infrastructure, expand our ecosystem, and build our community engagement and educational leadership to cement Morph’s position in the Web3 landscape.

How does Morph leverage Bitget’s user base for growth and user adoption?

One of our strategies for leveraging Bitget's extensive user base for ecosystem growth involves its affiliate program. By adopting Bitget's successful model, which has already attracted a vast network of over 30,000 affiliates and 50 million followers, Morph aims to replicate this success within its Layer 2 framework. 

The focus is on implementing and refining an affiliate-like system that has proven effective in drawing users and retaining their active participation. This is key to fostering a vibrant, engaged community invested in the long term. Morph's vision for growth is to create persistent momentum, where users are continuously incentivized, ensuring that as the ecosystem expands, it does so with the support and enthusiasm of its community members. This collaborative approach is designed to harness the collective strength of Bitget's user base, driving widespread adoption and sustained growth within Morph's Layer 2 solutions.

Can you share examples of Web3 projects that failed and what lessons investors can learn from them?

I prefer to not comment on other projects and name these directly. However, I've observed many Web3 projects that started with high potential yet failed due to specific missteps. 

Some projects, for example, may have impressive technical groundwork but fall short in user interface design, making the platform inaccessible to non-technical users. Others may have launched with a strong marketing campaign but lacked technical support or neglected community governance, leading to unresolved issues and a diminishing user base. 

There are also cases where projects could not adapt to the rapidly changing regulatory landscape, resulting in legal challenges that halted growth. These scenarios highlight the importance of a balanced approach that leverages robust technology and ensures a user-friendly experience, active community involvement, and incredible adaptability to shifting environments. Investors should seek projects demonstrating this holistic attention to innovation, practicality, and flexibility.

Can you advise new investors entering the web3 space, particularly in blockchain technologies?

As I have been alluding to throughout this interview, the best advice I can offer new investors is to research and formulate their vision of the future. It's crucial to consider which technologies hold enduring value, those that address real-world problems, and the incremental steps necessary to realize that future vision. 

Once investors have developed such a perspective, the due diligence process becomes more intuitive, allowing them to align a project's potential with their long-term outlook. New investors should begin by understanding the blockchain's underlying technology and its practical applications in areas they believe will be significant in the future. 

Engaging in community discussions, diving into developer forums, and following thought leaders can provide insights that cut through the noise and hype. Evaluating the team's expertise, track record, and commitment to their project's roadmap is also vital. 

A promising Web3 project should offer solutions to current market needs and demonstrate adaptability to navigate and shape the future landscape of technology and user needs. It's about finding those gems that are not only positioned for current success but are also building the foundation for sustained relevance.

Is there anything else you think is crucial for investors to understand about due diligence in Web3?

As I've emphasized, my guidance to new investors is to undertake thorough research and craft a personal vision of the future. However, understanding the technology and its potential current and future applications is just the starting point in such a rapidly evolving domain. 

Investors must understand that the blockchain space is still in relative infancy. Many concepts that appear promising today, or even show initial signs of success, may fail as the market's dynamics shift. Therefore, while I encourage investors to develop a forward-looking view, it's equally important to maintain a flexible mindset. Investors should be prepared to refine their theses as new information emerges and the industry landscape changes. Just as the most successful projects adapt to change, an investor's strategy must remain fluid, ready to adjust to the new elements of an ever-changing technological playground.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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