The Due Diligence Bible: How to Audit a Crypto Project

Most people buy a coin because a cartoon character on Twitter told them it would go up. This is a guide for the adults in the room.

Investing in crypto without reading the documentation is like playing Russian Roulette with a semi-automatic weapon. The odds are not just bad; they are fatal.

At Roylith, we reject 99% of the assets we review. We don't care about the hype. We don't care about the community "vibes." We care about the mechanics.

This is the exact framework we use to tear a project apart. If you want to find the next 100x, you first have to learn how to dodge the 10,000 zeros.

01 // Tokenomics: The Mathematics of the Scam

Tokenomics is not about "supply and demand." It is about Inflation Schedules.

Every crypto project is essentially a startup printing its own money. Your job is to figure out if they are printing it faster than people are buying it.

02 // The FDV Trap (The Silent Killer)

This is the number one reason retail investors lose money in a bull market.

Market Cap = Current Price × Circulating Supply.
FDV (Fully Diluted Valuation) = Current Price × Total Supply.

Here is the scenario: You see a coin trading at $1.00. The Market Cap is $10 Million. You think, "Wow, this is cheap! If it goes to $100 Million, I do a 10x!"

But you didn't check the FDV. The project has only unlocked 1% of its tokens. The FDV is actually $1 Billion.

For the price to stay at $1.00, investors need to absorb $990 Million worth of new tokens entering the market. That is mathematically impossible without massive hype. The price will collapse to match the inflation.

03 // The Cliff: Insider Distribution

You need to find the Vesting Schedule. This is usually hidden deep in the whitepaper or documentation.

Vesting is when the early investors (VCs) get their tokens. Usually, there is a "Cliff"—a period where they can't sell. But the day the cliff ends? It's a bloodbath.

If you buy one week before a major unlock, you are volunteering to hold the bag for a Venture Capitalist who bought at $0.01 while you are buying at $1.00.

04 // Utility vs. Governance Tokens

Most tokens do absolutely nothing.

They call themselves "Governance Tokens." This means holding the token gives you the right to vote on proposals. Let's be real: Nobody cares about voting unless the protocol generates revenue.

The Revenue Test:

• Does the protocol make money (fees)?
• Does that money go to the token holders (burn or dividends)?
• If the answer is NO, the token is worthless speculatively.

If Uniswap generates millions in fees but gives $0 to UNI holders, the token is purely a "meme" of the protocol, not a share of it.

05 // Security Forensics (God Mode)

You don't need to be a coder to check for "God Mode."

Go to the project's documentation or audit report. Search for "Multi-sig" or "Admin Keys."

• Good: The contract is "Immutable" (cannot be changed) or the Admin Keys are burned.
• Okay: There is a 5-of-7 Multisig wallet controlling upgrades, held by public figures.
• Scam: A single EOA (Externally Owned Account) wallet can "Mint," "Blacklist," or "Pause" the contract.

If one person can pause the contract, you don't own your money. They do.

06 // The Influencer B.S. Dictionary

Influencers speak a coded language designed to trigger FOMO. Here is your translation guide.