17 Important Factors When Measuring Crypto Projects

Fundamental analysis is one of the indispensable investment and trading strategies in the blockchain/cryptocurrency space. Therefore, the DAOrayaki community compiled the article “17 Important Factors When Measuring Crypto Projects”.Below, are 17 relevant factors, and I’ll share some real-world examples, so let’s get started! .

  • white paper
  • source code
  • Application scenarios
  • holding
  • competitor
  • Product Roadmap
  • Technical Support
  • founding team
  • Token Economic Model
  • degree of decentralization
  • Scalability
  • safety
  • market indicator
  • On-chain metrics
  • listed exchange
  • governance model
  • social media

1 — White Paper

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allcryptowhitepapers.com

A white paper is the official document of a blockchain project, through which users can obtain relevant information about the project. These include but are not limited to:

  • Founding Team Information
  • Technical Support
  • Token Model
  • consensus model
  • Expected milestones
  • Partner
  • Application scenarios

2 – source code

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Source Code Database Example (Ethereum)

Many blockchain projects are open source so that any user can browse the code and evaluate quality and security. Of course, this requires some programming and related technical knowledge. Meanwhile, some useful information available from open source repositories include:

  • Developer activity (features, etc.)
  • audit
  • smart contract
  • transparency

Open Source Blockchain Projects: Risks and Opportunities

A coin has two sides, one good and one bad for most people. It all depends on the choices they make.

media network

3 — Application Scenario

7

Token function example (MANA)

In general, every blockchain and token tries to solve real-world problems. for example:

  • DeFi tokens correspond to decentralized financial solutions.
  • Governance tokens correspond to the process of platform users participating in governance.
  • Game (Metaverse) players use tokens in the game.
  • Cryptocurrencies are used as payment scenarios.

A key to fundamental analysis is a clear understanding of the purpose of the coin. Therefore, when reading the official documentation of the project, it is best to look at the empowerment of tokens (such as DeFi platforms).

4 – holdings

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Example of Active Addresses (Litecoin)

This is a reality in the cryptocurrency space: a project that seems technically promising can also disappear if retail investors or institutions don’t buy in. Conversely, a project that everyone feels is bad, with good marketing and widespread promotion and adoption, may see huge growth.

So when choosing a project, you have to consider “network effects” and the growth level or potential of the token.

5 — Competitors

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Competitors on the same track (smart contract platform as an example)

Blockchain broadly includes a set of solutions that provide decentralization, scalability, and security. In the blockchain space, there are many subcategories:

  • pay
  • NFT
  • Oracle
  • Metaverse/Games
  • Smart Contract Platform
  • Layer 2 solutions
  • Web 3
  • file storage

Each of these tracks has its own head project. So when you want to invest in a project, it is best to first investigate which track it belongs to and see if the project is competitive.

6 — Product Roadmap

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Product Roadmap (Cardano as an example)

A good project has a clear mission and vision, as well as a roadmap. These roadmaps can usually be found in the whitepaper or on the project party’s social media. Here’s what’s available through the roadmap:

  • Feature announcements (e.g. staking, smart contracts)
  • New projects on the platform
  • new partnership
  • event or seminar
  • New version of the dApp or platform
  • Improvement plans for the network (decentralization, scalability, security)

Some projects publish roadmaps on white papers (which may be updated from time to time). There are also projects that prefer to let users “go with the flow”, of course, avoid such projects as much as possible.

7 — Technical Support

7

Technical support for a project (Terra as an example)

Blockchain infrastructure, smart contracts and dApps are developed based on programming languages ​​and blockchain libraries (frameworks). Therefore, if you want to have a clear understanding of what is going on behind the scenes of a project, it is necessary to examine the tools and techniques behind the project.

These sections include:

  • Programming language (eg Solidity, Rust)
  • Blockchain library/framework (eg Truffle, Remix)
  • Front-end technologies (eg React, Angular)
  • testing/monitoring tools (eg ethscan)

It’s a good idea to examine the tool suite used in the project and determine whether the set of tools and techniques supports the project’s intended goals.

List of programming languages ​​and frameworks used in 41 crypto projects

Mainnet, smart contracts, GUI, improvement suggestions, wallets, dApps, APIs, etc.

media network

8 — Founding Team

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Algorand project founding team

The key factor in whether a project has attention is the founder and team behind the project.

Let’s see some examples:

  • The Cardano (ADA) project was founded by former Ethereum co-founder Charles Hoskinson.
  • The Polkadot (DOT) project was founded by former Ethereum co-founder Gary Wood.
  • The main person in charge of the Algorand (ALGO) project is a famous blockchain professor at MIT named Silvio Micali.
  • The Avalanche (AVAX) project was born at Cornell University.

This is not a requirement for a successful project. However, with a good founder and development team, our expectations for a project will grow accordingly.

9 — Token Economic Model

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Token distribution for Uniswap, Avalanche, Solana and Elrond

Token economic model research is an important section in fundamental analysis. Simply put, tokenomics research can help you better understand the monetary “policy” behind a project.

Here are some caveats:

  • Check circulation, total supply and maximum supply. These data provide basic information about supply and demand.
  • Check if the coin has a “burn” or something similar to fight inflation.
  • Understand the “token policy” behind the project, experience the “consensus mechanism” of the project, and keep an eye on the official announcements and trends of the project.
  • Look at the token distribution to check if the distribution is “fair”.
  • Whether the project party has initiatives to incentivize users and provide users with passive income.

Everything you need to know about token economics

Supply, burn, monetary policy, token distribution, earnings, etc.

media network

10 — degree of decentralization

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Global Bitcon Node Distribution

The ultimate goal of blockchain technology is to achieve true decentralization. Therefore, the degree of decentralization plays a crucial role in fundamental analysis.

To investigate the degree of decentralization of a project, the following factors need to be considered:

  • The number of nodes participating in the consensus process
  • The company’s influence on network governance
  • The impact of the project’s software developers on network governance
  • Number of wallets in the network, number of active addresses
  • Token distribution
  • whale activity

Bitcoin is by far the most decentralized network known. All other networks and projects have some degree of centralization.

11 — Scalability

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TPS comparison of different blockchains

Another essential feature of blockchain projects is scalability. When looking at scalability, two factors need special attention:

  • Throughput: The amount of processing per second
  • gas fee: the cost of executing a transaction on the network

Smaller projects or more centralized projects usually have higher throughput or lower fees. Therefore, the centralized nature of these projects and the number of active users on the platform require special attention.

Ethereum Layer 2 Scaling Solutions Demystified

Sidechains, optimistic and ZK rollups, channels, and more.

media network

12 — Security

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Some hacked cases

Security is also a major concern for blockchain-related solutions. No one wants to invest in or use a project with a significant vulnerability risk.

Here are the caveats:

  • If you have relevant code knowledge, you can review it yourself.
  • Check to see if the project you are interested in has a solid security audit.
  • Find out if the project has been hacked in the past through news or announcements on social media.
  • Whether the project token you are interested in is listed on a major exchange means that the project meets “minimum” security standards.

9 DeFi risks you should know about

Smart contract risk, governance attacks, CBDC, regulations and more!

media network

13 — Market Indicators

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Market Indicators (Cosmos as an example)

Websites such as CoinMarketCap or CoinGecko list basic information about the coin.

  • market value
  • Trading volume (24 hours, 7 days, etc.)
  • Maximum Supply, Total Supply, Circulation

These metrics represent the overall market sentiment towards the coin and can also be used to assess the value potential of the coin.

14 — On-Chain Indicators

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On-chain data analysis platform (CryptoQuant as an example)

On-chain analysis refers to analyzing the activities of users on the chain. The following can be viewed using on-chain tools:

  • inflow
  • outflow
  • Miner Trends (PoW Assets)
  • Number of wallets
  • Active address
  • Trading volume
  • fluidity

Usually charts or candlesticks do not represent this information visually, so platforms such as CryptoQuant will collect this data.

There are hundreds of on-chain indicators, so it is necessary to select the practical indicators that are truly valuable.

15 — Listed on the exchange

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Exchange listing (DOT as an example)

A straightforward way to save time in the fundamental analysis of a project is to use the exchange as a reference.

Exchanges such as Binance, CoinBase, KuCoin or Kraken have strict requirements for project listing. So if a project is already listed on these exchanges, that means you can trust it “for now”.

Of course, this does not mean that you can only trade assets listed on the exchange, it is just that this factor needs to be taken into account in the investment decision-making process.

16 — Governance Model

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Projects with governance policies (yearn.finance as an example)

Governance is a challenging issue in the blockchain industry. On the one hand, projects need to be decentralized, but on the other hand, projects need different usage scenarios to empower their tokens. So some mechanism is needed to clarify the governance process.

The most popular of the current governance models is the use of “governance tokens”. The purpose is for users to buy tokens and then get voting rights based on their own holdings (e.g. one token for one vote).

At first, this might be an exciting idea. However, in practical applications, a series of problems have arisen. For example, if someone holds a large amount of governance tokens, he can “hold up” the governance process in his favor.

17 — Social Media

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Avalanche’s social media pages

A successful project requires a good image to maintain. This helps them promote their own solutions.

The following are the social media platforms commonly used by blockchain projects:

  • Discord
  • Twitter
  • YouTube
  • Medium
  • Blogs/Websites
  • Reddit
  • Linkedin

Summarize

Above, we have introduced 17 important factors for fundamental analysis. Let’s summarize:

Good projects have detailed white papers.

Good projects open source their source code.

Good projects empower their tokens.

Good projects have broad consensus among the user community.

A good project will guarantee competitiveness.

Good projects have product roadmaps.

Good projects use advanced technology.

A good project has a strong founding team behind it.

of projects have a fair and transparent token model.

Good projects have a high degree of decentralization.

Good projects are highly scalable.

A good project has high security.

Good project market indicators are less volatile.

Good project chain indicators fluctuate less.

Good projects are listed on more major exchanges.

Good projects have fair governance models.

Good projects promote themselves through social media.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/17-important-factors-when-measuring-crypto-projects/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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