Before the era of smart contracts, limited choices of blockchain protocols existed. Ethereum opened gates for start-ups and enterprises to utilise blockchain technology and implement services which could otherwise never be dreamt of.
This on one hand supported brilliant ideas to immediately turn into business proposition, whereas on flip side make it easy to ride blockchain phenomenon and ‘get rich quick’ scam of some companies.
In here I have shared my views on evaluating good projects and ICO in the space. This could help individuals to make better investment choices.
The bible to get information on most of the points below and to understand in detail about technology is — project’s whitepaper. To appreciate what, how, why kind of basic queries one must carefully analyse details given in whitepaper of the project.
Key factors to evaluate a project
The Reason
This is one of the key facet of project evaluation, more than 1500 coins and tokens (as per coinmarketcap) in crypto world is present. Some provide blockchain networking, few in crypto exchanges, money transfer, AI, Internet of things, crypto wallets, enterprise blockchain solutions, and list of domains goes on. Successful projects are/will be the ones which evolved because they plan to fix fundamental issue in current system or gap in current offerings.
Look for the reason, the idea, the concept behind the project and ask yourself questions—
Will this technology make things easier for consumer or business and how?Is there audience who can use this service and benefit from it directly or indirectlyIs this project really needed on blockchain
Last point worth asking yourself (or even to the project team) — Why is it necessary to issue a token for the project? Why can’t the company instead go for IPO than use blockchain.
What is stopping the project say after few years to offer services not in terms of tokens but rather more traditional way — Fiat money (e.g. USD)
Token Matrix
This is how the tokens are issued and distributed
Distribution across ICO phases — What part of tokens is out on private sale, pre-sale, public sale. It is important to understand as usually discount offered by project directly relates to how soon someone is investing. The larger the discounts and big chunk of tokens sold this way, the greater chances as soon ICO Is listed on exchanges price will go down due to selling and ‘making profit’ mindset of investors.
Distribution across Team and lock-in period — Good project understand value of development alongside ‘building community’ around their token ecosystem.
Check breakdown of token sale against each function of the company. To materialise project good chunk of token sale proceedings should be reserved for development and marketing/PR teams.
Also, it is usually good sign of stakeholders including early investors to have their tokens locked-in for long period
Number of tokens — This direct corelates to supply and demand principle of economics, less the number of tokens of ICO usually it’s seen their demand takes the prices in upward direction if every other detail remains unchanged.
Total tokens vs circulating — Increasing it is seen two numbers associated with token sale, overall number of tokens and currently in circulation. Valuation of project depends upon this and one should be careful to understand what number of tokens are planned to release in future if not already in market.
Team
Business success and growth depends upon the vision and direction provided by the management layer. Check the background and experience levels of co-founders, CEO, CTO and gauge what past success stories they bring with them and how it can be used in this project.
Product delivery is a team effort, there is no use of having super star visionaries on board if the best engineering team not behind them. Look for other team members and their profiles. See if you can get depth in knowledge of development group same like the management team.
Market competition
‘The less the competition the more chances to get succeeded’
If project plans to deliver a solution for a common but least worked on problem, that could lead to clear gains and demand for such service will surely be high.
Project working towards a niche market and capturing most of the value from it, can lead to huge growth. Competition kills monopoly, which is good for consumers as better products and services on less price are available. But for an investor competition brings slow growth and returns on investment.
Projects proposing solution to niche market are always the ones to watch out.
Said that, in current world it’s highly unlikely that the utility a project proposing is not already offered by someone. Try to dig out —
·How does a project/ICO better than its existing competition
· What difference project bring in existing domain.(Sometimes even a slight change in offering can exponentially increase the usability of the service)
Check for those indications and evaluate can this project with a different view bring something which is fresh and more efficient way of doing something.
Geopolitical environment
This is one of factor which is never talked in crypto community while researching projects and ICOs. In some part of the world, Blockchain and crypto is still seen as investment for shady people or tools for the drug trafficker and money laundering. Governments Highly influenced by institutions and other business bodies who fear blockchain related projects will eat away their market.
Any project relying on central authorities’ decision to deliver their core functionality could heavily penalised if those approvals get delayed or worse never given.
ICO in banking sector usually falls in this category and should be carefully researched before investing.
Market condition
This point is not associated to fundamentals but it is huge influence in project value. As a short term investor if your time frame is say 3–6 months, your dreams could be shattered in one of those cycles where investing in even the most brilliant projects will make you lose money.
Irrespective of the best team, concept, and other reasons project could stall or even fail in bad market conditions.
Other factors
I haven’t put these under main categories, but it’s worth having awareness of some of other factors –
· Does the company have a working product or prototype, if not pay close attention what the road map looks like for alpha / beta releases on mainnet.
· Companies with working track record are usually have more chances to succeed as they know what and how to do business.
.Marketing the product and going in partnership with other projects to complement the service offering is another key to make project a success.
Blockchain opened the Pandora box and options are limitless, each day a new project/ICO lands in crypto world with promises to change the world. By careful investigation and research in the project using white paper, media resources and news one can evaluate the project.
Note:- These are my views only, i am crypto enthusiast and not a blockchain adviser. Do not make any investment decisions based on above. Use your own research and tools.
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