Thisarticlewas originally published on .cult byMichiel Mulders..cultis a Berlin-based community platform for developers.
Analyzingcryptoprojects for investment purposes is an actual skill.
you could compare it with fundamental or technical analysis on the stock market.
Often, we come across a shiny new crypto project that tries to draw your attention.
But isnt it too shiny or too eye-catching?
Dont invest blindly because you might end up empty-handed.
It’s free, every week, in your inbox.
This article guides you through six core elements you should look at when evaluating a crypto project.
Some elements require more technical knowledge than others.
However, weve added tips that can help you verify these aspects without needing in-depthblockchainknowledge.
However, thats just their marketing engine running, which can be a positive sign as well.
To further investigate this, take a look at the publications the projects website lists.
If thats the case, it doesnt count as a full feature.
It only shows that the project is trying to raise awareness artificially.
A project that does things right will naturally gain media attention.
If you see tens of publications publish the same piece about a project, its most likely paid content.
Thats a red flag.
Advisory board and project support
Take a look at the projects partners, backers, and advisory board.
This can provide you with a lot of information about the maturity and professionalism of the project.
For instance, Pantera Capital is the first cryptocurrency fund in the US, founded in 2013.
They invested in many successful crypto projects and tools that shape the blockchain space nowadays.
Its always a positive sign if it’s possible for you to spot such partners.
Other well-knownVC fundsinclude:
see to it to look out for them.
State of the project
Weve already covered the marketing and business engines.
What about the projects current state?
Its a positive sign if theyve already started developing the product and gathered a small community of beta testers.
If people voluntarily sign up to try out a product, they see value in the project.
Avoid projects that havent started development yet.
Projects that have received funding through VCs dont have to worry about getting their marketing engine up to speed.
Their primary concern is to deliver value as soon as possible.
Therefore, analyze the teams composition.
A pure blockchain project should have a healthy mix of engineering, marketing, design, and HR employees.
Long-term vision
A project must have a long-term vision.
Roadmaps have become the standard in the blockchain space to capture a projects long-term vision.
It allows a team to explain how they want to achieve their goals and execute their idea.
However, any project can create a fictitious roadmap.
And its not always easy for non-technical people to understand if a roadmap is actually feasible or not.
Take a look at the description provided for each milestone.
It should include how the project believes users will adopt the product.
Adoption is the bridge between vision and reality.
Even though projects often host very detailed roadmaps, they frequently miss deadlines, or fail to deliver features.
Blockchain is a complex matter, and mistakes can happen.
Dont shoot a project for missing a deadline.
Evaluate how they communicate their failure to the community and if the delay is reasonable.
Transparent communication is a crucial characteristic for a successful crypto project.
Token economics (Tokenomics)
Tokenomics are vital for a crypto projects long-term survival.
Decrypt.codescribes tokenomics as, the study of how cryptocurrencies work within the broader ecosystem.
Crypto is notorious for its volatility.
This often turns a cryptocurrency into a speculative instrument, rather than a functional token.
The goal of tokenomics is to reclaim the tokens purpose through complex mechanisms designed by an economist.
For instance, proof of stake networks incentivise users with rewards for staking tokens.
Users lock their tokens for a particular period, and theyll receive a small reward for doing so.
Proof of stake networks is just one example of tokenomics.
give a shot to look beyond the projects hype and marketing engine.
To get a good first impression of a projects validity, spend at least two hours researching the project.
Read their whitepaper, technical explanations, but also media coverage to get a different view of the project.
This information will help you draw an initial conclusion.
Media coverage can give you a good indication of the projects intentions.
If a project seems promising, spend additional time investigating the teams composition, tokenomics, and long-term vision.
Story by.cult
.cult by Honeypot is a Berlin-based community platform for developers.
