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What’s The Best Crypto To Buy Now? 5 Questions To Ask Before Investing

There are currently over 25,506 cryptocurrencies. And while most know the basics when it comes to Bitcoin and Ethereum, making an informed investment decision on the rest can be confusing and intimidating. So what are the first five questions to ask before investing in a blockchain project?

There are now over 25,500+ cryptocurrencies in circulation and while most of us know the basics when it comes to big projects like Bitcoin (BTC) and Ethereum (ETH), attempting to make an informed investment decision about some of the smaller ones can be a confusing and intimidating prospect.

Specifically, what information about a project is useful, and what is not? Before we get to this, consider your jurisdiction and the local laws in your country. In the US, the SEC seems determined to deter investors from allocating their capital to tokens outside of Bitcoin and Ethereum. Almost every other token is at risk of being deemed a security, and therefore being subject to much tighter rules and regulations. For the casual or new crypto investor, one simple strategy might be to simply build a position in Bitcoin and Ethereum and call it a day. It’s the lowest-risk crypto strategy in a high-risk industry. However, for those investors determined to move further out on the risk curve, they owe it to themselves to perform due diligence on any potential crypto investment.

Given that blockchain is such a new technology, as well as the fact that it is open to the wider public (and thus accessible to unaccredited, often less sophisticated investors), a slew of misleading or downright false information can too often render online resources a veritable minefield. Not to mention the fact that some projects have been launched specifically to scam you.

The question of ‘what’s the best crypto to buy now?’ isn’t an easy one. So how do you know what to look for before deciding whether or not to pull the trigger? Here we identify five important questions you ought to ask yourself when doing your research into a potential cryptocurrency investment.

1. Does the project actually solve a real-world problem?

First, identify the problem. Determine the issue or inefficiency the project seeks to solve. It could be related to industries such as finance, supply chain, healthcare, identity management, voting systems, intellectual property, or data privacy. The clearer the problem, the better you can assess the viability of the solution.

Assess the significance: Consider the magnitude and significance of the problem. Is it a widespread issue affecting many individuals or businesses? Does it have real-world implications and consequences? Understanding the problem’s scope helps evaluate the potential market size and adoption for the solution.

Analyze existing solutions: Research and evaluate existing solutions or alternatives to the problem. Determine if the proposed blockchain project offers a unique approach or advantage over traditional systems or other emerging technologies. Look for projects that bring innovative ideas or introduce novel concepts to address the problem effectively.

Evaluate blockchain’s suitability: Determine whether blockchain technology is a suitable solution for the problem. Blockchain’s characteristics, such as immutability, transparency, decentralization, and smart contracts, make it well-suited for certain use cases but may not be appropriate for all scenarios. Consider if the problem can genuinely benefit from blockchain features.

Consider efficiency and cost-effectiveness: Assess whether the proposed blockchain solution offers a more efficient and cost-effective alternative compared to existing systems. Blockchain projects often aim to streamline processes, eliminate intermediaries, reduce costs, or enhance security and trust. Evaluate if the benefits outweigh the associated implementation and maintenance costs.

What network: Evaluate if the security token used to secure the network is through mechanisms such as Proof of Work (PoW), Proof of Stake (PoS), or other consensus algorithms.

Validate real-world applicability: Consider if the problem and solution have practical real-world applications. Some blockchain projects may have compelling ideas but lack practicality or face barriers to adoption. Assess whether the proposed solution can be integrated into existing systems or if it requires significant changes in infrastructure, user behavior, or industry standards.

Research market demand and competition: Evaluate the market demand and potential for the project. Are there clear incentives for users or businesses to adopt the blockchain solution? Assess the level of competition and existing players in the market. A thorough market analysis helps determine if the project has a viable path to success and sustainability.

2. Is there already a working product?

With many blockchain projects – a working product or service remains months or even years away. A lot can happen during that time, both good and bad, and that means there’s a lot of uncertainty and, therefore, risk until a minimum viable product rolls out.

Clearly if the project already has a working product, or at the very least has completed the alpha and/or beta stages of development, it should provide more reassurance of its current legitimacy and of its future success.

If the project has a working product or platform, it has reached a more advanced stage. It demonstrates a functional and usable solution that delivers on its value proposition. Evaluate the product’s performance, security, scalability, and adoption levels. Look for evidence of real-world usage, active user base, and positive feedback from users or early adopters.

Mainnet or live deployment: When a blockchain project launches its mainnet or goes live, it represents a significant milestone. This indicates that the project has achieved a level of stability, security, and readiness for real-world usage. Assess the mainnet’s stability, security audits, network activity, and the project’s ability to attract users and developers to participate in the network. Evidence that the platform is actually being utilized as intended by the founders clearly helps.

Track Crypto Work In GitHub
One popular metric for anyone wanting to track crypto developer activity is how active a project is on the popular code repository GitHub. GitHub activity refers to the contributions of developers to open-source projects (both Bitcoin and Ethereum, for example, are open source). The theory is that the more people working on a project, the more features and improvements can be expected — and the more people believe in the future success of the cryptocurrency. All this can have a positive multiplier effect on the value of the project’s currency or token.

What is a GitHub commit?
A commit (sometimes called a revision), is an approved change to a project’s source code that the project’s community and administrators agree is an improvement. Interestingly, multiple changes can be made every day, even on well established blockchains.

Using ‘commits’ as a way to value a cryptocurrency project is possible using sites like CryptoMiso. Crypto Commits Cryptomiso

Based on ‘commits’ the list of Top 10 crypto assets looks very different to the Top 10 by Market Capitalization. Source: Cryptomiso.

It’s important to note that the GitHub commits data used by CryptoMiso adds the code commits of the cryptocurrency of which new projects have been forked off, to a project’s total commits. In other words, forked projects inherit all the code commits of their predecessors.

This is why Monero Original and Monero 0, which are both forks of Monero, have a similar number of commits to each other — and to the original Monero. And it’s not just forked projects. DigitByte, for example, is not a fork of Bitcoin but the team behind this altcoin have copied and pasted the Bitcoin code. Hence, it has over nearly 20,000 commits on GitHub.

Furthermore, cryptoMiso only collects commits from one repository and does not incorporate commits on other code repositories. Ethereum developers, for example, use a range of repositories that are not represented in GitHub data. As the rankings provided by CryptoMiso, code commits alone are not a reliable metric for predicting the future value of a cryptocurrency.

So which crypto developer activity metrics do matter?
Investors can still use developer activity to help them evaluate cryptocurrency projects. However, different metrics need to be taken into account. The crypto insights platform Santiment, for example, has developed activity-based rankings that incorporates things like the number of code pushes, issue interactions, pull request interactions, Github wiki edits, and comments on commits. This approach ensures that developer activity cannot be simply ‘inherited’ from forks, that historical track records cannot be altered and that the collated developer activity is not only limited to commits.

3. Who are the project’s team members?

Is there evidence that the team contains competent, experienced technology professionals? Personnel with proven blockchain development experience should be observable at an absolute minimum. Marketing credentials that demonstrate that the project is serious about building the business long-term and forming partnerships should also be visible.

And the team should have a solid social media presence – LinkedIn profiles that detail demonstrable prior experience related to the current project, as well as Facebook/Twitter profiles, should be easily available and verifiable. Have the senior team members previously had roles in blue chip companies? Are they well-known in their respective industries?

If the team are active on platforms such as Telegram and Discord, this helps to emphasize the project’s transparency. If they are also providing regular updates about the project’s development and the partnerships being formed then this is an additional positive for the community; it also helps to boost the team’s reputation and professionalism.

Furthermore, it is also worth checking the number of followers the project has amassed on platforms such as Telegram, Reddit, and Twitter.

4. Have partnerships been formed?

If a new project is serious about its development, it will invariably seek to form working partnerships with more established companies. Perhaps the partnership will be with a future user of the blockchain platform. Or perhaps both parties are seeking to conduct research into a specific aspect of the technology.

Either way, being able to show investors that big-ticket institutional names are interested in the project undoubtedly helps to boost its future potential. Conversely, a project with zero partnerships after months/years of development is hardly going to impress.

5. Are the project’s Tokenomics feasible?

Understanding a project’s tokenomics is essential when evaluating a blockchain project as it provides insights into the project’s token economy, including its distribution, utility, and mechanisms for incentivization and network security. This is particularly important when you’re looking for long term crypto investments.

Token distribution: Evaluate how tokens are distributed among stakeholders, including the project team, early investors, advisors, and the community. Consider if the distribution is fair, transparent, and avoids excessive concentration of tokens among a few parties.

Token utility: Assess the purpose and utility of the project’s token within the ecosystem. Tokens can have various functions, such as providing access to services, representing ownership rights, serving as a means of exchange, or participating in the project’s governance. Evaluate if the token’s utility aligns with the project’s goals and if it adds value to the ecosystem.

Incentivization mechanisms: Investigate if the project has mechanisms in place to incentivize participation, contributions, or network security. For example, some projects may offer rewards in the form of tokens for validating transactions, staking tokens, or contributing to the project’s development or governance.

Network security: Examine the project’s approach to network security and consensus mechanisms. Evaluate if the token is used to secure the network through mechanisms such as Proof of Work (PoW), Proof of Stake (PoS), or other consensus algorithms.

Token supply and inflation: Assess the token supply dynamics, including the initial token supply and any plans for inflation or deflation over time. Consider if the project has a clear token issuance schedule or a mechanism to manage token supply based on demand and network conditions. Evaluate if the tokenomics strike a balance between incentivizing network participants and maintaining token scarcity or stability.

Governance and voting rights: If the project involves decentralized governance, evaluate how the token holders can participate in decision-making processes. Assess if the token provides voting rights on protocol upgrades, parameter changes, funding proposals, or other governance matters. Transparent and inclusive governance mechanisms can contribute to the project’s long-term success and community engagement.

By evaluating the token economy, you can assess if the project’s token has a clear purpose, aligns with the project’s goals, and provides value to participants. Understanding token distribution, utility, incentivization mechanisms, and network security helps gauge the potential adoption and sustainability of the project. It’s important to review the project’s whitepaper, technical documentation, and engage with the community to gain deeper insights into the token economy.

John DeCleene of Data Driven Investor looks at the fundamental questions an investor should ask before taking their first foray into blockchain projects.


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