Despite the crypto asset market hitting the mainstream in 2017, there remains no true consensus across the sector on how to determine the ‘fair’ value of a cryptographic asset in today’s marketplace.
Several evaluation metrics have been proposed, but unlike in the equity markets — where discounted cash flow models and accounting ratios have become the standards for price determination — new crypto evaluation models continue to emerge, with none yet gaining dominance as the go-to metric for value.
‘GitHub Activity’ and project valuations
GitHub activity refers to the contributions of developers to open-source projects (both Bitcoin and Ethereum, for example, are open source) on the popular code repository GitHub. The theory is that the more people that are working on a cryptocurrency project, the more features and improvements can be expected — and the more people believe in the future success of the cryptocurrency.
Thus, the chances are higher that the project will be successful. All this can have a positive multiplier effect on the value of the project’s currency or token.
Ranking cryptocurrencies by developer commits
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 one methodology possible using sites like CryptoMiso. Using this approach, the list of top crypto assets looks very different to the top assets ranked according to market capitalization.
According to CryptoMiso the top five cryptocurrencies with the most commits are Komodo (KMD), EOS (EOS), 0x (ZRX), Lisk (LSK), and Nuls (NULS), respectively. Ethereum, the second most valuable cryptocurrency project measured by market capitalization, only comes in at number 76 — behind projects such as ChainCoin (CHC), Particl (PART), and DigiByte (DGB).
While this seems an entirely valid approach at first glance, as Santiment CTO Valentin Mihov points out in a blog post, 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 recent forks of Monero, have a similar number of commits to each other — and to the original Monero. In this case the market doesn’t view commits as relevant to the price, though, as the original Monero is currently trading at $124, while Monero ‘Original’ is priced at just over $3.00.
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 17,000 commits on GitHub.
Furthermore, Mihov points out that 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.
While CryptoMiso’s cryptocurrency ranking platform does provide some food for thought, anyone using it to attempt a valuation should be aware it comes with limitations that distort the reality of a project’s developer activity.
CoinCheckup is another platform that provides a ranking of cryptographic assets by code commits. However, the results of its rankings by one-year commits looks very similar to that of CryptoMiso.
The top five ranking cryptocurrencies are EOS (EOS), Cardano (ADA), Lisk (LSK), Tron (TRX), and Nuls (NULS) while Particl and DigitByte are in the top 20 as CoinCheckup uses a similar method of collecting commits as CryptoMiso. Ethereum does not appear until page three of CoinCheckup's rankings.
As the rankings provided by CryptoMiso and CoinCheckup show, code commits alone are not a reliable metric for predicting the future value of a cryptocurrency.
So which 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 a 30-day developer activity-based ranking that incorporates 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.
This results in a 30-day dev activity ranking table that looks much more like the market’s current ranking of cryptocurrency projects.
SANbase activity ranking
Evaluating cryptographic assets
When attempting to determine the future fair value of a crypto asset, there are several metrics that can be taken into consideration. Market capitalization, the Network Value to Transactions ratio, the “refined” Network Value to Transactions ratio are three examples of how crypto projects can be evaluated. Developer activity of the type showcased on GitHub is potentially important to pricing calculations, but the formula requires the right mix of developer activity metrics for more refined modelling.