A checklist for new Crypto projects

Making it easier to pick new investments

Editors note: This article was posted for the first time back in 2017 when the big public was getting more curious about the crypto world. The article has since been edited to include up to date web-links.

So many coins to choose from. Which one to invest in? And what do you base your judgment on?
Pretty important and though questions. Since I have asked myself these questions often when diving into new projects, I have listed the most common and important ones below to help you all out.
If a project scores well on these following questions, you will have less risk and more chance for some nice profit.

Each of the more specialized terms have links towards the Crypto Wiki, in which they are explained more in depth.

The checklist for when looking into new potential crypto’s:

• Is it unique? Do they have a clear view of the competition? How do they plan to beat them?
• Can it draw fiat currency (USD, Euro, Yuan etc) in such a way as to give it a valuation that is fully independent of pure speculation. Are there significant risks associated with the value proposition?
• Is it rare? A limited supply with a low or negative inflation rate will lead to increasing price as demand goes up.
• Is it open-source? Are the people behind the project being transparent about their work and willing to share their new technology with the world? Being open source means their code will be more battle hardened and therefor have less bugs.
• Proof of external security evaluation? Is the product validated by outside users? Projects that are open about their auditing are more trustworthy. Bug bounty programs also help.
• MVP available? Any Alpha/Beta already launched? If not, you can only trust them on their promises.
• Specifications. Proof of? Governance model/security model? token structure? Legality? PoW and PoS have proven to be more robust than DPoS for example.
• Team, it’s history, who are they, what is their track record?
• Roadmap, how long do they think they need? How concrete is it worded?
• Working with other projects? How have those projects done so far? Working together with other projects will mean they can learn from each other and build a larger ecosystem together.
• Did they have an Announcement on Bitcointalk? How well was it received? Is there still activity going on in that thread? Are they on other channels and if so how active is the team and their community?
• Marketcap/24 hr volume at time of writing. The smaller the project the more upside potential, however, also the more risk of dealing with amateurs.
• Comparable price metrics, liquidity of the investment. Will buying 1000€’s worth completely disrupt the price?
• What is the current operating plan? Do they even have one?
• Crowd sale? ICO price? Why do they need funding now?

Nowadays many coins have their own kick starter through so called ICO’s (Initial Coin Offerings).
Let’s look at some critical questions that might help you refrain from the more dubious and to-good-to-be-true projects.

The following questions come from William Mougayar, a well known writer in the space, and often a very critical one. Which is exactly what we need.

Questions regarding ICO’s

• In what jurisdiction is the company incorporated?
• What legal structures are being disclosed?
• What is the token distribution structure?
• How is security handled?
• What are the apparent, perceived or real regulatory risks?
• If there is a DAO-like component, is its articulation realistic and well grounded?
• Who has written up the token issuance contracts and actual token issuance software?
• Which blockchain infrastructure is backing-up their sale?
• Have they published the terms and conditions of the sale in clear language?

Some red flags:

• No hard cap in the ICO
• No business plan and/or product description
• The whitepaper basically looks like a pr brochure
• No project milestones (without these, token holders will not be able to hold the devs accountable for endless delays)
• No plan for vesting, fund release or basic accounting (some of these ICO projects have a bunch of developers creating projects that will get millions in funding, but have no idea how to handle that money)

And finally here are three events that should give you second thoughts on holding on to a coin:

Exit Trigger Events include:

• The asset is illiquid more than 1 year
• Development team didn’t publish updates for over 3 months.
• Critical issues are discovered in consensus code.

What do you think? Is this comprehensive enough? Did I miss something vital? Which of these questions do you think is the most important?

Let me know in the comment section! I always want to hear more critical thinking when it comes to these kind of decisions, so let’s have a discussion.

Upcoming stories

I started my own portfolio back in 2015 and have gone down the rabbit hole ever since. There is something about this decentralized way of working together that is just fascinating. To help people understand this new sector with all it’s new jargon, I have launched the Crypto Wiki.

If you ever think, wait a minute, which crypto was Monero again? Who is this Vitalik I keep hearing about? What does Hash Functions mean?

This wiki has four sections;

• Jargon
• Coins/Tokens
• Companies/Organizations
  and last but certainly not least:
• People.

It explains who/what they are, with whom they work with etc.
This is often way quicker than scanning all those forums, websites, other (censored) wiki’s and blogs.

Please don’t get mad at me if something is missing, I’m only human. Better yet, if you do find some inconclusive info, let me know!

Goodluck!