Why does this cryptocurrency exist?
The mere existential reason of a Crypto currency should be that it is trying to solve a problem and by that you need to judge if they will have long term value or not. Look for real world problem solutions and not just a rehashed solution as the latter might not work for a very long time.
Also, research and ask questions about who is the development team of the currency and its core engineers. Are they reliable and what education qualifications do they have? What is the long-term vision of company and how have they achieved it in the past?
Asking these questions is just the primary step. Next comes understanding of the terms.
What is a Blockchain?
Mostly all cryptocurrencies are based on blockchain technology and it would be wise if you try to understand the basic understanding of how blockchain works and its underlying principles. It is a decentralized ledger that is used to update all records and a copy is send to all the nodes on the network. All the transactions are stored in databases.
Look for competitors
After you choose the cryptocurrency you want to invest in, you might want to do a little research about its competitors. As you may be aware of one company solving a problem but there might have other efficient competitors that might solve it.
Do a background check about the website and ask questions like does it look professional and does it sound authentic? Who makes up their investor and engineer team? Read their whitepaper and try to understand it. Look for users that have commented regarding security flaws or any thefts.
Watch out for fraudulent websites as they might just be there to take your money and provide nothing in return!
Total Float and Maximum Supply
You need to understand certain supply dynamics to dissect the answer as to which cryptos are going to be beneficial.
A little example will be that the supply of Ripple is limited to 100 billion coins i.e. once all the coins are mined, there will be no supply and only demand will dictate its price. Same case is with the Bitcoin.
Ether on the other hand has an unlimited supply and therefore the price will eventually become low as the number of ether will increase each year.
These concepts just mimic the concepts of actual stocks and therefore cryptocurrencies can be called as the “Tech Stock”.
