A Framework for Assessing the Merits of a New Cryptoasset

If you are new to cryptocurrencies and blockchain technologies, Bitcoin might be the only investment option on your menu. But as you embark on the crypto-scene you could be understandably overwhelmed when you encounter two to three thousand different cryptoassets available for sale and trade.

So, how do you determine which cryptoassets are worth investing in? Here’s a guideline of questions I ask myself to help identify a project as potentially worthwhile as opposed to a passing fad or a $#*!coin.

Origins and History:

· Who are the developer(s) and key people involved in creating and supporting this project? Do they have associates or social/financial connections that propose to be beneficial to the project?

· Which blockchain/platform does this asset utilize (Bitcoin, Ethereum/ERC20, etc.)? Alternatively, is it currently operating on its own platform (as a native asset)…or is it planning to make such a move in its future plans?

· Has the cryptoasset’s platform been involved in any forks or other redirective movements? What was the underlying issue instigating the divergence of directions? Was it resolved/improved? What was the impact of the process on the cryptoasset?

· How has capital been raised to fund this project? Crowdfunding? ICO and pre-ICO? Donations? Other creative avenues?

· What is the overall (big picture) price history of this cryptoasset? What analysis or insight might explain prior plateaus and/or volatility?

· What is the current circulating supply? What is the present market capitalization, and how does it relate to the anticipated performance of the project/cryptoasset? What is the typical volume range?

· What is the level of transparency in this project? Furthermore, have there been any prior security breaches or fiduciary malfeasance?

Features:

· What is the level of decentralization of this project? How important is decentralization to the project’s mission/stated purpose?

· What is the level of democratization of this project? How important is democratization to the project’s mission/stated purpose?

· What is the level of privacy/anonymity and security provided by this project?

· What relative speed does the project/blockchain operate under? How quickly are transactions/blocks processed?

· What are the applicable fees to utilize this project’s network? Any incidental fees/costs?

Project Vision and Direction:

· What are the highlights of the project/cryptoasset’s whitepaper?

· What service or good is being offered (target use case)?

· To whom (demographics of target use case customers)?

· Under what conditions?

· What means will be used to bring this good/service to the market?

· What is the overall benefit proposed by this project?

· What specific goals/milestones/benchmarks are proposed in the roadmap? Do the goals and timelines/deadlines seem feasible and concrete?

· What partnerships or collaborations are being cultivated to expand and optimize the [international/global] reach of this project?

· Which human and societal future demands or values are addressed by this project?

Structure:

· What type of protocol does this project utilize? How is it similar to and different from other protocols (in comparable use case applications)? What is the consensus process/mechanism and what are the fundamental guidelines or limitations?

· What is the distribution schedule for this cryptoasset?

· When will tokens/coins be released? All at once or delayed release schedule?

· How will tokens/coins be released? Air drop? ICO?

· How many tokens/coins will be released? Initially, and ultimately?

· To whom? Are reserve portions held back by owners/developers/future plans?

· What is the incentivization plan for this cryptoasset? Mining? Pre-mining? Staking?Bounties? What others ways can an investor increase his/her holdings without additional capital?

· What tangible and/or virtual infrastruture is in place (or to be put into place) for this project?

· Which exchanges/trading platforms offer this cryptoasset?

· Which wallets can be used in conjunction with this cryptoasset?

These should bring you to a basic, well-rounded understanding of the project/cryptoasset. Some of this information is readily available and can be researched directly. However, for a deeper scrutiny into the future prospects of a cryptoasset, the following considerations will require both critical thinking skills and a mind open to a future of exciting possibilities.

Further considerations for a creative and critical analysis of the viability of the new cryptoasset:

· How does this proposed project improve the current (possibly outdated) architecture/infrastructure/system?

· What future innovations could potentially be built on this platform/model?

· To whom will this project provide benefit and/or cost-savings?

· What other sectors/government/industry might be affected/impacted/interested/involved?

· What future demands/values could this project or cryptoasset address?

· Assuming this project, as a decentralized and democratized cryptoasset, proposes a “shared representation of value…” Value of what? Is this value applicable beyond the crypto-currency?

· What is this project/cryptoasset’s greatest competitive advantage?

· What is its most obvious weakness? What would cause it to fail?

· What is the strongest criticism of the project? And who is discussing it (Reddit, Discord, Telegram, Slack, Medium)?

· What are the uncertainties associated with this project? How can ambiguities be addressed?

· What are the potential legal or regulatory issues that could interfere with (or advance) this project?

Armed with this background research and analysis, you should be able to carry on an intelligent conversation about the project/cryptoasset, but more importantly, you will have a fundamental understanding of the both the basis of your investment choice and the level of risk you are accepting.

Due diligence is crucial for maintaining a healthy crypto portfolio. Hopefully this article helps you make informed investment decisions in a market with projects that can disappear just as quick as they appeared, but please remember that the statements in this article do not constitute financial advice.

Want to chat? Follow me on twitter @Triblincanto