Token Metrics ICO rating methodology V2.0

Token Metrics ICO rating methodology V2.0

Hello there! It’s almost 4 months passed since we published v 1.0 of our rating methodology. In crypto space 4 months feels like eternity: more than 850 ICOs raised over 4.5 billion USD while crypto market cap decreased from 400 billion to less than 250 billion USD and only 16 ICOs conducted in this timeframe has positive (not including locked tokens). In such market conditions you should be extremely selective. TokenMetrics methodology and spreadsheet strive to be as objective and transparent as possible and aggregate the most important information about every ICO that is listed in our spreadsheet. Find out below about our methodology and how we score projects.

Our twitter — https://twitter.com/Token_Metrics

Our spreadsheet — https://docs.google.com/spreadsheets/d/1e0SpaDV34s-v5KewlXgRp5FcvsK9VphBR1pj-Spuu7o/edit?usp=sharing

First of all, we never take money or any other form of a reward (tokens, spots in the whitelist, etc.) for listing and evaluating projects in our spreadsheet. Do not contact us with proposals to list your project for a reward. Our score is our personal opinion which is never paid. Our scoring methodology v2.0 consists of 26 quantitative and qualitive indicators. Below you can find a description of how we score each project by those indicators. We strive to provide the most transparent and objective spreadsheet in crypto space minimizing impact of our personal attitude towards particular projects.

Since v1.0 we changed almost everything. Now our spreadsheet consists of 4 sheets:

1. Top upcoming ICOs rated by our complete 26 factors methodology;
2. Interesting projects on an early stage that haven’t published their token sale metrics yet and therefore cannot be assessed by complete methodology;
3. Passed ICOs rated by the methodology 2.0;
4. Passed ICOs rated by the methodology 1.0.

Interesting projects list is just our opinion scored from 1 (least interesting) to 10 (the most interesting). We decided to go for this scoring along with our complete methodology as lots of extremely interesting projects do not publish their token sale metrics before the end of a private pre-sale. We whether don’t know or cannot disclose what we know and therefore cannot score such projects by complete methodology. However, to get into token sales of those projects you need to spot them early and subscribe to all possible media channels to get updates and be the one of the first to get into whitelist.

Methodology Description

Token Metrics methodology aims to assess the quality of different ICOs and is based on our experience investing in ICOs and historical data of the best ICOs. Our methodology consists of three key dimensions: token economics, hype metrics and qualitative metrics. Each dimension has its own indicators that are assessed for a given ICO. After all indicators are assessed we calculate the overall rating by dividing number of points awarded to ICO by the maximum number of points (excluding bonus points) that can be achieved (which is currently 101 in methodology v2.0 but may change in the future as we enhance the methodology). Token metrics ratings should be used only for comparison purposes but not as a financial advice or guidance.

There are bonus points which a project can earn in every dimension. Bonus points are given for indicators which are not common for most projects and do not affect its’ perspectives in a negative way if not presented. Bonus points are added only to the numerator but not the denumerator of the ratings equation. With the bonus points project could potentially receive more than 100% score for any of the dimensions which is unlikely, except for the Hype metrics as recently some of the ICOs succeeded to attract massive attention from the crowd.

Each dimension score is calculated by dividing the amount of points earned by the project by the total possible amount of points that a project could earn in a particular dimension (not including bonus points).

Before scoring the project we look at the whitepaper and website: whether it is mostly promotional or concentrated on the product, the team, use-cases, we search for evidence on claimed on the website partnerships and look for concerns expressed by other crypto investors. Last but not the least we check whitepaper for plagiarism. We assess how the team is transparent and responsive: do they provide answers on tough questions for example, on legal concerns. Are there any government fillings or tests passed? All these steps are taken to prevent low-quality ICOs from getting into our spreadsheet.

The total number of points an ICO could get in ICO economics dimension is 36 and 1 bonus point. Amount of points awarded to the project is then divided by 19 and calculated as percentage. The total amount of points for qualitive metrics is 51 and 1 bonus point. For hype metrics there are 14 points and 3.5 bonus points. Description of how different indicators are assessed provided below.

ICO Economics

1. Token-sale hardcap (maximum 10 points): the formula for calculating the score is: 10*(1-hardcap/current crypto market cap * average % of ICO market cap on a fully diluted basis to total crypto market capitalization during ICO of most successful (from ROI point of view) projects * average % of tokens allocated for crowdsale of those projects. Currently average % of total ICO marketcap to total crypto market cap is 0.048% and 63% is an average percentage tokens allocated for crowdsale by successful projects. Those numbers are subjects for a change as we add new successful ICOs to the statistics base. We believe that projects should have a reasonable hardcap for their purposes and don’t ask the market for excessive numbers in exchange for hype that they can raise. The smaller the hardcap the higher the potential returns post-ico (this is an opinion not a financial advice) and the higher this indicator.
2. Circulating supply at ICO price on a listing date (maximum 5points): first we estimate how many tokens will be unlocked on a first listing date then we multiply this number by the highest ICO price (for example, if private sale price per token is $0.1 and crowdsale price is $0.2 we will multiply by $0.2). Here we try to assess how lucrative the circulating supply of a particular project will be on a listing date comparing to other ICOs. We also use this indicator to compare the project with its competitors in the qualitive dimension (more in the following section). The formula for evaluating circulating supply is as following: 5*(1 — circulating supply/current crypto market cap * average % of ICO market cap on a fully diluted basis to total crypto market capitalization during ICO of most successful (from ROI point of view) projects.
3. Maximum Discount (maximum 5 points): ICOs that provided investors with 0% — 15% maximum discount get 5 points, 16% — 25% — 4 point, 26% — 35% — 3.5 points, 36%-45% — 2 points, all ICOs with more than 46% maximum discount get 0 points. The higher maximum discount the higher risk of the token price dump post-ICO therefore the smaller the rating.
4. Percentage of tokens distributed to public (maximum 3points) — ICOs that allocate more than 80% or less than 20% to the crowdsale get 0 points, other projects get points based on their position regarding the average of the most successful ICOs which is 63%. Too low ICO allocation may lead to post-ICO price dump as lots of tokens will be held by very small number of people who can manipulate the price for their own benefit. Too high tokens allocation for an ICO may sigh that team’s intentions are not aligned with ICO participants as team is holding too small amount of tokens;
5. Token Inflation (maximum 2 point): if there is token inflation ICO gets 0 points, if there is no token inflation — 2. Token inflation is bad for token holders, the more tokens project plans to create the more diluted token value will get;
6. Buyback Program (bonus 1 point): If project plans buyback program it gets 1 bonus point;
7. ICO Token Price (maximum 3 points): when assessing ICO token price we apply the same principle as when assessing % of tokens allocated during ICO, however the formula is different. The average price of successful ICOs is $0.11 and the closer the price per token of an ICO that we review the higher score it gets. ICOs with token priced less than $0.01 but more than 0.001 gets 0.5 point. If a token price is less than 0.001 project gets 0.
8. Excluded countries (maximum 1 point): ICOs that prohibit citizens of more than 5 countries from participating due to the legal reasons get 1 point. If citizens from 3 to 4 countries are prohibited ICO gets 0.75 score, if 1–2–0.5 points, otherwise 0. We believe the more countries are excluded the more it is likely that there will be unmet demand after the ICO;
9. KYC/AML (maximum 1 point): ICOs requiring all participants to go thorough KYC receive 1 point, if not — 0. KYC during ICO increases chances that the token will be listed on major exchanges, prevents participants from misbehavior and makes it possible to set individual cap for each participant therefore increases chances for an unmet demand when listed;
10. Token is ERC20 or NEP-5 compatible (maximum 2 points)? ICOs with ERC20 compatible tokens receive 2 points, NEP-5 compatible 1 point, not compatible — 0 points. We believe that compatibleness with major crypto standards with appropriate infrastructure such as light wallets and decentralized exchanges should significantly increase number of potential investors that willing to buy a particular token, moreover, it means instant liquidity after unlock.

Fundamental

1. Team (maximum 10 points): linkedin profiles of key team members (quality of a profile filling, is there an ICO project in the list, are there other companies where team members are current employees), number of employees, team members’ past experience (how relevant it is, what companies they worked for in the past, what positions they occupied and for how long), do the team members complement each other, how capable is the team to achieve roadmap milestones, was the team successful in reaching previous project’s major milestones (if there were such). For how long core team members work with each other.
2. Advisors (maximum 2 points): how relevant advisors’ past experience is, are there any high-flying names on the list (for example, Chris Skinner or Don Tascpott) that could bring hype around the project, evidence that listed advisers really “advise” a project (linkedin profiles, articles in the media, blogs etc.).
3. Impact and idea (maximum 10 points): addressable market volume, is there a need for blockchain technology, is there room for a network effect, is there a need for a token, are the potential customers ready to pay in cryptocurrencies, how innovate idea is, does the project have sustainable competitive advantages, what impact on crypto space the project will have;
4. Product stage and roadmap (maximum 10 points): does the project have working product, MVP, Github code or at least not public prototype of the future product. When assessing not public prototype we search for evidence backing promised in the roadmap prototypes that are not available for the public. Presence of a prototype not only increases the legitimacy of a project but also significantly improves the chances that a token will be listed on major exchanges after ICO. Moreover, we look at how detailed the roadmap is, how close to the ICO date major milestones, for how long there will be no news after ICO, how ambitious and at the same time achievable roadmap is.
5. Competitors (maximum 5 points): are there competitors in the crypto space (if not are there any competitors outside crypto space), what is their valuation and how it compares to project’s post-cio circulating supply valuation. The higher upside the higher the rating. For example, maximum rating is given for the project which post-ICO circulating supply is at least 6 times less valuable than the closest competitor’s valuation;
6. Type (maximum 5 points): mean market capitalization of protocols and blockchains is more than 12 times higher than for applications and more than 25 times higher than for the middleware, therefore projects that build blockchains recieve 5 points, protocols and off-chain scaling solutions get 4 points, other middleware projects and applications get from 0 to 3 points depending on the industry in focus (for example, ID gets 3 points while gambling gets 2)
7. Partnerships (bonus 1 point): has the project secured partnerships with well-established organizations before the ICO. Is there any evidence that the partnership is really secure. Non-clickable Logos of different companies claimed to be partners on the ico web-site are not counted;
8. Token use cases (maximum 3 points): we look at whether there are many use-cases for the token or not. How many drivers are there for token price appreciation.
9. ICO funds allocation plan (maximum 1 point). Is there a clear plan? Is it detailed? Does it reflect company ambitions? What % is allocated to marketing (allocation of more than 35% to marketing is bad as raising funds to further increase the hype around project is not what we are looking for)?
10. VC funds (maximum 5 points): here is a link to our article describing why we think that VC funds are important for the success of a given blockchain project. Soon we plan to publish updated statistics of different funds’ performance in a bear market, so stay tuned!

Hype Metrics

1. Community in Telegram (maximum 5 points and 1 bonus point): the formula for calculating this indicator is as simple as: number of subscribers in the ICO project’s telegram group / 10 921. 10 921 is an average number of telegram users that successful projects had during the ICO stage. This number will be constantly changing as we add new projects to the list. Everything above average is calculated as a bonus for a project but is limited to 3 points that an ICO could receive for this indicator;
2. Reviews (maximum 5points and 2.5 bonus points): we look at several web-sites and blogs that we believe attract most of the crypto community attention and have their own methodology for assessing the projects. First, we calculate the number of reviews, give a score and then adjust this score in accordance with the overall sentiment of the reviews we consider during the ranking process. If the overall sentiment is positive, then we multiply the rating by 1.5; if bad then multiply by 0.5; and if the overall sentiment is neutral we judge solely by the number of reviews. The list of blogs and sites we look into: crushcrypto, ICOdrops, Ian Balina, TheGobone, OhHeyMatty, Wolfofcrypto, Sergio, CryptoBriefing, Mandy, Lendex, Hacked. If an ICO was reviewed by 8 or more bloggers we assign it 5 points, if 6 or 7–4.5, if 4 or 5–4, if 1,2 or 3–3, otherwise — 0;
3. Bounty/referral/airdrop (maximum 3 points). If an ICO runs bounty program it gets 2 points, if a referral program — 1, if airdrop — 0 points. If project doesn’t go for any type of bounty/referral/airdrop we assign 3 points. We believe bounty and referral programs «blow» artificial hype (which is not about the project and its product but about free tokens or high discount) around ICO and bring in people who most probably will be ready to dump tokens as soon as possible. Moreover, we think that absence of bounty/referral/airdrop indicates that the project is confident in its ability to raise the funds and didn’t set too high hardcap for the sake of “representation expenses”.
4. Alexa rating (maximum 1 point): if a project’s web-site is in the Alexa top 100 000 web-sites worldwide it gets 1 point, 100 000–200 000–0.7 point, 200 000–300 000–0.5 point, >300 000–0 points.

Disclaimer

This is not a financial advice. Investing in ICOs may be extremely risky, always remember to do your own due diligence and consult financial and legal advisors before investing in ICOs. We are not paid for our ratings and analysis and do not grade ICOs for money. We do not take part in bounty or referral programs.