5 Things to Look for When Researching a Cryptocurrency

Photo by Glenn Carstens-Peters on Unsplash

Finding the right cryptocurrency to invest in can be a daunting task. But there are some things you should look for when evaluating a coin before testing the waters with your hard-earned money. If you’re interested in trading a cryptocurrency and want to learn more, here are five things to research before diving in.

1. Find the Purpose

• The majority of cryptocurrencies are created as a reward for validating data blocks that are used for purposes outside of sustaining the currency itself
• You may be aware if you’re a Bitcoin tribalist that Bitcoin doesn’t pass this test
• This is not to say that Bitcoin is a scam, bitcoin has existed long enough and has enough demand that it can sustain itself
• No other coin participating in this game is probably capable of claiming that
• In other words, while any coin that claims to be the next bitcoin is certainly a scam, bitcoin itself is not a scam

2. Find the Whitepaper

• Cryptocurrencies shouldn’t only make generalized promises to solve issues, they should guarantee a reasonable solution to that issue
• This is where a whitepaper comes in
• This is a publicly published document outlining the project’s purpose and operation
• Even the anonymously released Bitcoin has a publicly accessible whitepaper that is still regularly read and distributed

3. Find Out Where You Buy and Use the Cryptocurrency

• You should probably avoid purchasing cryptocurrencies outside of a legitimate cryptocurrency exchange unless you’re a miner (or an experienced investor)
• While different exchanges have varying requirements for coins to be listed, you’ll be safer sticking to these exchanges if you want to buy and sell cryptocurrencies
• In some circumstances, the smart contract code and the ledger itself will make it challenging for a scam coin to move widely among genuine circles because this could expose the coin more rapidly

4. Find Out Who Makes the Coin

• Decentralization is the way to go right now
• However, the majority of reputable cryptocurrency projects will have a board of directors that is disclosed publicly or have associated organizations that support and develop the currency
• Even though you don’t need to be familiar with every board member’s name, you should at least be able to know businesses that support or use the blockchain
• Even if you don’t, you should be able to look up such people and groups online to see if they are legitimate and actually participating

5. Find Out if the Coin Seems Sustainable

• Some of the warning signs discussed in the introductory paragraphs are combined with this and are being given new consideration
• A currency worth investing in should be able to solve a particular issue, and the coin’s developers should have this as their primary objective rather than profit
• For instance, IOTA, one of the technologically ambitious coins available, trades at a fraction of the price of more well-known tokens
• Why? In part because IOTA is not designed to be a get-rich-quick scheme or even a traditional store of wealth, but rather for long-term growth
• The purpose is to accomplish a task, and the financial benefits follow

REFERENCES:

1. https://www.makeuseof.com/how-research-cryptocurrency/

DISCLOSURE:

None of these articles constitute financial advice. Articles are highly summarised to make it easy for the reader and save your time, so please DYOR further before putting your hard-earned money into any product mentioned.

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