In the past, the simple way of looking at coins to invest would be to check top 100 in CryptoCurrency Market Capitalizations and invest in any of them.
But after the rise of ICOs there are more than 1000 cryptocurrencies in the market. Most of them have no or little use. Many of them are veiled behind big marketing words.
Due to this, I wrote few things to look into a currency before you invest into it:
First things find the following about the currency:
- Launch Date
- Current Price
- Market Volume
- Exchanges which have listed this token
You should be able to reject most of the coins using this information only. Most of the coins will have very low price and market cap. Others would be listed only on Chinese exchanges. Try to invest in only those coins which are listed on Poloniex, Bittrex or Kraken. They should cover most of the legible coins.
After this look into the following things:
Problem: What is the purpose of the technology behind it? Some of the use cases are like identity management (CIVIC), decentralised computation for graphic rendering (GOLEM), decentralised storage (SIA), marketplace (PARTICLE) or browser (BRAVE). These are just a few of the examples. Make sure you understand for business solution the project aims to solve
Team: Read about the team involved in the project. Do they have prior experience working with the Blockchain projects? Has the team previously worked with any tech product in the past? Most of the time you would see some random names in the team with contributions. A simple Google and Linkedin search will help you realise that their only major contribution till now was launching this project. A sample good team is like Filecoin(Juan Benet is working on Blockchain from 2014) and Steemit(Dan Larimer has successfully launched 3 different blockchain projects)
Use of the token: There are different types of cryptocurrencies and tokens in the market. Some are currencies i.e. Bitcoin, Monero or Dash. They are currencies with different scaling and privacy features. Ether, StorJ and GAS will be used to pay services on their platform. There are other currencies which are form of voting rights or equity rights in the organisation like SteemPower, Komodo or DGD
Competition: What are current solutions available in the market. Which other cryptocurrency is working to solve the same problem. There is decentralised Cab booking service. Do you think it can compete with Uber, Lyft, Ola or Didi Chuxing? On the other hand Open Bazaar serves a different set of audience. Golem will be competing with Google Zync. Filecoin, Sia and Storj compete with each other.
Social Proof: Read about the tech on Reddit, Twitter and Bitcoin Forum – Index. There are many websites which you would cover their views on the Cryptocurrency. Do read before investing in them. If nobody is talking about them, avoid them. If only 3–4 people are saying that project is good, avoid it. Good projects get lots of discussion in the forums. Avoid news websites, you can pay them to publish an article about your coin
Some coins to avoids:
- Which talk about Bitcoin and blockchain on their website and not about the coin itself
- Coins which will say that price will increase by x in another n months
- There is no website to see the transactions happening with the coin. One of the key features of blockchain is public ledger. If you are not able to see the transactions, it’s not blockchain.
Do your research before investing in any cryptocurrency. 90% of the current coins will die soon. Most of them made promises which cannot be fulfilled. Many even do not have a use case. It is easier to lose money in Cryptocurrencies than to make.
