With the thousands of coins out there and hundreds more released every day, one can get overwhelmed with the vast amount of options when it comes to investing into one of these projects. This article will go over a foolproof strategy which anybody can use to assess and evaluate any ICO or token and decide based on their own preferences whether the project is a good fit for an investment.
In order to choose a fitting project one must first select the niche which one is interested investing in and assert one’s position. Each ICO, token, or coin has their solution to a particular problem, with a few exceptions like the Useless Ethereum Token, or even Dogecoin. For example, Siacoin focuses on distributed storage, Monero focuses on private transactions, and Golem provides a decentralized supercomputer.
From here on, the direction in which your research and time is focused on depends on your assertion. For example, some investors believe that Monero has great potential as untraceable transactions are high in demand. Others might believe that distributed storage is the next big thing, as currently there is no foolproof way to securely store data online without a third party being able to remove or block it. Finally, some might think that a decentralized supercomputer that can aid in scientific computing, business analytics, and machine learning is an extremely valuable service.
Each of these assertions are perfectly valid, but if you don’t have passion for your investment your hand will forever remain weak and you will never be fully sure of the bag you are hodling.
Due to the amount of cryptocurrencies out there, it may be hard for one to go through each and every project to select the one you like. That is why I compiled an article explaining each of the top 50 cryptocurrencies in a single sentence, if you give it a quick read I’m sure one or two projects will stand out to you. Once you choose a favorable project, move on to the next step.
Once you select a project you like, it’s time to delve deeper. In order to evaluate a project’s value and potential we must identify its competitors. While some projects may be so obscure and “innovative” that they don’t quite have any direct competitors, it’s good to at least identify somewhat similar projects that are at least in the same niche as the original. Even if the competitors’ projects aren’t based on blockchain it can still provide useful data to evaluate a businesses’s potential.
Let’s take Monero for example, the obvious competitors to the coin is ZCash. Both projects aim to accomplish the same thing but each use slightly different methods to achieve that. Here are more examples of direct competitors: Siacoin vs Storj, Golem vs SONM vs iExec, Substratum vs Skycoin, Ethereum vs Lisk vs NEO, the list goes on and on.
Once you’ve identified your project’s competitors its time to zoom in and look at the details and compare each project.
How do you compare two cryptocurrency projects? There are three main factors that heavily influence a coin’s price: Team, Product, and Utility.
Let’s start with the Team. What investors are looking for is transparency when it comes to the project’s team members. The venture’s website should have a clear page with their team’s LinkedIn profiles.
If business members are refusing to put their name on the line, there is no reason you should trust them with your money. This isn’t 2013 where most project’s founders try to remain anonymous due to the then uncertain nature of crypto. These days the government recognizes ICOs, Tokens, and Cryptocoins as valid business operations so unless there is some fraud or shady business going on there should be no reason to hide one’s name.
Once you have the team members’ linked in profile, take a quick look and see if they are qualified for their positions. Did the developer have prior experience in the field? Did the CEO lead any previous companies? Do they have any reputable advisers?
Assess each project’s team members and make sure neither lacks transparency, experience, or support. A project that has only three team members and claims to conquer the world is probably not going to do a great job at fulfilling its promise.
Once you have an idea of each project’s team it’s time to look at the Product, how do the two compare?
The easiest way to evaluate a product is to look at the code. You don’t have to be an experienced coder in order to get a feel of how well the code is maintained or written, but having basic knowledge of C++ definitely helps.
In this example we will compare Golem vs SONM vs iExec. Navigate to each project’s Github repository and take a look at the amount of commits each has. In our case Golem has 5,002 commits, SONM has 1,135 commits, while iExec’s largest repository has 421 commits. That in itself does’t mean that one project is inferior to another, but it provides perspective when comparing the different implementations. In addition, some projects may have proprietary back end code which is not going to be open sourced. In general, that is not desired in a project as cryptocurrency investors prefer open sourced apps.
Another useful metric is the amount of contributors a project has, there is a direct linear relationship between the amount of commits and the amount of contributors but it is a good criteria to keep in mind. In our case, Golem takes the lead in the amount of contributors which is a whopping 27, compared to SONM’s not too shabby 12, and iExec’s 5. As a result, it comes to no surprise that Golem is currently at around $500 million market cap, compared to SONM’s $177 million. However, what is surprising is iExec’s market cap which is a whopping $171 million, the reason behind it lies in the product’s utility.
The Utility of each project is defined by the features it provides. The higher the utility the more support a project will get, which in turn will increase its valuation.
In our case, to explain iExec’s high valuation with the seemingly low number of contributors and commits we must look at the current available features for the project. iExec does have a working mainnet available. The platform focuses on providing dApp developers with computing power, it even released a dApp store where developers can publish their decentralized apps.
In the case of Golem, it can currently be used for rendering 3D Blender models, albeit not very efficient as not many users are on the testnet, the feature works.
Lastly, SONM has released their Minimal Viable Product (MVP), but currently other that having a wallet balance there isn’t a viable feature you can use it on.
After going over the three criteria the winning spot is a tie between Golem and iExec. Both have working features, Golem allows for Blender rendering and iExec allows developers to publish dApps.
After thoroughly comparing our project with its competition we can move to the fun part of the analysis: quantification.
This step is all about numbers. We will quantify each project’s relevant info in order to generate a clear picture in our heads in regards to each one’s potential.
The first piece of data we are going to look at is the ICO date of each project. The older the project the more ahead in development it should be. In our case, Golem ICO occurred in Nov 2016, iExec in April 2017, and SONM in June 2017. As you can see, it makes sense that SONM’s product isn’t quite ready yet, it is the youngest project out of the three. However, what is more impressive is how iExec is already on their mainnet while Golem is still on the testnet, something to keep in mind.
First number we are going to take a look at is the amount of money the project raised during their ICO, assuming they had one. Our research shows Golem raised $8 million in 39 minutes, iExec raised $12 million in 6 hours, and SONM raised a whopping $42 million over a span of 4 days. What do those numbers mean when put side by side?
The duration and target amount raised is 100% up to the company, each team has a different campaign strategy. By selling out quickly and having a shorter duration ICO, the team ultimately creates a sense of scarcity. Which in return makes supporters more excited and makes contributors feel more secure in their decision if they know that only a select few are able to participate in the initial offering.
On the other hand, a longer campaign allows for a higher total funding round which allows more interested parties to take a piece of the pie.
By raising the most amount of funding in the shortest amount of time, Golem’s investors took the lead in enthusiasm for the project. iExec contributors also set an impressive record, but nothing tops the massive amount of funding SONM received over a span of 4 days.
The good news is that the SONM team has an immense amount of support and funding, the bad news is there is more pressure on the team to provide a vast array of features which can definitely backfire if the team fails to deliver.
Again, that isn’t necessarily a bad thing, as a project lead with more hype will experience more extreme swings. If you are looking for a higher risk investment SONM might be for you, while if you are looking for more steady and lower risk growth Golem and iExec might be a better fit.
Another interesting number to take a look at is the activity for a project’s subreddit. Unfortunately, it is impossible to rely on reddit subscriber info for accurate information, especially live viewers which can be easily fabricated with the use of bots. It’s not only Golem, SONM, and iExec that suffer from these live viewer bots but other subreddits as well. This makes it impossible to know the true amount of live viewers. Instead, gauging other subreddit metrics is a better way of comparing activity.
In our case we decided to use the amount of topics created in the past month for each subreddit to measure how active each community is. After using the following search queries for the Golem subreddit,the SONM subreddit, and the iExec subreddit, we counted the following: Golem has 5 pages of topics in the past month, SONM has 4 pages of topics in the past month, and iExec has 3 pages of content in the past month.
The conclusion is that Golem is the most popular subreddit – which isn’t surprising-, followed by SONM and iExec. What is interesting is the lack of activity in the iExec subreddit. As a middle child, iExec should have quite a bit more engagement if not as much engagement as the SONM subreddit.
That shows that the market might not be as excited about iExec, maybe because it doesn’t promise many impressive features, but instead focuses on a dApp platform that many don’t understand.
Yet another valuable metric to look at is twitter followers, while it is true that companies have been found of buying fake twitter followers, you can easily audit a company’s twitter using twitteraudit. In our case, Golem has 113k subscribers on twitter, SONM has 23.3k, and iExec has a measly 17k followers. To make sure Golem didn’t buy their subscribers we ran a twitteraudit query on their account. The results came back as expected: 97% of their followers are real.
Putting all that together and we can finally get a crystal clear picture of the niche of supercomputing in cryptocurrency.
Out of these three projects all make great investments. Golem is more suited for the conservative investor who would prefer a slower and steadier growth betting on a highly supported project with a clear vision and sharp execution. iExec has the most working product but because it is harder to grasp its true purpose, the service is more suited towards tech savvy investors who are looking to delve deeper into dApp development. Last but not least, SONM is more suited for shorter term investors looking to take on a bit more risk but for a chance at a more impressive reward.
The higher risk with SONM lies with the less transparent team and the newer code, but at the same time the team promises more features than Golem, and if they succeed, SONM is in a great position to grow.
The above method can be applied to any project in cryptoland. The key factors to keep in mind is the team, the code, and the community. If a project has all three it is guaranteed to succeed. By using the above method you will be able to easily see where the risk in each project lies and you will have an easier time deciding whether you want to invest money into it. The easiest way to loose money is to trade solely based on hype or emotion. I will end the article with a famous saying successful investors in stock markets provide: Invest in the business, not the stock.