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In 2017, many members of the ICO get rich. Recall, for example, the token called Status: it was launched in June, collected about $ 100 million, and over the next six months soared by 1,200%. Yes, the cryptocurrency market grew by leaps and bounds. Now the situation has changed a bit: we have undergone a correction, we understand that the market can grow and fall, which means that we need to learn to correctly assess our virtual assets. And here's what you need to do.
1. Pay attention to the team behind the development of the token
As in the world of startups, cryptocurrency depends a lot on the founder. Bitcoin investor and researcher Tuur, Demaster looks not only to the education of developers and their previous projects. It is good when developers are known for works in the field of cryptography, high-load systems, peer-to-peer networks or large open source projects. The more knowledge and experience they have, the less likely they are to repeat the mistakes of their predecessors.
It is also useful to assess the openness and honesty of the team. Chris Berniske, co-author of the book "Crypto Assets" and a partner in the investment firm Placeholder Ventures specializing in cryptocurrencies, believes that it is important to get acquainted with the developers — even not in person, but through their podcasts, videos or correspondence. Clearly whether they are answering questions about a product? Do you understand their motives?
2. Carefully review the white Pater documentation and determine which problem the token is trying to solve
Usually, developers publish a technical document explaining the technical and economic features of the project — and each investor should carefully examine it.
Since the main property of cryptocurrencies is decentralization, i.e. they are controlled not by the Central authorities, but by the participants of the network (which, according to cryptocurrency supporters, is good, since centralization is a hotbed of incompetence and corruption), the document should clearly explain the benefits of decentralization in this project. About this "Scriptactive" write Chris Burniske and Jack Tartar.
For example, cryptopleura Swarm City where it is possible to implement projects like decentralized Uber, not owned by a commercial company, so its services cheaper cost to the members of the network, which may bring on Board more drivers and, in turn, reduce prices for consumers.
Bernice and Tartar ask: "are there Enough of these factors to compete with Uber in the long run? Such questions should be asked about any cryptocurrency."
But it should be borne in mind that decentralization is not free: blockchain is slower and more expensive than traditional databases, and also implies greater openness of data, and transactions in it are usually paid.
3. Pay attention to the time of token issue
It is important for the investor to understand at what stage of the project development a token is issued. Some projects start only as a platform for the transmission of money and information and they can use existing cryptocurrencies, such as air, and later some of them plotting ICO. Sometimes this is justified, but the investor should understand why the developers deviate from the original plan and why they did not create their own token from the beginning.
Alex Sunnarborg, founding partner of Tetras Capital, the new York crypto hedge Fund, which manages assets worth $ 20 million, gives an example of the Raiden network, which operates on top of Ethereum and is designed to speed up transactions. Sunnarborg says: "When I first heard about them, they didn't have their own token. The creators of the project say that the development began in February 2017, but the ICO was announced only in September, when new ICO appeared as mushrooms after the rain. Sunnarborg says, " the timing suggests that this is just a way to raise money."
According to the creators of Raiden, the purpose of ICO was"to improve the quality of work and the development of the system." Investors bought up tokens for $ 33 million. Sunnarborg explains: "no one uses their own token in Raiden today. According to CoinMarketCap, the total market value of all tokens in the network is about $ 200 million."
4. Ask yourself if the cryptocurrency platform can use ether instead of its own token
Assessing the merits of the token, Sunnarborg offers to ask an even simpler question: "Can we imagine that the system works without this token?"Arianna Simpson, the founder of the Autonomous Partners cryptocurrency investment Fund, voiced a similar question:" Can this token replace the ether?"Sunnarborg gives an example of a currency that is not easy to replace-it is a REP token used on the Augur platform. It is a gambling platform on which users can bet on the outcome of any event, such as the outcome of the presidential election. REP tokens are not needed to place bets, but their owners influence the determination of the outcome of the event, and the reward is also paid in Rep.
Sunnarborg explains: "If you do work to determine the outcome of an event, you are entitled to share in future revenue, and with such architecture to own REP profitable. But if the main function of the token is to give you access to the system, and immediately after using this system it is sold, it should be considered unnecessary."
5. Explore The github repository
Usually cryptocurrency systems publish their code on the Github website. Here you can see how intensively the development is carried out — frequent version updates, on the one hand, indicate the activity of developers, and on the other hand, can indicate any problems of the project.
According to Burniske and Tartarus, one of the important indicators may be the rating of the project on the website CryptoCompare (cryptocurrency earns points, when the user puts code Github project to bookmark, make a copy for your own purposes, or develops at its own cryptocurrency). The more points a token has, the better. However, it should be borne in mind that old projects with such a system have an advantage over young ones. If you do not understand what is discussed in the last paragraph, you should probably contact a familiar programmer.