How to Evaluate a Blockchain Project? — A Step-by-Step Guide
The FinTech industry has been on fire lately, as new, industry-shaking projects have emerged in recent years that threaten even the most famous and established players. While this would benefit consumers, it also creates new problems for investors. P2P loans, ICOs, IDOs, etc., are just a few new ways to put their money to work. Some innovative companies are even looking to take the middle ground between P2P lending and cryptocurrencies as they gain momentum and promise significant returns. However, valuing consumer credit is a much simpler process than estimating the value of blockchain projects. Until recently, most cryptocurrency investors didn’t even have a firm basis for doing so, but as with any rapidly evolving industry, new valuation ideas emerge along with a growing number of different stakeholders.
In this article, we will touch on what blockchain projects are as well as examine their types. In addition, we will talk about a framework for evaluating crypto projects before investing in it. Finally, you will find out about the five most popular platforms for investing in blockchain projects.
What Does a Blockchain Project Stand For?
Blockchain technology is becoming more of a mania today than cryptocurrencies themselves. Governments around the world argue about whether virtual coins are good or not as they develop regulatory approaches. But no one doubts the benefits of blockchain, even China, which has banned everything related to digital currencies and crypto projects.
The best thing that Bitcoin has given to humanity is the technology on which blockchain projects are being developed today. The innovative solution is used in many spheres, guaranteeing increased security, speed, and transparency.
So, blockchain projects are private or public programs based on creating a chain of blocks containing information. Data on any transaction in a blockchain-based network is stored in a so-called distributed registry, which guarantees the authenticity and genuineness of transactions. Blockchain technology is now used to create projects in banking, payment services, logistics and transportation, healthcare, energy, the public sector, and many other industries.
Although blockchain technology was first used to create a market for the virtual currency Bitcoin, it is less and less associated with cryptocurrencies these days. Its dynamic development in recent years has led to a growing number of innovative applications, even in industries far removed from the financial market. Blockchain, which contains data on transactions and information exchange between individual users, offers real advantages in the form of complete transparency of processes, guarantees of data reliability and security, and the ability to track all changes in real-time.
Types of Blockchain Projects
Blockchain projects grow out of one another, constantly modifying and improving and even using each other’s developments since most are based on open-source code. The focus and scale of blockchain projects are incredibly varied, used to develop corporate platforms, accept cryptocurrency payments, or even support enthusiasts’ projects to preserve the copyrights of drawings or musical compositions in the blockchain. As we learned in the previous chapter, blockchain classification can only be multidimensional, that is, based on a set of independent parameters. This means that it is virtually impossible to categorize each blockchain into any group. However, almost every blockchain has its own features and attributes, as well as a fairly well-defined scope of possible applications.
In the crypto world, there is a rather impressive number of crypto projects that are united according to a certain attribute. With the growth of the cryptocurrency industry, not only the number of companies involved in this area is growing, but also the variety of forms of application of blockchain technologies. The main types of blockchain projects are:
NFT projects have not only become a popular topic of discussion in the media but also allowed users to generate significant profits, giving digital art a second life.
The development of cryptocurrencies and non-interchangeable tokens has taken virtual world projects to a new level. Now their users can secure ownership of digital objects with NFT tokens, buying and selling them for real money. Large brands immediately took advantage of this opportunity, selling goods and opening representative offices in popular video game simulators.
The emergence of the Ethereum blockchain has enabled the development of financial services based on it. According to defiprime.com data, most of the existing DeFi is built on Ethereum, and the number of new decentralized finance applications is steadily growing.
- Web 3.0
As Web 3.0 networks will work through decentralized protocols — the fundamental building blocks of blockchain and cryptocurrency technology — a strong convergence and symbiotic relationship is expected between these technologies and other domains. They will be interoperable, easily integrated, automated via smart contracts, and used to provide completely different systems.
How to Evaluate a Blockchain Project? — A Step-by-Step Guide
Blockchain and cryptocurrency are new experimental technologies, but their scope is incredibly vast, so project evaluation is usually a whole process. Let’s take a step-by-step look at the framework for evaluating crypto projects.
- Checking the project’s viability
Thousands of cryptocurrencies are currently active and in circulation, but probably more have appeared and died. The first thing you should do when you come across an interesting project is to go to a website such as CoinMarketCap or CoinGecko and find out if the coin is still trading. These websites can also provide additional information about the cryptocurrency, such as whether the trading activity and volumes are genuine. If you come across a new project, check if it is listed on at least a few reputable exchanges with significant trading volume.
- Preliminary research
The next step is to do some technical research yourself. There are tools that will make this as easy as possible for you. Tools like Glassnode and Binance Research, for example, can help with analyzing detailed data in the chain, such as the number of transactions the blockchain makes in a day, among many other metrics that can tell you a lot about the usability and attractiveness of that particular cryptocurrency.
- Search for the crypto project reliable sources
When it comes to researching a specific project, YouTube is a good place to start. Face-to-face interviews offer a wealth of information that cannot be found elsewhere and help explain some of the technical parts of a project that might be difficult to understand just by reading the project’s whitepaper. Chances are these videos will answer most of the questions you may have jotted down during your technical research. Finding the official YouTube channel of the project you are working on will probably make your technical issues much easier.
Now that you have done the technical research, you can visit the official website of the project and its social networks to find information reflecting the following points:
- Team Experience
- The quality of a Whitepaper
- The market, options for application
- Further Growth Potential
- The solution the project offers
- Popularity within the community
- Project Transparency
- Project’s future
This research aims to assess whether a particular project’s token is worth buying, usually in the hope of making a profit in the future. If all your questions are answered after the research and your concerns are eliminated, it’s time to check out what the project has planned for the future.
To do this, you need to pay attention to three things. A project roadmap to see their plan, a project blog or Medium page to see their past plans and whether they were successful in executing them, and news about the project on sites like CoinDesk or Decrypt to see what the public opinion of the project is.
Top 5 Platforms for Blockchain Projects Investment
- Binance Launchpad
One of the most popular platforms for launching tokens, which takes place on the cryptocurrency exchange Binance. The platform provides startups with its blockchain platform for successful fundraising and subsequent listing on the exchange.
It is a decentralized fundraising platform that allows blockchain teams and different companies to fund and launch their projects. They use it to create multichain token pools, raise funds, and expand their communities.
A decentralized incubator that helps promising projects reach their full potential by harnessing the investment power and potential of the community. The project team aims to democratize access to investment opportunities previously only available to wealthy investors and venture capital funds, opening a closed ecosystem of early-stage crypto-project investments to all.
Innovative technologies are shaping a new economy and the Internet as we never imagined before. Today it is not difficult to find many blockchain startups that offer solutions for the future, starting from metaverse and NFT and ending with the development of services to accept cryptocurrency payments. Most developments deserve close attention and can become a profit if invested in time.
However, it shouldn’t be forgotten about security. When studying white paper sites, do not forget to pay attention to the terms and conditions and user agreements, and do not skip a line because your money depends on it. It is also essential to check the jurisdictions that have given the projects the green light. So far, blockchain projects are not regulated everywhere, and therefore there is always the possibility of fraud.