General

A Step-By-Step Framework For Evaluating Crypto Projects

The most important role project managers play in the execution of any project is project evaluation. The importance of project evaluation to check the feasibility of such a project remains undisputed. 

Any resources invested into a project without proper evaluation must surely be a waste because the project may not be feasible at a point.

This rule also applies to the many cryptocurrency projects being developed in recent times. Even though some crypto projects may look and sound appealing to the eyes and ears, there are some factors an investor needs to consider before he decides to invest in any crypto project.

The need for evaluating crypto projects is not limited to beginners who are still on the ground floor of crypto but also to people who wish to expand their crypto portfolio. 

Therefore, having an evaluation framework for crypto projects you want to invest in will be helpful.

This article will explain a step-by-step framework to help you in evaluating various crypto projects.

How To Evaluate A Crypto Project

The first rule of evaluating a crypto project is making an unbiased judgement that is not clouded by emotions.

Oftentimes, the sentiments which we have attached to the decisions we want to make, betray us. Therefore, you should avoid making such impulsive decisions based on emotions.

Secondly, endeavour to critically analyze and examine the different aspects of the crypto project to make a better-informed investment decision. 

Evaluating a crypto project comes with certain questions which you need to ask in other to get a hint of what the crypto project is all about.

At the end of all these, from your evaluation result, you should be able to make an informed decision on which crypto project you want to invest in. 

Do not rely on speculations to make a choice, a good research will give a more correct result than speculation.

How To Research A New Crypto Project?

A good way to check on the quality of a new crypto project is by checking them out on initial exchange offerings (IEO) platforms such as  Binance Launchpad, OK Jumpstart and Gate.io Startup. These platforms can provide users opportunities to invest in such startup blockchain projects.

There are also initial coin offerings (ICOs), which are fundraising mechanisms for crypto projects. 

However, ICOs are hosted on a crypto project’s website which makes it more attractive and less secure for scammers to penetrate.

IEOs are often launched on the exchange platforms like Binance, Launchpad etc which makes them more secure because the projects undergo a series of verification processes before they are authorized to launch their token.

Hence, ICOs are generally considered riskier than IEOs but this does not mean that one should not conduct independent research before using an IEO platform. 

This research and evaluation will always aid the investor to know if the crypto project is and will be beneficial to him now and later.

Factors To Comsider In Evaluating A Blockchain Project?

If you want to evaluate the main aspects of a crypto project, then you should consider these factors before investing;

1. The vision Of The Project:

When evaluating a crypto project, beware of what is called the “vaporware” in crypto. This concept refers to projects that have the most hype but they are unlikely to achieve much.

It is important to ensure the crypto project of interest has a strong and achievable vision.

Many good ideas are propagated by the visionaries in the crypto industry but only a few are pragmatic enough.

2. Background And Team:

Another factor to be considered while evaluating a crypto project is the background and team anchoring such a project. The level of credibility and professionalism of the team will determine how successful the project will be.

When looking at the team, consider things like the team members’ experience, their history and level of expertise in the crypto space and how cohesive the team is.

3. Quality Of The White Paper:

You need to pay attention to all the clauses in the white paper to fish out any obscure language or phrase. 

A white paper is a document which gives an outline of the crypto project’s vision, objectives, the problem it intends to solve and solutions to the problem. 

A good white paper should be well written and comprehensible, otherwise, it is not advisable to invest in such a project.

4. Possible Market And Use Cases:

Another factor to consider is the potential market and use case of such a project.

Can the project solve the problem it intends to? Does the problem even exist? Has the problem been solved before? These questions should run through your mind before adopting such a project.

Also, the use cases of the project will affect the market for the project. If the project is target to a particular group of people, the market is already limited to that certain group.

5. Ability To Grow:

This is a mother factor to consider before adopting a crypto project. You should consider the likelihood of such a project increasing in value over time. The project will likely grow with time if it has a good team, strong vision and strong use cases.

6. The Product:

Another factor is the product which is the real solution the project promises to offer.

Every product has a problem it intends to solve, hence, it is important that the product is actually needed and solves a real problem. 

For example, Solana (SOL) was built to solve the scalability in the Ethereum blockchain by using a proof-of-history consensus mechanism.

It was imbued with an internal clock which can greatly enhance transaction speed, making it one of the fastest blockchains for transactions.

7. Community Traction:

Community traction is yet another factor to consider since it helps you evaluate the level of social engagement the project is getting on different social media platforms and other community groups.

You can gauge this by checking their social media platforms, blog subscribers etc. More active communities indicate that the project will likely be successful.

8. Market Capitalization:

This refers to the total value of all the tokens that have been mined and the total value of a company’s shares if the token has not been mined.

Having this information will help you know how well people have adopted the project as well as the overall size of the project.

The market capitalization shows the stability of a project because cryptos are volatile assets.

Crypto projects with larger market caps are generally more stable than the ones with small market caps.

Conclusion

In summary, evaluating a crypto project is very necessary before embarking on any crypto journey, especially if the project is a new one.

This article has given some guidelines on some of the necessary factors one should consider before making this decision. Though there may still be other factors to account for, the above factors are very necessary for crypto project evaluation.