My Crypto Checklist
So many coins to choose from. Which one to invest in? And what do you base your judgment on?
Pretty important and though questions. Since I have asked myself these questions often when diving into new projects, I have listed the most common and important ones below to help out.
If a project scores well on these following questions, you will have less risk and more chance for some nice profit.
The checklist for when looking into new potential crypto's:
- Can it draw fiat currency (USD, Euro, Yuan etc) in such a way as to give it a valuation that is fully independent of pure speculation. Are there significant risks associated with the value proposition?
- Is it unique? Do they have a clear view of the competition? How do they plan to beat them?
- Is it rare? A limited supply with a low or negative inflation rate will lead to increasing price as demand goes up.
- MVP available? Any Alpha/Beta already there?
- Team, History
- Working with other projects? How have those projects done so far?
- Did they have an Announcement on Bitcointalk? How was well was it received? Is there still activity going on in that thread? Are they on other channels and if so how active is the team and is their community?
- What is the current operating plan
- Roadmap, how long do they think they need? How concrete is it worded?
- Proof of external security evaluation? Is the product validated by outside users
- Marketcap/24 hr volume at time of writing
- Price at time of writing, comparable price metrics, liquidity of the investment. Will buying 1000€’s worth completely disrupt the price?
- Specifications. Proof of? Governance model/security model? token structure? Legality?
- Crowdsale?, ico price? Why do they need funding now?
Nowadays many coins have their own kickstarter through so called ICO’s (Initial Coin Offerings).
Let’s look at some critical questions that might help you refrain from the more dubious and to-good-to-be-true projects.
I took the following straight from the Satoshi Fund, a hedge fund that invests only in cryptocurrencies.
Strict ICO requirements:
- Whitepaper describes exhaustive technical details of implementation
- Proposed consensus design has no single point of failure
- Team is solid and has proven blockchain related know how
- Proof-of-Concept open source code exist
Recommended ICO requirements:
- There are independent security audits of the code
- There is independent investment due diligence
- The project is fully functional at the ICO date
The following questions come from William Mougayar, a well known writer in the space, and often very critical.
Questions regarding ICO’s
- In what jurisdiction is the company incorporated?
- What legal structures are being disclosed?
- What is the token distribution structure?
- How is security handled?
- What are the apparent, perceived or real regulatory risks?
- If there is a DAO-like component, is its articulation realistic and well grounded?
- Who has written up the token issuance contracts and actual token issuance software?
- Which blockchain infrastructure is backing-up their sale?
- Have they published the terms and conditions of the sale in clear language?
And finally here are three events that should give you second thoughts on holding on to a coin:
Exit Trigger Events include:
- The asset is illiquid more than 1 year
- Development team do not publish updates more than 3 months.
- Critical issues are discovered in consensus code.
What do you Steemians think? Is this comprehensive enough? Do I miss something vital? Which of these questions do you think is the most important?
Let me know in the comment section! I always want to have more critical thinking when it comes to these kind of decisions, so let's have a discussion :)
Upcoming stories
I started my own portfolio back in 2015 and have gone down the rabbit hole ever since. There is something about this decentralized way of working together that is just fascinating. Because of this I have quit my job and started helping people understand this new mind boggling experiment by writing understandable blog posts. They used to be only for friends and family but now that I have also started giving workshops and meet-ups, I wanted it to be more open to the public. So you can expect more content to come :)
One of my creations for instance is a Wiki about the crypto environment.
If you ever think, wait a minute, which crypto was Monero again? Who was Vitalik? What does Hash Functions mean? I created a document that I regularly update (in part to help my own memory a bit), it’s called Cryptocurrency Wiki (https://docs.google.com/document/d/1zIrLEel8K7qX3MlLR06Tzp_OJaA0lhwy9_SN4fJiqdU/edit).
This document has 4 parts;
- Jargon/Definitions
- Coins
- Companies/Organisations
and last but certainly not least: - People.
It explains who/what they are, with whom they work together etc. The way I go through it when I want to search something is by pushing command/control (depends if you are on a pc or a mac) + F on your keyboard and then type in the thing you are looking for.
It could very well be that I have written something about it. This is often way quicker than scanning all those forums, websites, wiki’s and blogs.
Please don’t get mad at me if I got something wrong, I’m only human. Better yet, if you do find some wrong or inconclusive info, let me know!
Succes!
very interesting reading, can't tell you if anything of this was wrong because I'm new into this but keep it up and share the word :)
Thanks man, if you have any questions or need some more info, hit me up :)
And if later on you do find some additions, share them with us! It will help us all grow