Coin Evaluation Template

Introduction

How do you approach investing in cryptocurrencies? Do you play it safe and stick to the top 10? Are you a risk taker and invest only in altcoins?

Whichever the case you always have to know what are you investing in. Picking your cryptos and building a portfolio can be stressful. That’s why I’ve created for you a template for coin evaluation.

The idea is to encourage you to do your own research and have a cheat sheet when doing so. This template can serve as a reminder for what you should be looking at and what to favor overall.

Centralization type

Blockchain technology offers a possibility for us to exchange value peer to peer, in other words with no middleman. That’s why I favor those coins that are fully decentralized.

  1. Centralized (bad)
  2. Semi-centralized (neutral)
  3. Decentralized (good)

Note: That doesn’t necessarily mean it’s a good investment. Ripple is centralized but it’s still #3 in rank by market capitalization. However, those projects that are aligned with the vision of decentralization tend to perform good, as market participants entered this market for that reason.

Team and Advisory board

Social capital is the most valuable asset when it comes to cryptocurrency projects. The complexity of the project, vague legal framework, inexperience with blockchain development is just some of the problems teams face when starting a crypto project. That’s why you need to look for the all-star team with a high level of prior experience. Also looking at a coin through the team can serve as an indicator of intent. Do they want to enter the market just to make some $ or do they have a genuine idea that’s beneficial to the ecosystem?

Did the lead executives (CEO) manage/work for multi-million dollar companies?

  1. Yes (good)
  2. No (bad)

Did the tech lead managed/work for multi-million dollar companies?

  1. Yes (good)
  2. No (bad)

Lead executive years of experience

  1. 1-3 (bad)
  2. 3-5 (ok)
  3. 5-10 (good)
  4. 10+ (excellent)

Lead tech years of experience

  1. 1-3 (bad)
  2. 3-5 (ok)
  3. 5-10 (good)
  4. 10+ (excellent)

Team size

  1. 1-5 (bad)
  2. 5-10 (ok)
  3. 10-15 (good)
  4. 15+ (excellent)

Average team age

  1. -20 (bad)
  2. 20-25 (ok)
  3. 25-30 (good)
  4. 30+ (excellent)

Advisory board is equally important as the team itself. The criteria applied on the team should be applied on the advisory board members, but keep in mind that advisers are there to provide guidance for those less experienced. Therefore as a rule of thumb, advisers should be more competent than the team. Don’t fall for familiar faces and hotshots. Make sure to check if they are fully involved with the coin, or are there just to make you think competent people are backing it up.

Social media

Awareness and attention is the key for a particular coin. As the price is governed by supply and demand, a large following and loyal crowd can indicate a lot about the demand. A number of followers indicate demand, and loyalty will indicate that the coin isn’t going to be dumped.

Community size

  1. Small -10000 (bad)
  2. Medium 10000-30000 (ok)
  3. Large 30000-50000 (good)
  4. Extra large 50000-100000 (excellent)

These evaluations are compared to leading cryptocurrencies. For example, FB page called Bitcoin has around 444k likes, Ethereum has 143k, while Ripple’s group has 113k members.

Product   

This is the key point. The one that you should be weighing the most. Many projects still haven’t had a mainnet launch, and are just an idea. Investing in an idea is not bad, but it’s highly risky.

Product status

  1. Fully working product (excellent)
  2. Beta version (very good)
  3. Alpha version (good)
  4. Prototype / MVP (ok)
  5. Demo only (bad)
  6. Just an Idea (very bad)

Open source code

  1. Yes (good)
  2. No (bad)

Activity on Github

  1. Active – commits are done on a regular basis (good)
  2. Passive – commits are not done on a regular basis (ok)
  3. Empty (bad)

Whitepaper

  1. Yes (good)
  2. No (bad)

Coin strength

This is key point number two. All of the above can check out best, but if you are holding a coin that has high inflation rate, low in trading volume so you can’t sell it immediately if needed, or you would have to wait for ages for the transaction to confirm, then it doesn’t matter that the lead executive is Bill Gates, advised by Satoshi Nakamoto himself, have FED as an investor, etc.

Coin inflation rate

  1. No new tokens created (good)
  2. Deflationary (excellent)
  3. Emitted in proportion to the amount of network activity (ok)
  4. 2nd round might occur (bad)
  5. A company can decide (very bad)

Percentage of coins allocated to the founders/team

  1. 0-5% (excellent)
  2. 5-10% (good)
  3. 10-20% (bad)
  4. 20%+ (very bad)

The following three points are hard to put into a checklist, because of the dependence on the competitions (other cryptocurrencies) performance, so I am just going to point them out as they are:

  1. Trading volume against other assets volume
  2. Market cap against other assets market cap
  3. Value growth since trade start date against average total market growth

Conclusion

That’s it. Now next time you are thinking of investing in a coin or a token, go through this template and make sure that everything checks out good. It doesn’t have to. You can invest in those coins that are just an idea by two anonymous developers with no investors and now following, but this template will remind you not to put your life savings into it.

Don’t mistake this approach for Fundamental Analysis as I see many do. Rather use it as a initial screening mechanism which will determine whether or not you should proceed further with your research and the amount of attention you would give to a particular coin.

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