In January of this year, the total market value of the cryptocurrency market reached a peak of US$814 billion. However, the current market value has dropped to 210 billion US dollars, down by more than 70%, and the price of mining machines has plummeted by 90%.
At present, there are many blockchain projects in the market. Among them, there are MLM coins, air coins, altcoins, pseudo-blockchain projects, etc., which are used to collect money under the banner of the blockchain, and there are also Bitcoins. , Ethereum and other blockchain projects with actual value.
Faced with such a severe blockchain investment situation, how can investors select valuable blockchain projects for investment? What are the evaluation criteria for blockchain projects? Let's see below!
How to evaluate blockchain projects?
The white paper of blockchain projects is an important reference for investors when evaluating blockchain projects. The white paper not only covers the underlying technology, application scenarios, profit model and development plan of the project, but also gives a detailed introduction to the total issuance, circulation, fundraising plan and lifting cycle of the token.
If investors have the intention to invest in blockchain projects, they can carefully study and evaluate the project white paper from the following three aspects:
First, whether the technology is innovative. Some blockchain projects on the market now only make minimal changes to the source code of the existing blockchain open source projects, neither innovating the underlying technology, nor adjusting and optimizing the existing technology system.
For example, Infinitecoin belongs to this kind of blockchain project without any technological innovation. It only modifies some parameters on the basis of Bitcoin and Litecoin, so that the set block is generated. The shorter the time and the larger the issuance of tokens, naturally there is no long-term investment value.
Secondly, whether the project team has experience in blockchain industry. If there are senior blockchain experts involved in project technology development or investment in the project, such as Stellar (Stellar) was initiated by the former Ripple founder Jed McCaleb, then the blockchain project is relatively reliable.
At the same time, the integrity of the team structure will also be related to the future development of the project. In addition to the development and operation personnel, a complete blockchain project team should also include legal advisors and third-party agencies. Of course, the most important thing is to investigate whether the information of the project team members is falsified, and whether the team members have bad historical records, such as suspected pyramid schemes, runaways, and so on.
Finally, the asset status of the project. There are two indicators to measure the asset status of a blockchain project: the reserve ratio and the commitment ratio.
The reserve ratio is the ratio of the amount of tokens retained by the project (the project’s assets) to the amount of tokens circulating in the market (the project’s liabilities), and it indicates the extent to which fluctuations in the market price of tokens affect the project. The higher the reserve ratio, the smaller the impact of token price fluctuations on the project. For example, in the Decentraland project, 40% of the 2.8 billion MANA tokens are used for crowdfunding, 20% are used to reward project partners, 20% belong to early investors and development teams, and the last 20% are funded by Decentraland Will keep. In this project, only 20% of the MANA tokens retained by the Decentraland Foundation belong to the assets of the project, and the other 80% of the MANA tokens may be circulated in the market. Therefore, the reserve ratio for the Decentraland project is 25%.
The commitment ratio is the ratio of the redemption value of the token to the funds raised by the project. It indicates how much value must be created for each dollar invested in the project’s assets to satisfy the token holders. The higher the commitment ratio, the greater the project risk, because a high commitment ratio means that the project team needs to use less funds to achieve more commitments to token holders.
What are the elements of a good blockchain project?
Some investors have a misunderstanding that even if the use of blockchain technology cannot be a bonus item for the project, at least it will not deduct points for the project. On the contrary, if a project is not suitable for the use of blockchain technology, but forcibly adding the elements of the blockchain, not only will it not be able to improve the quality of the project, it will also increase additional costs.
So how do investors judge whether a project is suitable for blockchain? Generally, projects using blockchain technology need to have the following three elements:
One is the participation of multiple parties and the high cost of information exchange. Blockchain technology is suitable for businesses where there are many participants and it is difficult to guarantee the reliable transmission of information. In the blockchain system, data is jointly maintained by all business participants, each participant has a complete data, and all parties in the system can participate in the process of reaching a consensus, thereby preventing the system from being manipulated by a few people. For example, in the domestic letter of credit business involving many banks and enterprises, the information transmission method of the traditional letter of credit system is inefficient and the cost of reconciliation is high. The Blockchain Domestic Letter of Credit Information Transmission System (BCLC) captures this business pain point and uses blockchain technology to solve the problem of reliable information interaction between multiple parties. On the contrary, if only one or two parties participate in a project, then the use of blockchain technology is somewhat redundant.
The second is that there is no trust relationship between the participants. Blockchain can solve the trust problem. The traditional distributed system can only solve the problems of unreliable communication, downtime, timing, etc., but cannot solve the problem of subjective evil by the participants. The blockchain system can achieve ultimate consistency in a trustless basic environment, that is, reach a consensus when there are participants doing evil. Therefore, blockchain technology is especially suitable for scenarios where there are many participants and the participants do not have any trust basis between each other. However, if a strong trust relationship has been established between the participants, or there is a sound legal system guarantee and strong supervision from the government, then there is no need to use blockchain technology.
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