Evaluating the value of cryptocurrency and blockchain-based project

We are faced with so many choices in cryptocurrency based projects. Getting onto the internet we come across many crypto projects and the related cryptocurrencies. Friends and relatives come up with lists of crypto businesses worth of our considerations. Making objective assessment of these on an individual basis is critical. When I started dealing with internet based businesses a few years ago, one of my mentor told me something I have always remember along the way. He said that before joining an online business, it is important to evaluate it on the basis of its products or services. It is always best to join an internet based business that has a remarkable product or service, which you can prove. Joining a program because it promises huge returns in itself is not good enough. Scammers promise people huge returns for small investments. Many people lost their valuable time, efforts and resources out of that. The issue of evaluating business models and investment opportunities is critical. As crypto enthusiasts, how can we evaluate crypto-based projects? I will try to give some few guidelines.

The viability of a crypto project, from the investor’s perspective, is based on the utility of the cryptocurrency and the predictability of business outcomes. I will talk a bit on the predictability of an online business project. Predictability is about consistency. If clients do something in a certain way, several times they should reap similar results.  Predictability shows low level of risk involved in a business. It is normally described as how much a client can foresee or foretell a certain outcome following a specified action. A crypto-based project should have some certain degree of predictability. You, as a user, should guess a certain level of return after putting a certain level of effort and resources into the project. An online project that implements so many changes within a short space of time, may not be a good platform to invest in. Whatever changes to be adopted should be gradual and incremental rather than disruptive. I once worked with a project where changes were introduced almost on a weekly basis and willy-nilly. Online companies that introduce willy-nilly changes usually are inclined to benefit on the expense of the users.

Let us turn attention from the issue of predictability to that of utility of the cryptocurrency and the supportive nature of the accompanying ecosystem. When assessing a crypto-based project one needs to look at the size of the community involved and the potential of the increase in the community. The stability of a cryptocurrency depends on the number of participants and the role they play. A cryptocurrency that operates with a large community is usually stable and more valuable.

In itself the crypto coin should have a pulling effect based on its functionality. It should act as a strong incentive to people or businesses to own it. It should serve a very critical function for the community and the wider economy. An example of a token that is serving a big community and the users value it is the BAT owned by Brave Browser. People who use brave browser for surfing the internet earn it. Imagine its utility as it circulates around the global community of the Brave browser users. It also rewards creators of content. Ethereum is also a very functional token as it is linked to creators of various platforms, including content creating sites. It has supported a lot of decentralised communication systems. Some functions of cryptocurrency include voting rights, acting as medium of exchange and a measure of dividend payment. Some peer-to-peer marketplaces use their tokens as medium of exchange, thus have high utility. The Omni of OmniBazaar peer-to-peer marketplace derives its value because it is a medium of exchange. A coin that does not have a strong use is useless since it is just for speculative purpose. So when looking at investment opportunities one needs to evaluate a cryptocurrency based on its utility.

One outstanding feature of any cryptocurrency is scarcity. This is also a critical requirement of fiat currency. Scarcity means that there is limited supply of the coin. If the supply is limited and there is a rise in demand, the value of the crypto coin increases. One mistake which some companies face when having their initial coin offering is to introduce a very large supply of a coin and giving people easy way to acquire the coins. This weakens the coin value. We have seen some firms resorting to buying back their coins. The problem of wishing to buy back coins introduced on large supply, is that people lose confidence in the cryptocurrency. This results in the ultimate failure of the coin. This is linked to the issue of perception of the coin. The value of the coin depends on the its perceived use. To increase the perceived value of a coin, the offering firm can do better by getting into partnership with well-known companies or organisations.


In a summarised way, this discussion has focused on how someone can evaluate a crypto project and its currency. The internet these days is full of whiter papers of prospective crypto businesses. By reading the whitepaper, one is able to deduce the viability of the project. When the company has started operation, it is also wise to assess what it does on the ground and what is on its whitepaper. A wider variation could indicate a possibility of unpredictability. Remember when we talk of investment in a business we do not only talk of financial resources. A person invests in various ways from resources, effort and time. None of these should be wasted. Time is a valuable resource because we have limited number of hours in a day. As an entrepreneur you need your return in form of a profit. If you receive nothing for a year of heavy investment in time and effort, you have incurred a loss. Critical evaluation on the start of the project insures you against heavy losses.

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