There are more than 1500 cryptocurrencies in circulation at this time, a staggering amount considering the average person only knows the basics about the big options like Bitcoin BTC, -0.20% or Ethereum ETH, 0.68%.
When it comes to investing in smaller projects, it can be daunting and confusing to know what’s a good investment. Blockchain is a pretty new technology and it’s also accessible to the general public, which means there is often a lot of false or confusing information online. Here, we’ll explore what you should look for before investing in a project; specifically, we’ll cover the five key questions you should look into when you’re researching a potential blockchain investment project.
1. Is the project addressing a real issue?
There are a lot of coins out there that exist solely as a value transfer protocol and they don’t have anything more than what’s already provided by Bitcoin or Litecoin LTC, 0.46%. There are also a lot of blockchain companies that are just trying to get on the cryptocurrency bandwagon and don’t really have any goals or objectives for joining this technology. Think about the problems that blockchain is trying to address, and then look for a project that can actually provide a solution in real-world situations. If the project can fix something, it’s probably going to be in high demand once it hits the market. That’s something worth investing in.
2. Does the project have a working product?
Many blockchain products are a long way away, years even, to getting a working product or service. The reality is that in that time frame, a lot can happen for better or worse. That means investing in it means there’s a lot of uncertainty and risk until the working product is released. As per Monica Greenwood, a blockchain writer at Custom Essay and Boom Essays:
“if the project already has a product through development, it’s more reassuring and it’s a more legitimate product to invest in. It’s also evidence of possible success and you can see if the platform is being used as intended.”
3. Who is working on the project?
You’ll want to explore and find out if the team members working on the project are experienced, competent, and great at blockchain technology. You want to see if the team consists of people with proven blockchain experience, at a bare minimum. You should also see if the business has some marketing credentials and background, which would show that they’re serious about developing the business in the long term.
Look into the team’s social media profiles, to find out if there is any prior experience that’s related to the current project. They should all be on LinkedIn and/or Twitter so you can verify all that experience. Research the team leaders and senior team members to find out if they have a background in cryptocurrency and if they’re well-known and respected in their industries.
Also, if the team is active on the social media platforms, it means there’s a higher chance that the project will be transparent, and you can easily get some updates about the development of the project and the partnerships around it. According to Bob Jones, a business blogger at Essayroo and Academized:
“it also means the team is most likely more professional and experienced in their field. Look at how many followers the project has on social media to get social proof.”
4. Has it formed partnerships?
Projects that are serious about their future will try to form some partnerships with companies that are more established in the industry. This partnership can be with a user of the blockchain platform or it’s a partnership between two equal parties that want to research that technology. In either case, it’s important as an investor to look into whether some institutional names are looking at the project and interested in it. It means there’s more potential, whereas a project with no partnerships even after a long time in development is something you should stay away from.
5. What is the token supply?
You want to see what the token supply is, both the current circulating supply and the total supply in existence. That helps you determine how scarce it is compared to other currencies, and you can figure out how much the price could appreciate.