How to Evaluate New Crypto Projects and ICOs
A crypto project is a network that uses cryptocurrency and blockchain technology to record all the transactions and keep a decentralized network of users. The recent years saw the significant attention and popularity of cryptocurrency projects. We all know that cryptocurrency is a digital or virtual currency that uses cryptography for security and safety. It operates independently. Cryptocurrency has many advantages such as decentralization, blockchain technology, and smart contracts which enable the automation of agreements, etc. Crypto users can store their currency in a wallet using private keys. It will store their asset securely, and the wallets can be hardware-based, software-based, or paper-based.
Crypto projects encircle different pieces that contribute to the overall functionality and success. A crypto project is a digital endeavor to create, develop, and implement a specific cryptocurrency, application, or platform. These types of projects can be varied from alternative currencies to decentralized applications. Blockchain technology plays a pivotal role in every crypto project, in a way, it is the backbone of the project.
This article will take you to how to research new cryptocurrencies and projects, what are the key indicators of a promising project, what are the red flags and warning signs in new projects, and the ICOs, IEOs, and IDOs.
How to Research New Cryptocurrencies and Projects
Let’s check how to research new cryptocurrencies and projects. Since the inception of Bitcoin in 2009, finding new cryptocurrencies has become important. The urge to find new cryptocurrency has led many new investors to try it, but they were unsure about how to find the way. The section below will explain how to research new cryptocurrencies and projects.
The first point to consider here is always a checklist before investing. Consider it as an official document to list down information such as team members, the project’s use case, tokenomics, and roadmap. The use case is the main problem that the crypto project is trying to solve, Tokenomics or token economics is the basic plan of how the project’s new crypto tokens will be distributed. This section will decide how many coins will go to every section of the team and what type of coin it will be. There will be a lock-up period for the founding team to lock up the tokens. If the lock-up period is longer, it will increase the confidence of investors in the project’s long-term bond.
The founding team is an important part of the research process. It’s important to check the background of all the members of the founding team. One must consider their experience, does their background matches the project, did any of the members have any fraudulent history with the past projects, etc. Almost all the crypto projects are community-driven. That means the growth of the community will increase the confidence of the investors. Popular platforms such as Twitter, Telegram, and Discord can be used to build crypto communities.
Key Indicators of a Successful Crypto Project
The key indicators of a promising project are market capitalization, high trading volume, competitor analysis, engagement, price, immutable transactions, active addresses, etc.
- Market Capitalization – Also known as market cap. It is the total capital of a company.
- High Trading Volume – Trade volume is the number of shares traded within a period. A high trading volume indicates liquidity and strong heed.
- Community and Adoption – As I mentioned above community adoption will help to increase the confidence of the investors
- Immutable Transactions – All the transactions with cryptocurrency will be added to the blockchain. Nobody can alter or delete the transaction then, and this will help to increase the safety and security of the ledger.
- Active Addresses – The wallets must be engaged always. Low amounts of active addresses will result in doubting the project’s credibility.
Understanding ICOs, IEOs, and IDOs: Which is Best?
ICO means Initial Coin Offerings, is a blockchain-driven economic process. It will help to sell coins or tokens to sponsors in return for virtual payments. This term was introduced in 2013 but only became popular in 2017. ICOs will raise money quickly because they are easy to understand. By using ICOs, business owners can inspire investors from all around the world. Mostly all the campaigns of ICO development services last for thirty days, and within this time all the businesses acquire funding.
IEO means Initial Exchange Offering, and it is almost similar to ICO. Initial Exchange Offering swears that the tokens will be listed on the market for sure. Some of the recent famous blockchain projects such as Elrond and Polygon started as IEOs. All the exchanges undergo KYC or AML verification, and this guarantees very high security for investors. No dishonest practices will take place because of the regulatory framework.
IDOs or Initial DEX Offerings can be used to make the crypto coins created recently available to the general public. IDO benefits are similar to IEOs, and IDOs are approved by a decentralized exchange community. The decentralized exchanges don’t require any KYCs.
Red Flags to Avoid in New Crypto Projects
There are some warning signs and red flags to know. Let’s take a look at it;
Red Flags
- Anonymous team – One must know the team very well. What’s the background of every team member, does they have any negative history with the project they worked on before, etc? These are some of the factors one must consider while doing the background study of the members.
- Promises of high guaranteed returns – A guaranteed return within a short period is a clear sign of deceiving and a risky project. No investment or exchange platforms can promise guaranteed investments and there are risks of loss associated with it.
- Lack of use cases and utility – There must be a clear idea about what the project is trying to solve. Otherwise, it will end as a failure. The truth is not all failed crypto projects were scams, some had good ideas, but there was no business to generate returns. Many of the failed crypto projects had a product or service that had no demand.
Conclusion
Now you have understood everything about crypto projects and ICOs. Many opportunities with over 10,000 crypto coins are out there. It’s like if there is a good, there is a bad. The chance of fake or scam crypto projects is there. So, consider all the above factors we have mentioned before approaching any projects.