How to evaluate a Blockchain project

Main aspects of a project

  1. Vision: the long-term vision of the project, the type of impact it will build on its target market.
  2. Product: the product or service object of the project.
  3. Tech Stack: the platform and network on which the product relies, if applicable.
  4. Team: the group of people who follows the operations of the project in all aspects.
  5. Advisors: a group of people who support the team in the decision-making, networking and scaling operations of the project.
  6. Community: the extended group of individuals and companies that contribute directly or indirectly to the project.
  7. Business Plan: the project development plan.
  8. Market Cap: the capitalization status of the project.

Vision

  • What kind of market is the project going to challenge?
  • What kind of problems does it solve?
  • How does it compare with incumbents and competitors?
  • What kind of economic benefits are there for the occasional user?
  • What kind of economic benefits are there for the token holders?
  • How does it relate to other blockchain technologies?
  • How does the overall business work? This question will be better addressed in the Business Model section.

Project Type

  • Tokenization projects: plan the tokenization of a Business Model, through the issue of utility (ICO) or security (STO) tokens. They usually focus on the creation of a main digital product or service and use an existing blockchain platform for the automation of economic aspects, with levels of complexity ranging from the simple token issue to any advanced economic scenario.
  • Extension Layers: add advanced features on an existing blockchain, without it being affected or aware. These projects mostly aim to solve scalability problems affecting almost all blockchain platforms and to build completely decentralised services on them.
  • Blockchain: the most ambitious projects, which foresee the development of a new blockchain platform, they are also the most difficult to evaluate.
  • Communication and impression: how the website and all the informative and popular material of the project is presented, level and quality of communication, documentation and graphics.
  • External reviews: the average score level that is recorded in the benchmark sites, even if the scores are often inaccurate, a high score is very important to guarantee public visibility and attention.
  • Partners: the level of prestige of the partners participating in the project, especially if inherent in the business sphere.

Tokenization Projects

  • Is the token indispensable or is it just a fundraising tool?
  • > Indispensable: the value of the token will grow as the value of the project grows.
  • > Not indispensable: the value of the token could be canceled even as the value of the project increases.
  • How does the Token Model integrate with the Business Model?
  • Is buying something part of the Business Model? Is selling something part of the Business Model?
  • > It is interesting to check in this case the sustainability of the revenue streams, the traceability of the same and the possibility of automating a return for the stakeholders.
  • Is the token linked to the use of the product / platform, i.e. does it provide the user with exclusive access or does it provide interaction rights with the product?
  • Is the token the exclusive payment unit for the use of the product / platform, or are there others?
  • Does the token guarantee ownership of resources?
  • Does the token generate rewards that are monetizable on product / platform user actions?
  • Are any rewards generated automatically distributed by the on chain code or do they go for human governance?
  • What are the incentives for token holders?
  • What incentives are there for customers, partners and project suppliers to purchase the token?
  • Does the token grant governance rights?
  • Does the token enable interactions between users?

Extension Layer

Blockchain Project

  • Solves a specific (e.g. file storage) or generic (e.g. Smart Contract execution) problem, how does it deal with similar projects?
  • What are the incentives for token holders? Possible answers are:
  • > access to infrastructure;
  • > access to profits;
  • > access to infrastructure governance.
  • What are the incentives for nodes (all those who provide infrastructure)? What kind of relationships are there between the different types of node?
  • The relationship between nodes and between nodes and token holders.
  • What Consensus model do you propose?
  • > Most common networks are based on Proof of Work(PoW), Proof of Stake (PoS) , reputation (PoA) or other.
  • What kind of governance does it guarantee?
  • Is it decentralised enough?
  • How active is your community? How many developers are following this project?
  • What kind of partnership did the project establish?
  • What market cap do you want to reach or have you reached?

Tech Stack

Transactions

  • Which is the transactions per second limit of the platform?
  • > The scalability of the blockchain platform could directly impact the scalability of user’s business model, so users have to be aware of this limitation.
  • What is the average latency for finalizing a transaction?
  • > Depending on the application, a user needs to be able to finalize a transaction in a reasonable time (30/40 seconds) in order not to compromise the user experience.
  • Do transactions support programmability mechanisms like Smart Contracts? Can Smart Contracts perform tasks of arbitrary complexity (are they Turing complete)?
  • > Is the blockchain able to implement on-chain all the functions required by our value proposition? Otherwise we need to centralize some logic, reducing the advantages introduced by the use of a decentralized solution.
  • Are we using programmability features based on consolidated technology (such as the Ethereum Virtual Machine)?
  • > Using brand new technology for Smart Contracts means undergoing technological risks, a lack of skills and off-the-shelf solutions, a lack of support and traction by the community of reference.
  • Are there any fees for executing transactions?
  • > If the use cases foresee frequent transactions with low economic value, it is necessary to understand how much the average transaction cost becomes expensive for the average user.
  • Are fees fixed or variable?
  • > Variable transaction fees can make some use cases unpredictable and therefore inapplicable.
  • What factors do affect the transaction fees?

Consensus

  • security: how robust the blockchain is to attacks from the outside in relation to the consistency of the operations performed on it;
  • scalability: how many operations it supports in the unit of time, and therefore how many users the network can satisfy at the same time,also causing increased usage costs;
  • decentralisation: i.e. how much decision-making power is distributed evenly among all active supporters of the network (miners and other types of nodes).
  • Distributed Consensus: like Bitcoin and Ethereum, all nodes participating in the network have the same weight in verifying and indicating the validity of transactions.
  • Hierarchical Consensus: like EOS, there are sub-networks whose consent is managed in a peculiar way, however these sub-networks are supervised by a first-level network that guarantees uniformity.

Platform

Roadmap

Team

  • experience and success stories: some team members have experience and perhaps success stories in the context of the project;
  • integrity: team members have no questionable background, positions or conflicts of interest that could compromise their work;
  • network: team members have a network which is consistent with their mission.

Advisors

Community

  • the level of adoption;
  • the level of maturity;
  • the speed of evolution.
  • number of project stars, indicating the popularity of the project;
  • number of forks or clones, indicating the interest in reusing or modifying the project;
  • number of devs of the team dev and total contributors;
  • number of pull requests / number of merged pull requests, which indicates the effort of the community, external to the development team, in proposing changes;
  • number of issues / active issues, which indicate the number of problems encountered by the community and the speed with which the team solves these problems;
  • frequency, amount and date of last commits, which indicate the overall community health.

Business Plan

  • Value proposition: defines the high level objective of the project and the “product” of effort.
  • Financial plan: numeric quantification of the expected effectiveness of the project, even if its presence is not very useful (no financial plan really comes true) its absence should be an alert.
  • Market size: indicates the potential market reachable by the product, usually for blockchain projects we always think in a worldwide context.
  • Token Model: when applicable, describes the main parameters of the / of the tokens issued by the project, quantity and modality of issue, distribution and rights granted to the token holders.

Business Model

Token Model

Tokenomics

Token Velocity

Legal

Governance

Project Stage

Market Cap and Fundraising

References

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Michele Mostarda

Michele Mostarda

Blockchain advisor and entrepreneur, software engineer experienced in cryptocurrencies, startups, crowdfunding, big data and machine learning.