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With so many blockchain networks popping up all the time, new and even seasoned crypto enthusiasts can feel overwhelmed when deciding which are the best investments.
In this guide, we’ll outline the most important aspects of any blockchain project and why you should pay close attention to these details when evaluating different chains in the crypto market.
Example
Arguably the most important part Blockchain projects are its use cases. Why does the project exist? Is the project to enhance payment processing? Improve business supply chain or entertain users?
Technically, there is no such thing as an invalid use case, but some use cases are definitely more applicable than others.For example, a A project designed to help millions Probably more support than meme coins for getting food. If a person sees a project as valuable to them, and that value translates to a broad audience, then that’s where the project’s strengths lie.
When examining use cases, it is best to View the project’s white paper. For example, we can check out Polygon’s white paper, which details potential use cases related to the platform.
Community
A project is nothing without its community. After all, blockchain technology is an open-source and user-driven solution. When evaluating blockchains, it is often best to examine the community and see how much power they have.
Solid projects are generally as decentralized as possible, offering users from around the world the ability to hold tokens and have a say in governance. These users are often outspoken, and public conversations take place on platforms like Reddit, Twitter, and Discord. It’s usually best to join a project’s Discord server to gauge the size and contribution of its community.
Transaction Speed and Scalability
One’s chosen blockchain project may have the best of intentions, but if the technology cannot scale or handle transactions reliably, it is at a serious disadvantage. What good is a platform that can’t serve the hundreds of thousands of customers it hopes to gain?
When evaluating a blockchain, it’s a good idea to examine the network’s typical transaction speed and how it intends to scale massively. Is it possible to implement an upgrade? Will it, or is the network already using a second layer solution? Does this solution sound realistic in the long run?
The Ethereum website contains extensive documentation on its current and future approach to scalability.
One can combine this factor with the community factor, as dedicated community members will have open discussions around their favorite project’s use cases and potential upgrades and how it currently works.
Consensus and Governance
The two most common blockchain consensus methods areWorking Roof and Proof of Stake. A proof-of-work (PoW) network requires miners as users, who devote their computing power to solving complex equations and verifying transactions. Although the required computer power is bad for the environment, miners are paid for mining each block.
Proof of Stake (PoS), on the other hand, provides power to users who hold, stake or lock their digital assets. Generally, the more assets users stake, the more power they have in the network.
With staking, users typically become validators and then validate transactions, eliminating the need for miners. This process is more environmentally friendly than mining and rewards the efforts of interested users. While PoS and PoW each have their pros and cons, many believe that PoS is the future of blockchain and PoW networks are going out.
After all, PoS is the more scalable option and Ethereum is the second largest cryptocurrency in terms of market cap. Upgrade to PoS in the next few months. Consensus directly affects network governance and is an issue to consider when evaluating different blockchain networks.
team
The team behind the project is as important as the technical aspects of any blockchain. Projects should be very open to who is developing the project and the history and skills of the team.
Failure to disclose details about development teams can be an important warning sign when evaluating blockchains, as lack of information can means they are looking to deceive the user. While this is not always the case, it is advisable to stick to projects that are open to their development process.
Polkadot project Some key members are provided on its website, including their real names and histories. That said, it can be improved by including relevant social links in the team’s profile so that users can conduct their own research to verify the project and the team behind it.
route map
Blockchain should not only have a solid use case, but also a roadmap for future developments and product feature additions.
A complete roadmap usually means that the team has thought long-term about their project and how it can benefit the world. It also provides users with more knowledge about what they are investing in and whether the network aligns with their values.
Cardano Roadmap Each section of its roadmap has detailed sections, ensuring that all users have an understanding of what to expect in the future of the network.
Market Cap/Total Value Locked (TVL)
to that moment Decentralized Finance (DeFi) Projects Specifically, an important factor to consider is its total value locked (TVL) and market cap.
TVL stands for Total amount of all funds locked Enter the smart contract of the DeFi platform. The higher the TVL, the healthier the platform’s ecosystem, as more and more users are taking advantage of its product.
Alternatively, a project’s market capitalization constitutes the value of existing assets within its ecosystem as an indicator of the project’s growth potential. This figure includes not only those who use the platform’s tokens, but also those who hold the assets passively.
One can think of market cap as an indicator of a project’s popularity, while TVL can mark how much money has actually been moved across its various protocols. Both stats are important, but it’s important to understand what each stat means in relation to project competition.
DeFi Pulse details the TVLs of various DeFi projects, while CoinMarketCap lists the market caps of nearly every chain on the market.
longevity
Finally, see how long the project has been on the market. If it has been available for years, what has the project accomplished? Is it sticking to its own roadmap and being reliable, or is it suffering from constant delays and failures to deliver? The reliability of an item is a good indicator of its longevity.
Or, if a project is new to the market, consider watching it for a few months to see how things develop. If developments look smooth and the group is making considerable progress and announcements, this could signal a more solid long-term investment.
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