The crypto market has expanded and changed in recent years, and it’s now an integral part of the traditional finance market. Investors now have access to thousands of emerging crypto projects at all times. When selecting which to invest in, they need to carefully assess each blockchain project based on its merits and potential profitability.
As blockchain is both an IT and financial project, this process is often difficult and requires special skills and knowledge. In this article, we’ll discuss the steps investors need to take in order to assess the long-term viability of a blockchain project.
Step 1: Understand the Problem the Project Is Solving
The first thing an investor should do is identify the market problem the new blockchain product solves. Every product or service should solve a problem someone has and is willing to pay to solve.
It often happens that an IT product offers an interesting and novel feature but doesn’t address a specific problem for which there’s a market. Some investors are willing to invest in such products as well for their potential, but they should also be aware that there’s no clear way to profit from them.
The most common problems blockchain currencies solve are about trust, transparency, ownership, and coordination.
Step 2: Analyze the Team and Leadership
A strong team is often an indicator that a blockchain project is worth investing in. When assessing the team, the investor should go beyond the founders and focus on CEOs, managers, IT experts, and, often, the financial side of the team as well.
Public profiles, prior industry experience, and transparency about the role in the project are all good indicators of strong leadership, but there are no guarantees.
A wider development team is just as important as the leadership and is often easier to research. The goal isn’t just to assess whether the team can deliver on its promises, but also to determine whether it can scale the business and deliver a high-quality product for years to come.
Step 3: Evaluate the Technology and Architecture
Technology is the backbone of any crypto project. Start by identifying whether the project is a Layer 1 blockchain, a Layer 2 scaling solution, or an application that uses an existing system. Each of these options has its upsides and downsides regarding security, decentralization, and scalability.
Features such as transaction speed, network security, and the fee structure are most important to end users, so focus on them when assessing the project. Open-source code is often a good indicator of quality, as it allows independent developers to contribute to and improve the project.
The software should also be updated regularly, and a team should work to fix bugs and address user-reported issues. This shows that there’s a dedicated team behind it and that efforts are being made to improve the software.
Step 4: Tokenomics and Economic Design
Tokenomics determine how value flows through a blockchain ecosystem. The process starts by understanding how the tokens can be used. This can include payments, governance, staking, and access to services. Cryptos have long been used in some industries, such as gambling. For instance, Roobet casino reviews show that players can wager in crypto with low fees and an easy interface. It has been the case for years.
However, as blockchain-based currencies are increasingly used for more complex purposes, the ecosystem needs to support more advanced features as well. Investors should examine the total supply, the inflation rate, and the token distribution.
For instance, tokens that allocate large amounts to early investors could lead to heavy selling pressure. Well-designed tokenomics should balance between the needs of users, developers, and validators to benefit in the long run. The ecosystem shouldn’t rely on a constant supply of new users to operate.
Step 5: Adoption, Partnerships, and Ecosystem Growth
Long-term profitability of a crypto asset depends on how it can be used in the real world. Adoption metrics are often more important than the value and price index. For instance, an investor should be aware of the number of active users, developer activity, and transaction volume.
Good projects also attract third-party collaborations. Those create tools, apps, or integrations on top of the core project. Partnerships such as these also demonstrate that the investment is credible and fosters collaboration within the industry.
Steady, organic growth in scale is also more important and more meaningful in the long run than sudden spikes and increases that some projects tend to experience and then quickly lose.
Step 6: Governance Model and Community Strength
Governance shows how a project will evolve over time, and therefore, it’s one of the most important metrics to keep in mind. A decentralized governance model allows token holders to vote on upgrades and changes. Consequently, they are not relying on a single team.
The investors should check if the voting power is concentrated among a few large holders. Community strength is a key factor when choosing a blockchain project to invest in. Communities with active forums, user participation, and open discussions are often a better investment than those that don’t generate such activity.
Projects that have a network of active community members tend to adapt to changes faster and respond to users’ needs in ways that alleviate the problems and glitches users experience. All of these features are important for investors.
To Sum Up
There are many potential blockchain projects that investors could be interested in, especially now that cryptos are so widely accepted. Investors should carefully evaluate blockchain projects before deciding which are worth investing in and which could turn a profit later.
Several metrics could be used to demonstrate that the project is worth pursuing. Not all of these are about technology, infrastructure, or real-world use. They are also about the community behind a project, but in terms of the user base and developers. Once an investor takes all of these into account, they can make an informed decision about their investment.
