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Is a CFA® Charterholder and founder of MPower365.com. A site devoted to helping people integrate cryptoassets into their investment portfolios. The CFA designation is globally recognized and attests to a charterholder’s success in a rigorous and comprehensive study program in the field of investment management and research analysis.

Visit the site to subscribe to the newsletter and stay up to date on his latest research into cryptoasset investing.

CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.

Assessing A Cryptoassets Scalability

Is Your Investment More Likely to Rise Up or Burn Down?

Five components of scalability:

  • Project leads can hire and develop
  • Clearly defined roadmap to obtain a share of the market
  • Outside Developer Interest in contributing
  • Sustainable Burn Rate
  • Geographically distributed

Depending on how far along the project is there will be varying degrees of assessing their ability to hire and develop you can do. For small, recently launched projects this may not be readily discernible. For larger projects further along it becomes easier.

Is a project lead an evangelist? If so will he be able to bring his vision to market with a strong technical team he’s hired to fill in the skills he lacks.

Alternatively, the lead is a technological wizard. Has he surrounded himself with people versed in marketing to get the word out about the project and build a community around it?

When checking out the project leads background verify they’ve built teams with diverse skill sets to tackle problems in the past.

Road Map

While strong technological underpinnings are important, sustained success requires technology to be complemented by a strong go to market strategy.

A roadmap is important because it gives you a clear understanding of how the project intends to get to market. Anyone can put together a white paper to try and raise capital.

A roadmap outlines the project team’s pursuit of the vision from the white paper and provides milestones to evaluate as an investor. This is one of the advantages of investing in a coin post-ICO. You have a chance to evaluate the likelihood a project will achieve its goals based on their track record of hitting milestones.

One of the keys to hitting milestones is outside developer interest.

Outside Developer Interest

The reality is even if you are capable of making great hires. Most of the best developers will never come to work for you. For projects to succeed they can’t just rely on the talent, they have internally.

They need to demonstrate an ability to attract interest from outside developers. This is important for two reasons. It helps strengthen the core offering if a project is open source. Partnerships with developers also expand the ecosystem around a project.

Ex: some of Ethereum’s co-founders went on to build dApps and protocol enhancements for Ethereum outside the scope of the remaining core project team’s focus.

Two resources I’ve found helpful for evaluating outside developer interest are onchainfx.com and coingecko.com

Onchainfx provides a nice summary of the Github activity around projects and whether it is increasing over time. It also provides a lot of other great info helpful for evaluating projects like transaction volumes.

Coingecko encapsulates all of this information in what they call a developer score. Scaled to a 100 with a higher score being better than a low one, derived using the activity from the repository of the project on Github.

You are also able to dig deeper into the numbers if you prefer to get details on commit activity and code changes. I also like the fact Coingecko has trend numbers you can follow. A new project trending upwards is potentially a better investment than an older project with higher absolute activity if it appears the developer community is losing interest in it.

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Outside developer interest aids sustainability. As their involvement is often community driven and comes at a lower cost than hiring on full-time talent.

Sustainable

When I see a company that hasn’t raised a lot of funds, has a large team, and the coin they created has a low market cap. This signals they are burning through money quickly and won’t be around long. The best project in the world isn’t a worthwhile investment if it runs out of money before it succeeds.

Dappcapitulation.com is a helpful resource for staying on top of some projects treasuries and burn rates. Currently, its data set is limited though and you’ll typically need to do a web search and check out message boards or discussion channels. To get a good handle on how, when, and where projects are spending their funds.

One use of funds with a payoff for scalability is investing in expanding usage globally.

Geographically Distributed Usage

Think about how widespread usage of Bitcoin is globally. Every project should aspire to this, empowering users to connect with each other worldwide.

Does the project have global ambitions? Projects with global ambitions have a larger potential user base giving them a higher ceiling for scaling.

Unfortunately, the tools needed to break down usage globally quantitatively are not extensively built out yet. So your analysis will need to be more qualitative.

  • Does the team talk about global reach?
  • Is there multilingual support?
  • Are updates provided in multiple languages?
  • Are there dedicated evangelists in countries across the globe promoting the project?
  • Are there dedicated social media channels for the project in multiple languages/countries*?

*WeChat is huge for crypto in China so make sure you check it out along with the typical gathering places we tend to default to in the English speaking world.

Nano is an example of a project that started out US-centric and has done a good job of scaling globally. Building an evangelist network in countries worldwide and highlighting the efforts of these evangelists to increase adoption in their countries in a weekly newsletter.

Global reach is not just important for scaling it’s also important for securing which will get into next in a discussion on node quality

Resources:

Onchainfx

Github

Coingecko

Dappcapitulation

The following two tabs change content below.
Is a CFA® Charterholder and founder of MPower365.com. A site devoted to helping people integrate cryptoassets into their investment portfolios. The CFA designation is globally recognized and attests to a charterholder’s success in a rigorous and comprehensive study program in the field of investment management and research analysis.

Visit the site to subscribe to the newsletter and stay up to date on his latest research into cryptoasset investing.

CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.

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