How to Select High-Quality Blockchain Projects?

For blockchain investors, the question of greatest concern is probably: How is this project? Is its token worth buying?

To answer this question, we first need to understand what stage of development the blockchain industry is in overall, and the most intuitive data to see the development stage is user penetration. Taking Bitcoin as an example, as of now, the number of Bitcoin holding addresses is 38.46 million, while the total global population last year was 7.6 billion, a penetration rate of only 0.5%; if we count all global cryptocurrency investors, according to relevant data from 2020, there are about 70 million, a penetration rate of only 0.92%.

If we refer to internet user penetration, 0.92% approximately corresponds to the level of the internet around 2000. What was the state of the internet around 2000? It experienced an explosion followed by a bubble that burst, and after the industry was hit, it warmed up and continued to develop steadily. This is very similar to the current blockchain industry.

However, we all know the subsequent development of the internet: after experiencing the bubble burst and accumulation, a large number of internet enterprises rose rapidly, and companies like Google, Amazon, and Facebook profoundly changed our lives.

History does not simply repeat itself, and we cannot absolutely say that the current blockchain is the internet around 2000. However, because blockchain has the powerful driving force brought by the rise of digital assets represented by Bitcoin, the development speed of blockchain will be much faster than that of the internet, but in the process of rapid development, it is inevitable that mud and sand will flow together.

Overall, the current development of blockchain is still in its early stages. In the early stages of development of things, bubbles are huge, and it is difficult to distinguish between true and false. This article will interpret for you what constitutes a high-quality blockchain project from the aspects of token model, investment institutions, project team, community, etc., allowing you to develop a discerning eye.

Token Model: The Soul of Blockchain Projects

Token, translated from the English token, may be more familiar to many people in the crypto community as "coin." The token model can be said to be the soul of a project. Whether a project has value, whether it is worth participating in, and whether it is worth holding for the long term can largely be seen in the token model.

The token model can be analyzed from these aspects: the basic situation of token production, distribution, etc., as well as application and circulation scenarios.

A blockchain project's token production method mainly includes mining, public/private offerings, auctions, airdrops, etc. Among them, mining is currently the most mainstream production method. Almost all blockchain projects with high market capitalization rankings require mining. Of course, the methods of mining are also different, such as Bitcoin's hashrate mining, DeFi project's staking mining, FIL's storage + staking mining, etc.

Regardless of the form, there needs to be a reasonable and self-consistent mechanism to ensure that participants can obtain tokens fairly and can freely enter and exit. Many projects' production mechanisms are relatively complex, and some users seem to understand but not fully understand. At this time, you can look at some visible data, such as the number of mining miners, the number of staked tokens, the size of hashrate, etc.

In terms of distribution methods, there are mainly recipients such as teams, miners, communities, early investors, risk reserves, incentive reserves for related behaviors, etc. Among these, the relatively important recipients are miners, communities, and incentive reserves for related behaviors. The distribution and acquisition of tokens must promote the creation of real value by the system, such as producing content, providing storage, promoting trading and payment settlement, etc., rather than simply dividends and resonance.

In terms of application and circulation scenarios, whether the project's positioning of its own project is clear, whether the project has clear market demand, whether the market demand is rigid, and whether there are enough circulation scenarios for project tokens. Taking Ethereum (ETH) as an example, the reason why Ethereum can become the king of public chains and is considered likely to surpass Bitcoin is that its application and circulation scenarios are rich enough: various altcoins issued based on Ethereum, DeFi projects, payment and storage, staking, etc.

In addition to the above content, you should also pay attention to the token circulation rate, the number of holding addresses, and the exchanges where the token is listed. Especially the exchanges where it is listed, the more and more well-known, the better. After all, these exchanges have professional teams that have conducted in-depth research on these projects.

The above content can be obtained through official channels, third parties, media, etc., and compared for screening. It is particularly worth mentioning that the project white paper must be read. The economic architecture, business logic, technical design, and the team itself all need to be specially studied and analyzed.

Investment Institutions: Follow the Professionals

Whether a project is reliable can largely be seen from its investment institutions, because investment institutions are more professional than us ordinary people, invest more, and collect more comprehensive information. The professional investigation and screening by investment institutions before investment will help ordinary investors avoid some risks.

Investment institutions will conduct in-depth research on the project's value, market prospects, technical strength, team composition, etc. In most cases, the project will also announce its investment institutions. We can see how many well-known investment institutions have invested in this project, in what form, and how much they invested.

Investment institutions investing in projects not only provide funds but also give many subsequent supports, such as professional consulting, network and other resource support, to promote the project forward.

It can be said that entrepreneurs and investment institutions are a community of interests. Investment institutions will support entrepreneurs through their resources. Therefore, after a project is invested by well-known investment institutions, the probability of success is generally relatively much higher, and for ordinary investors, the risk is also much smaller.

Community: The Foundation of Blockchain Projects

Community, known as one of the three major attributes of blockchain, requires a relatively solid user base for a project to mature, and needs more users to participate. Blockchain communities are significantly decentralized. How to obtain a large number of users in the early stage and win user recognition tests the project team's ability very much. Many professional investment institutions and well-known large exchanges also value the project's community construction.

If the project has a good user base and an active community, the project team's performance after launching the project will generally not be too bad, and it is a potential stock worth investing in.

From the perspective of the secondary trading market, the essence of price increases is the continuous entry of new people and new funds. Therefore, the quality and consensus of the community can be said to be the foundation of the project, determining how high the building above can be built. For example, Dogecoin, which performed eye-catchingly in this market round, relied on the strength of the Dogecoin global community to make this网红币种 snowball into the top five by global market capitalization.

Project Team: Unity is the Foundation

As the saying goes, no matter how great a thing is, without excellent people to do it, it will not succeed.

The other factors of a blockchain project can be said to be the right time and place, and the team's unity is the foundation for the success of a blockchain project. The quality of a team can be analyzed from many aspects, such as the original intention of the team to establish the project, the founder's past resume, the team members' education, background, financial status, etc.

In addition, team composition is also very important. For example, in a team, there must be technical experts, operation experts, financial elites, and other talents to form a synergy to make the project vibrant and successful.

Risk Warning:

Finally, I need to remind you of risk. It can be said that all investments involve the risk of loss. While blockchain projects are favorable, there are also many bubbles and risks. Compared with traditional stock markets and other investment markets, investment in the blockchain field is still in its early stages. Many blockchain projects are still some distance from true implementation, and a large number of institutions are actually still quite far from real blockchain.

I believe that the development of blockchain will survive the fittest over time and complete the leap of the dragon gate, but as investors, you should still clearly recognize: the market has risks, and investment should be cautious.

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