You know the feeling: suddenly you hear about this new fintech project that will revolutionize something. Maybe social media, maybe music, maybe data storage or data processing. Anyway, it will be big. There is a buzz about this new token on all the crypto boards you know, and even your friends are starting to ask you "if you heard about this thing". Before you even realize it, you see it on top 100 tokens in Coinmarketcap.

So, the big question arises: should you follow this project? Should you invest in it? And I'm not talking only from a financial point of view. You can invest a lot of things in a project: writing skills, support, marketing or coding skills. So, would you do it? Is it worth your time?

I think I've been in this situation at least twice a week in the last two years. Since my interest in crypto began to shadow any other major projects I had, that is. So, in time, I put together this list of questions that I'm using more or less on autopilot, every time something "revolutionary" is exploding in the crypto world.

It may or may not be your cup of tea, but I thought it's worth sharing. Feel free to take whatever you want from it.

1. Token Purpose and Problem Solved?

We're in a post-Bitcoin era. Just because you have a blockchain and you produce tokens, that doesn't mean your project is valuable. Bitcoin already does that and it has a humungous adoption (by adoption I really mean "publicity" or "awareness"). Everybody knows about Bitcoin.

So, the first and the most important question is: "does this token has a purpose and a problem to solve? A real purpose and a real solution to a problem?".

If yes, I'm moving forward.

2. Codebase

That's basically the technical solution. If you look at the coins listed in Coinmarketcap I think 80% of them are just colored coins on top of a Bitcoin-based code structure. Which means they are propagating an already outdated technology. Some of those forks are having interesting innovations, though, like Gridcoin, or Slimcoin, so just because it's built on top of a Bitcoin codebase is not discarding per se.

But it does need to have a solid tech behind it.

If I can cross off this point, I move forward.

3. Developer Activity and Affinity?

I really want to know the people working on it. Social coding platforms, like Github and Bitbucket are giving us an unprecedented level of transparency. We can see if a developer actually has a track record, we can see if there's a team or not behind a project, we can evaluate the quality and speed of the development (or support).

Oh, and by "affinity" I understand the degree to which the members of the team can coexist together without hurting each other. If you've been on Steemit for more than one year, then you remember the era in which @ned and @dan were kinda fighting with each other. In the end, all problems were solved and there is a new team behind Steemit and @dan has a very interesting new toy, Eos, but in other cases, like Synereo (or, more recently, Tezos) things were turning out bad.

So, if all is good here, I move to the next question.

4. Token Distribution (Minting) Mechanism?

Is this a PoW token? A PoS token? What's the governance structure and how the tokens are created? These question are extremely important in the medium and long run, because they can dramatically shift the course of the project as time goes by. Proof of Work, for instance, can quickly spiral up the requirements and make participation prohibitive if the algorithm is not ASIC-resistent.

Also, if we talk about PoS, I need to know how the initial supply will be minted (ninja-mining or insta-mining are not very conducive to trust, in my opinion). Which paves the road for the next question.

5. Token Supply and Inflationary / Deflationary Nature

Closely related to the one above is the economical parameter known as inflation: is the supply limited? If yes, it will increase demand by scarcity. If not, it may take some time until the supply reaches a critical mass. I wrote an entire article about these two models of creating value: "scarcity creates demand" versus "oxygen money", feel free to have a look at it if you're curious.

I tend to lean towards the "oxygen money" approach, but it's highly dependent on the context. Once I decided I agree with the inflationary / deflationary model, I move forward.

6. Project Age?

This question also includes a more specific one: "does this project even exist?". Is there some flesh around it or it's just a website and a web form with which I'm buying an ERC20 token that I will never know if it's really worth something? So the project must be real, there must be something that I can test, otherwise I will simply stop.

There is also another subtle caveat to this question: if the project does exist, but for many years, without really taking off, then I'm stopping. Competition is fierce so probably other teams have already started to solve the same problem and their solution might be better.

7. Market Adoption?

Are there any real people using the token, a part from the founders? Like it's a real market out there? Having the token listed on Coinmarketcap helps, but not always. There are some projects which are answering correctly to all the questions until now, but they don't have their token listed, for various reasons.

But there must be some "crowd effect" in the project, some interest and some positive sentiment, otherwise I won't continue.

8. Current Price?

And finally, the last question is the price. And mostly "is the price accurate or pumped?". Many coins are generating heavy social exposure and pump the price in the beginning, only to dump a few months after the launch. I'm not saying all of them are doing it on purpose, because there are many factors at play, but this can happen. It happened to Eos, for instance, which started at $4, but then dropped below $1.5. By the way, I find the current price of Eos, around $10, accurate after answering to all the questions above.

As you can see, there are 7 more questions a part from "is this token at a good price for me now?" that I ask before deciding if I'm going to invest (my time, my skills or my money) in a blockchain project.

Hope this helps :)

---

I'm a serial entrepreneur, blogger and ultrarunner. You can find me mainly on my blog at Dragos Roua where I write about productivity, business, relationships and running. Here on Steemit you may stay updated by following me @dragosroua.

---

You can also vote for me as witness here:
https://steemit.com/~witnesses

---

If you're new to Steemit, you may find these articles relevant (that's also part of my witness activity to support new members of the platform):

• Rewards: Were Does The Money Come From?
• Netiquette: How To Avoid Being A Steem Douche?
• Witnesses: What Are They And Why Should You Care?
• How Can I Mine Steem And What CPU / GPU Power Do I Need For That?
• The Beginner Guide To Not Getting Hacked On Steemit