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Our newly launched ebook “How to Find the Best Cryptocurrency to Invest In - 2018 Edition” explores three categories of cryptocurrency fundamentals - coin utility, economic and technical foundation, company and community - and provides you with some subcategories by which you can assess the potential value of a cryptocoin or blockchain. Here’s the second excerpt from the eBook that is available for (free) download over here.
There are mainly three types of Coins:
The main purpose of a cryptocurrency is to function as a store-of-value that can be exchanged between users.
A good store-of-value will comply with many of the qualities of ‘good' or 'sound' money:
At the very least, a cryptocurrency requires liquidity so it can serve as a means of value exchange.
Examples: Bitcoin Cash
Blockchain platforms allow third parties to build decentralised applications (dApps) on top of their framework of algorithms. The benefit is that it allows companies and individuals without blockchain and cryptography expertise to make use of blockchain utilities, such as smart contracts and other decentralised applications.
Examples: Ethereum, EOS, 0x, NEO, Qtum
Blockchain applications focus on providing users with a particular functionality, for example, cryptocurrency exchange, financial services, social networks, etc. While some applications have their own blockchain, others are built on top of a platform such as those described above. Each of the applications has its own token to represent a holding in the application, and users of the application are often required to redeem the particular tokens in exchange for use of the application.
Examples: STEEM, Binance, Auger
Assess: Does the coin have underlying utility that contributes value to the blockchain ecosystem and/or mainstream ecosystem? How great is the demand for this utility and the value it will contribute?
If there is no underlying utility to give value to the coin, it is likely that demand (if any) for the coin is based on speculators’ frenzy. Just like a ponzi scheme, the last ones to enter the scheme forfeit their investment.
This blog is part 2 of a 4 part series. To follow the series, you can subscribe to receive our blog updates by email or follow us on social media, or you can download the complete series in eBook form.