Teach you how to evaluate a block chain project

2018-05-02Editor:Devin Zuo

During the process of block chain speech and training in the past few years, the most frequently asked questions by the students were: Teacher, could you please help me to see how this project is, whether it is worthwhile to invest? Whether if a blockchain project is worth funding or not, it can’t only be answered in a few words and requires a scientific multi-dimensional comprehensive assessment to have a relatively reliable answer.

In the face of the status quo of authenticity block chain project stored, as the general public under the premise of who does not have the field of block chain expertise and industry background knowledge, it is certainly difficult to identify the authenticity and level of a blockchain project. 

As an industry expert or technical expert in the blockchain field, there is not enough energy and time to help each student to analyze the authenticity and prospect of the blockchain project. To this end, this article examines this issue in depth and shares it with investors, entrepreneurs and blockchain enthusiasts who are engaged in the blockchain industry.

 Generally, the unreliable blockchain projects fall into three categories:

1. A typical pseudo-blockchain project is a project that can realize its business value without using blockchain technology.

2. There is a project that requires a blockchain application scenario, but the probability of success is very low.

3. Purely money-buying blockchain projects: No value, no team, no landing, only plan to raise money from investors and then run away.

Of these three types of projects, the third category of projects is the most irresponsible, which usually exists in a variety of forms.  The so-called air currency and MLM currency are traditionally the manifestations of such projects. Most of the current blockchain projects in China belong to the first category. They use the concept of blockchain and industry popularity to conduct project speculation. In reality, they are not just application scenarios, and there is no real industry pain point with blockchain technology to solve.

The second type of blockchain project, although it has just needed application scenarios, can also solve the pain points in the industry, but because of resources and operational capabilities, or regulatory policies, markets, and other reasons, the project is challenging to succeed.

In general, a pseudo-blockchain project has the following distinct features:

So how do you identify and evaluate blockchain projects? Usually, blockchain projects are divided into two main categories: foundation class and application class.

The author's viewpoint is: the key to a foundation class project is to check the team's technical strength, an application class is to focus on the team industry resources situation and the operation ability.  

If a blockchain project is not to solve the above problem, it is more likely to be a fake blockchain project. Specifically, the evaluation of a blockchain project can be made from the following aspects.

The first dimension of evaluation is the need and pain point, which is whether the target blockchain project solves the pain points in specific areas, whether there is a rigid demand, which is the value of the blockchain. For example, in the figure below, Bitcoin, Ethereum, Big Zero Coin and IOTA solve the pain points in specific industries respectively.

The second assessment dimension is technological innovation. Its technological innovation points as its core competitiveness and value in the industry.

This dimension is primarily targeted at essential block chain projects.

The third dimension is accessibility. Many blockchain projects have rigid demands that can solve the pain points of the industry, but they are difficult to land to the ground. Even if an excellent project cannot be successfully implemented if the final landing cannot be achieved. This is an empty fight for investors. There are a number of factors that affect the landing of the project, the most important of which are four aspects:

Precision insurance projects can be combined with precision medical and medical equipment implementation, using blockchain, big data, and artificial intelligence technologies to enable healthy people to pay less premium. However, due to the regulatory policy of the China Insurance Regulatory Commission, it cannot be implemented for the time being.

The fourth assessment dimension is regulatory compliance. Policy compliance is the critical factor affecting the landing of blockchain projects. In particular, the market of some blockchain projects is only located in a specific region or country. If the policies of the area or state are relatively strict and changeable, then the project is usually hazardous.

The fifth assessment dimension is the project team. For the evaluation of the Block chain project Investment, the average investor believes that the team's influence factor occupies a significant proportion. So it is a necessary dimension and link that to decide a block chain project value is worth to invest or not with the team's investigation.

The sixth evaluation dimension is the technical strength of the team. The functional strength of the team can be directly or indirectly investigated from the following aspects.

•    For the primary chain project, its core technology is innovative and industry-oriented.

•    The technical feasibility and implementation difficulty of the key technology involved in a project.

•    Whether the project has already released a test network can indirectly understand the mechanical strength of the team.

•    If the project is open source, it will generally be uploaded to Github.

•    Which basic blockchain is based on developing (for application chain)

•    Core technical team personnel. The role of CTO or technical experts in addition to programming experience requires a certain degree of industry influence.

The seventh assessment dimension is the relationship between partnership and investment. Typically, partners, project participants, and investor capabilities determine the operational and resource capabilities of a project, also play a decisive role in the successful implementation of the project.

The eighth assessment dimension is the market size. Investors need to understand the market size of their business in the industry, whether they currently have competitors, whether they are regional or global markets. The following figure shows the market size of the entire blockchain industry.

The ninth assessment dimension is the information disclosure of the project. Regular exposure of project operation information and progress information will allow investors to participate and focus on project information. 

Active multi-channel disclosure of project progress and market promotion and community activities involving project parties usually means that the project party is actively implementing the project. The following questions can help determine the degree of information disclosure for a project.

•    Project party has an official website with a dynamic update.

•    Project party has a WeChat public number or other similar platform release project information on a regular basis.

•    The code is open source, and have a certain frequency of updates.

•    Whether the project party regularly discloses project operation information, investment information, etc.

•    What are the information disclosure channels for project parties?

The tenth assessment dimension is the business model. The business model of essential chain or technology blockchain project is usually with little difference from the traditional software project or Internet program, while the business model of the Blockchain project for industry application is typically vague and ambiguous. In this way, there are several ways to control whether a plan is worthwhile business models.

•    Is there a feasibility study report?

•    Are there project white papers? The infrastructure-based blockchain projects require technical white papers.

•    Whether the business model can earn money depends on whether the value solution more significant than the cost.

•    Demand with low frequency and non-rigid requirement is difficult to succeed.

•    The business model should be simple enough and with few links at first.

•    If the business model has been verified by POC.

The eleventh assessment dimension is the project process tracing. Through the project process tracing, investors can understand the progress of the project more directly and whether it is a worthwhile investment, but can also help to control the risk of the project. If the item side can regularly come out the progress of code development and dynamic reporting the project weekly, the project will be more reliable.

The twelfth assessment dimension is risk analysis. The risks of blockchain projects usually come from multiple sources ,which are mainly analyzed from the following three aspects.

•    Policy risks: The transaction of digital assets is high uncertainty. The digital asset trading sector currently lacks strong regulation. Therefore, the digital electric currencies have incredibly high risks such as skyrocketing,plunge,and dealer manipulation. Individual participants may probably be inexperienced after entering the market, and it may be difficult to withstand the volatility of the assets brought about by the asset impact and psychological pressures caused by market instability. At present, every country in the world has different policies on block chain, digital currency, and ICO, the investors need to consider policy risks.

•    Technology risks: Blockchain technology is still under development, many techniques are still not commercially available. Most of the actual blockchain projects involve the core technologies of the blockchain, including cryptography, consensus mechanism, privacy protection, extensibility oracle prophecy technology, reasonable contract, wallet security technology and so on. Investors need to consider technical risks.

•    Schedule risk: There are many factors affecting project schedule risk, besides technical risk, the stability of team members, market operation capability, and project party's resource capabilities.

In summary, assessing a blockchain project requires multiple perspectives and cannot be judged solely on the basis of only one aspect: if there is any professional industry insider in a platform, whether investors are indicated, and whether there is a technical genius. Only by comprehensive analysis and judgment can the assessment of the project be closer to the real situation, and the evaluation results can provide investors with valuable decision-making basis.