Comparison Guide for Crypto Reviews
These are the categories that I will be using when reviewing crypto protocols. The explanations for how I justify my ratings for each category are here.
This Guide is to go along with my first crypto review which will be posted later today. I will link to this guide for all future review.
User Activity
Developer Activity and available dApps
Founder & Team Experience
Marketing & Social Media Presence
Frog Rating & Decentralization
Security, Accessibility & User Experience
1. User Activity
This is one of the most important ways to rate a crypto protocol. As a reference, Ethereum would score a 10 in this category. People need to be using it for something. And by using it, I mean actively using it and engaging with dApps and smart contracts. Not just holding it on an exchange, or staking it to earn more.
The coin itself is often used as Gas, which is the energy to process a transaction on the network. You can consider the coin as a toll you pay to drive on the road, if the road is the network itself. Thus, one of the basic forms of demand for the coin comes from user activity itself.
If you have 10 million transactions a week, and they each burn 0.01 of the coin per transaction, then there is an inherent demand for 100,000 units for the coin each week that is completely immune to a bear market. So you can already measure a sense of velocity that forces people to either mine the coin, earn the coin in DeFi, or buy the coin on an exchange. Coins with low levels of user activity are doomed unless they can change that.
All good and transparent blockchains will have some form of explorer for users to look through and explore real time user data. On Ethereum, Etherscan is that site. In general, this chart needs to be going up and to the right at this point. In 8 years once growth in this sector has slowed down, then maybe a flat chart could be considered healthy, but for now, everything is up and to the right.
2. Developer Activity and available dApps
This is the 2nd most important way to rate a crypto protocol. As a reference, Ethereum would score a 10 in this category. In order for there to be a continued growth in transactions there needs to be healthy developer interest in the chain, as well as a strong stable of existing dApps. The value for the crypto is determined by what you can do with it.
Some examples of dApps are decentralized lending, decentralized leveraged contract trading, decentralized mortgages, Decentralized exchanges, Decentralized collectors items, and there are a lot more. So if it costs money to make a transaction, then these smart contracts need to either have the capability to make you more money than the transaction costs, or they need to be enjoyable enough to be worth the money.
You can already see how certain chains like Cardano ($ADA) are worthless, and are mostly seen as a joke by the majority of the serious crypto community. You can also see just how early we still are that projects with no functioning dApps or very much usage at all can make it to the top 3 crypto by market cap with little more than the equivalent of a few Ted Talk style videos and a charismatic founder with a coherent marketing plan and vision.
3. Founder and Team Experience
This is a more nebulous category for a few reasons. As a reference, Ethereum would score a 3 in this category when it started, but at this point Vitalik has gained the experience to make it a 10. The founder and the team need to have skills, intelligence, experience, and connections with the right people. You can have the most technically perfect blockchain protocol, but if they don’t have the business experience to know how to do SEO on their website, or are ignoring key parts of the business model, they can cause a project to fail. But at the same time, you do not want a project with too strong of a leader because you can end up with something that isn’t sufficiently decentralized like $SOL or $EGLD, where you are dependent on the team for everything and the community is not empowered to do things on their own for the health of the blockchain. Or worse, $XRP which is wholly centralized and isn’t even blockchain really at this point.
4. Marketing and Social Media Presence
This is an important category because of how early we still are in the emergence of this new technology. Estimates that only 16% of Americans currently own crypto (2 years ago, that number was 4%), and the portion of americans savvy enough to have taken custody of crypto is probably much smaller with 10 million monthly active users on Metamask in August 2021 worldwide.
I would suspect that this only amounts to about 1% of Americans currently using crypto and interacting with smart contracts (getting the picture of how much growth is still on the table?). Due to the general unawareness of the public towards crypto, marketing is important. Crypto often has to be sought out with intention. Every CEx has different coins listed, sometimes you really have to search to find what you want. And even then, there are thousands of different crypto protocols in existence. If you don’t know what you are looking for, then you will never find it.
This means that the Founding team behind the blockchain, and the users of the blockchain have to be marketing. I know this flies in the face of my constant warnings to be mindful of shills, but thus is the duality of man. The blockchain needs to be hosting live events and hackathons to attract developers. The blockchain needs to be plugged in with mid-level influencers (1k-20k followers, big enough to have reach, small enough to not be shilling). The blockchain should have paid advertisements in real life spaces. An example is $XTZ, Tezos paying McLaren’s F1 team for a sponsorship. Or $CRO buying and renaming the Los Angeles Lakers Staples Center after their crypto exchange. The only tokens that can afford to not do this, are Bitcoin and Ethereum, every one else needs to be buying ad space in the real world or highly trafficked digital spaces, like a recurring Hulu or Spotify ad.
5. Frog Rating & Decentralization
This is going to be a partially subjective rating from me. As a reference, Bitcoin would score a 10 in this category. Basically, how popular is the crypto among Anons, not the blue check crowd. If a crypto is very popular among Venture Capital, thats a pretty big red flag for me. VC’s are typically trying to make money, not to make things. The launch of $ICP is a good example. They pre-mined it to themselves and then sold to a few VC’s, before paying Coinbase to list $ICP at which point they dumped their bags on to the markets.
The more VC activity and VC chatter and Blue Check twitter activity there is, the more likely they are looking at you as their exit liquidity. You can read more about just how underhanded the VC behavior was regarding ICP here. What you really want from a token is for some anime avatar with Tibetan iconology all over their twitter profile talking about it to their followers in between making fun of an oat milk company and discussing whether any videos of plasma lightning actually exist. The more anons there are on board, the better.
I am not providing any investment advice for $YAYO, but the above tweet and the above account is the kind of activity you want to see surrounding a blockchain on twitter. The last thing you want to see is a real human face wearing a suit in what is clearly their LinkedIn photo with an account name that is just their wallet name.
https://nitter.net/_blackzodiac
Take a second, and peruse the content on this twitter account. I have no idea who they are, I’m not affiliated with them at all, I simply pulled them up when looking for an example based on a token that I know has a high frog rating ($YAYO). But it fits the metric doesn’t it? Esoteric takes, between 1k and 10k followers, and content that is far enough outside of the norm as to elicit an emotional response from the average person. (Cigarettes are bad! I’m not reading any more!) Anons do this on purpose to filter people out from their followers. More followers are not always a good thing.
Decentralization goes hand in hand with the frog rating. The more decentralized a protocol is, the less ability any one actor has to impact others. I will use $SOL again as an example. The network of $SOL is ran through over 1,100 validators, but realistically, only 4 of them are in real control, which is why the network can go down with a targeted DDOS attack. $XRP validation is done entirely on Ripple’s servers and they have 100% control of the network, its a foolish investment and is basically no different from buying stock on the NYSE in terms of how much control they have over your assets. Bitcoin is the most decentralized in terms of just how many different ASICs, GPUs, and distributed computational power is securing the network. The largest country in the world (China), made it illegal to mine BTC overnight in May and the network barely even blinked.
The Hashrate of the Bitcoin network chart is above. It’s essentially a measure of the total computing power of the network at any given time. You can see the decrease occurring from May to July, and then the network recovered as other nodes went online elsewhere. Much of the Chinese mining capacity moved over the summer, with quite a few operations even moving to states in the US like Texas and Oklahoma where power is cheap.
6. Security, Accessibility & User Experience
This is a bit of a catch all category. For security, we are asking is the protocol safe enough that you can’t lose your coins/tokens if you leave them in cold storage. This mostly goes back to decentralization. The most secure protocols also happen to be the most decentralized. If a member of the dev team or a node can decide to invalidate your transactions or to block your address, its not secure. The game of web 3.0 puts ownership directly in the individuals hands. Agenda 2030 is about owning nothing and being happy, because ownership is synonymous with control. Good blockchain puts you 100% in control of your assets.
For accessibility, we are asking questions about how understandable the chain and interface are. Are the smart contract functions and signing of transactions simple enough that with 15 minutes of instruction the average person can understand what they’re doing? For instance, Look at the interface for $UNI (a layer 2 on $ETH) below. It’s fairly clear what the transaction is going to do.
And now lets look at the interface for $DIKO (a layer… 3 (?) written on top of $STX) below. There is a lot more confusing information in this transaction, and a lot of quality of life improvements could be made to the user interface. The token names for instance are not visible which might confuse a new user. On the plus side, a link to the smart contract for the token is on the transfer page, so this can be verified as a non-fraudulent transaction, which is good, but not user friendly.
The first example from $UNI would be considered pretty accessible, while the second example from $DIKO would have a much lower accessibility score.
And finally, we have the user experience itself. How easy is it to verify that a transaction has completed? What is the relative speed of the network? Are you going to be sitting around for 10 minutes, 30 minutes, or worse, having to go do something else and come back later just for a transaction to complete? Sometimes this space can feel like dial up internet, some of you may remember early pirate bay, seeding torrents and waiting weeks sometimes for someone who had the piece of the file of a game you were trying to steal to seed the rest of it so that you could finally have another copy of Command and Conquer Generals on your PC. This space can feel very similar, except instead of a pirated game its a 5 figure transaction and the network is congested. Most of the time transactions are resolved and confirmed in 10 seconds or less.
Networks that are congested, are inherently not quite scalable without transactions being moved to a Layer 2, implementing rollups, or some other function to aggregate transactions. If we use the highway metaphor earlier, you can alleviate traffic and split Gas fees by carpooling, or having public transport allowing dozens of people to ride in one vehicle. Scalability it a problem that solves itself as a network grows, because the dApps exist on that network and the demand for alleviating gas fees pushes Devs to solve the problem in order to serve the market for personal profit.
An example of what can happen when too many people try to sign too many transactions at the same time. As a DeFi dApp called Grim Finance was hacked earlier this week, many users tried to withdraw their funds all at the same time. And so the Gas fees kept rising to pay for these transactions to the point where people were paying $8,000-$16,000 just to sign a transaction and withdraw their assets from the platform.
This, of course represents a short term increase in Gas fees on $FTM and has already gone back down, but also, as more dApps are added, Gas fees go up as more users come in, and they eventually get high enough that Devs are incentivized to fix it. Ethereum has been walking this tight rope for the past few years, and despite the Eth killer narrative, they’ll figure it out.
It’s interesting you bring up up marketing, I noticed Crypto.com sponsoring UFC, I think they started being a major sponsor this year maybe last. As much as I love mma, I don’t usually align with the sponsors and couldn’t decide whether to look into it not. I read more about the staking but got uncomfortable and didn’t go through with it.
Enjoying🎢↘️🎢↘️ the ride.