Investing in cryptocurrency is risky. This is a new asset class. This is an emerging technology. We don’t know where this space is going, but what I can tell you is that there’s a lot of opportunity in this space. Let’s take things with a grain of salt. There are a lot of opportunities, but there are also a lot of pitfalls.
A lot of dangerous scams are happening it’s very easy to get your face ripped off. People hear about cryptocurrency, they put their life savings into some random project, and then the price falls 50-60% sometimes and then they panic and sell – and I just feel so bad for those people, because there’s not a lot of good information out there to help them prevent situations like that and then it turns these people off from cryptocurrency as a whole. So the industry loses someone who otherwise could have been a supporter. You know, maybe they could have contributed to the space in a positive way who knows but because they got burned like that, they’re gone they’re done there, not getting back into crypto ever again.
So I want to prevent that from happening, so I've created this article so that you’ll be able to kind of do your research on different cryptocurrency projects as you go along.
I hope you guys read my articles for more great information like this and with that out of the way, let’s get into it. As far as I can tell, there are three really important criteria to any cryptocurrency project that you need to understand and understand very well before you ever think about putting any real money into it. So we’ll start with the first one.
This is a real product, something that works, something that people can use right now. There are a whole bunch of cryptocurrency projects out there that oh we’re building this and so and so and it’s going to be available at you know, XYZ time. I don’t think those are necessarily the best or worse investments, but I’m I always come from it as a skeptic, once you’ve filtered out the projects that don’t have anything that people can use right once you’ve gotten rid of those you have to ask yourself Is this project competing with something that already has first movers advantage, so does it make a real improvement right and I think a really good example is litecoin versus bitcoin.
So bitcoin is the internet of money. It’s the thing that you know: if you’re a native internet kind of person you can use bitcoin, most people recognize and accept bitcoin. It ha just has the network effect. A lot of people know about bitcoin. A lot of people have invested in bitcoin, but not a lot of people have invested in litecoin. Now, let’s look at what litecoin does in comparison to bitcoin.
5) Litecoin as compared to Bitcoin
It doesn’t make a real improvement, at least as far as I’m concerned it hasn't. You know it is technologically speaking impressive right. I don’t want to take away from that because it does use a different algorithm and I don’t even understand all of it quite that well, but at the end of the day all litecoin does, is it replicates bitcoin. It’s a bitcoin that has slightly lower transaction fees and it’s a little faster now. Those are improvements, and, let’s not ignore that technically impressive, yes, but you don’t want to put your money into something, that is only a slight improvement because guess what bitcoin has a first movers advantage? Do you think that people are going to suddenly shift away from bitcoin into litecoin for slightly faster transactions and lower fees? No, that’s just not how it works now, if it was all of a sudden, you know instantaneous and no fees, and it was still as secure and as good as bitcoin in every other way.
6) Litecoin – Not an Improvement
Well, maybe that would be a significant improvement right, but it doesn’t. It doesn’t do that it doesn’t make a real improvement again, not as far as I’m concerned. Now I don’t want to turn this into you know bitcoin versus litecoin thing and if you’re, if you own litecoin, it doesn’t have first movers advantage.
7) Bitcoin over Litecoin
The bitcoin market capitalization is 80 times larger than litecoin and that’s probably not going to change. So that’s the litecoin versus bitcoin example. I think it’s also worth talking about something: that’s not as black and white, at least not to me and that’s the protocol wars.
So this is essentially who is going to be the computer of the internet. Who is going to power all the decentralized applications right now? It’S Ethereum Ethereum is the biggest. It has the first movers advantage, and it is, you know there is a lot of controversy over who is going to replace Ethereum.
9) Ethereum Improvements
If anyone – and no one quite knows because again it comes back to this problem, does it make a real improvement, and are those real improvements if they make any going to justify overtaking something that has first movers advantage because that is very difficult to do when you have first movers advantage you’ve got all the benefits, you are the largest. You have network effects, you have already scaled and that is going to be the hard part, especially because Ethereum is upgrading right. The Ethereum improvement proposals and Ethereum 2.0 and so Ethereum isn’t like a stagnant scale thing. That’s never going to change it will so maybe Cardano or binance coin or polka dot or avalanche are some other examples out there. Maybe they do make some real improvements, but nothing is stopping Ethereum from implementing those improvements on its own.
So that’s kind of the big controversy there. If you can pick the right, one put your money behind it. You’re going to make a lot you’re going to be good, but let’s move on to point number two: is there? a community. A community is the most important thing in any cryptocurrency project because these are the people that use this stuff.
Do people, use it and care about it and like it matters to them because this is going to be how the word gets out. This is going to be how people learn about the project and it’s easy to see. If there is a community or not right, it’s very much like does this have a working product? Do you know it’s very similar in that regard, but the problem is: is there a real community, and sometimes this can be difficult to tell now? I want to introduce you to a word called astroturfing, so this is something it’s pretty sneaky.
It’s seen around for a long time, but not a lot of people know about it. So astroturfing is where you try to create a movement or maybe you do create a movement, and you want it to appear like it’s, grassroots and or you know, generally unorganized, and this is just a natural thing that people feel very strongly about. But you created it, you were, you know, pulling the strings behind the scenes.
12) National Smokers Alliance
You were organizing things, it’s more of a collective organized effort. The funniest real-world example has to be the NSA, not the government bureaucracy, but the national smokers' alliance. So everyone knows today that smoking gives you lung cancer, it’s bad, for you hurts your lungs so on and so forth.
We all know this now, but that wasn’t public knowledge for a very long time right. It took about a hundred years of people fighting the tobacco companies to get the word out. So what the tobacco companies did was. They created the national smokers' alliance and they astroturfed they put money behind this they made it look like it was an organic thing, but it was very organized and they created this little community that stood up for smokers, right, fight, political correctness and smoke a Cigarette, let your kids smoke cigarettes right all these kinds of things, so they did that to try to you know, increase people that use tobacco to stop legislation from passing. That would be anti-smoker and it was just one big dumpster fire people figured it out pretty quickly because well, they weren’t very good at it. But here’s the other problem, though astroturfing has been going on in cryptocurrency since day one because this is the wild west.
When you send cryptocurrency, you can’t undo it right. If you scam someone on PayPal, they can go to Paypal and say: oh hey this guy scammed me. I want my money back.
Paypal is going to step in and say: okay, let’s figure this out but online in cryptocurrency, you trick someone into sending you their bitcoin. They send their bitcoin, and that’s done! God they’re! Never going to get that bitcoin back so, which is why there are just so many scammers and one of the biggest examples for Astro curving has to be the big connect problem or issue. So this was a lending platform and you know this was one of those things where you put your cryptocurrency in bid connect.
They pay you some kind of interest and well you get rich, they get rich, it’s good for everybody. It was too good to be true. I mean they were giving like 300 interest on whatever you held in there.
If it sounds too good to be true, it is now what they did was elaborately astroturfed, so many different communities. They fooled it and you know they fooled everyone into thinking. This was a legitimate thing and they scammed, I mean millions of dollars. I don’t know the exact number, it could have been billions. Who knows, but it’s scary, you know and that’s not the only example. There are a lot of smaller-scale examples.
15) Other Issues
You know, projects that are out there random cryptocurrencies, because it takes very little effort to create a cryptocurrency. You can fork bitcoin tomorrow, and make a slight improvement. You know make you do a little bit of this a little bit of that and it’s out there, and that’s that all you have to do now is convince people to buy it.
So once you understand that there’s a lot of astroturfing going on inside the cryptocurrency communities online once you understand that, well, how do you identify those? How do you spot them before they get you right, because once you get into some of those communities you can get brainwashed, they can feed you all the good information in the world? Oh, this random cryptocurrency is going to, be the next bitcoin it’s better than bitcoin. It has all these benefits and technological improvements, and you know next thing you know you’re out of money, you know, maybe it’s a bit connected or maybe it’s just you know, someone created a bitcoin clone and, let’s maybe not even a real improvement, not even a change, all they did was change the name.
16) A Religion?
Sometimes that happens too. So here are some things you can watch out for you find the community right. Are there people that talk about this and care about this project? So you find that community and then go in there and ask yourself: are these people dramatically writing everything? Does this sound like a religion now this one’s kind of tough, because even in legitimate working cryptocurrency projects, sometimes it is a little dramatic, a little crazy, or if hey you look into some subreddits on cryptocurrencies and you would think that this was their religion?
Some of them, but something else you can look out for you know a couple of things high centralization: does these communities exist in other places on the internet right? I think a good example is you know, let’s apply this to bitcoin, there’s a bitcoin subreddit. Some people talk about bitcoin on Twitter and Facebook, and you know every social media. That’s out there, it’s decentralized, there’s not one place that these people congregate.
Now, if the only people that talked about bitcoin – oh well, they just all happen to be on Reddit in this one specific subreddit and they don’t go anywhere else. That’s fishy, that’s very fishy! So if the people that talk about the cryptocurrency projects hang out in one place only online – I would be you know – that’s a red flag right there, and now it doesn’t necessarily mean that it’s an Astro, turf community. You got to use your best judgment you’re going to have to think for yourself on this one.
Do the people in there talk like bots right again, goes back to you know, it’s a highly centralized community, and they all talk about this project like it’s the religion, that you know, two red flags right there and the number three right here. A lot of things to watch out for is the celebrity influencer endorsement. You cannot trust people that are famous in the real world on the internet or otherwise, because guess what they’re just trying to make money like you are, but because they have the name recognition, they have a lot of people.
18) Why not Invest
That’ll follow them buy into the projects that they pump. You're right, they can make a lot of money doing this stuff, and this is why I mean there are just so so many examples, and this is why I don’t watch or listen to a lot of people. You know big names talk about different projects to invest in because, well you know they bought in before they talked about it publicly billy bob, the country singer, decides to put a hundred thousand dollars into some random cryptocurrency project, and then the next day he tweets about.
Oh, everyone buy this cryptocurrency project. Well, all his country, music fans, are going to buy into that cryptocurrency project. The price is going to go up, billy bob, the country singer sells out, and this is a gray area of the industry as a whole and there’s not anything.
19) Careful Before Buying
People can do to stop this from happening. I would strongly recommend you be skeptical of people that are celebrities or influencers telling you to buy this or that no I’m not saying this is like a one and done thing like you know if a celebrity endorses your cryptocurrency, it’s a scam right because there Are a lot of people that do this for bitcoin it doesn’t make bitcoin an astroturf community, it’s just something to watch out for and then another thing to watch out for in these astroturf communities and projects. Explosive growth, explosive growth is a red flag, because a lot of growth can be hacked right.
20) Scam Coin
You can pump up the numbers on a subreddit or a social media following you, can buy ads and drive traffic and make create accounts, and you can have people create all their fake accounts and you can just create a massive pro like if I wanted to. I had enough money and resources and manpower behind me. I could astroturf a Twitter account and get it to like a hundred thousand followers, two hundred thousand followers and there’s not a lot of ways that people would be able to know.
Oh wow, a hundred and eighty of those 200 000 followers are fake, it’s really hard to tell, and then that means those 20 000 people are getting duped right because master care for me, maybe I’m using all that celebrity influence to pump up some Scam coin, so I can get rich. So if you wanted to simplify things, ask yourself the one really important question: do these people care about the project fundamentally right, whatever this project is trying to do, or do they care about trying to get rich when you break it down like that, it’s pretty easy To see which communities are filled with getting rich quick that are going to sell their bag, the second that it’s good for them and screw you over in the process and the people that do care about building something. That’s going to be the future of the web.
The next great big thing: that’s going to benefit not just them personally, but everyone. So we’ve got a working product that people use. We’ve got a community of people that use it and then we’ve got this number.
Three-point here: a good team: these are the people that are leading everything. These are people that can make or break a product project because of these people, their judgment isn’t good, they’re stupid or they don’t care, or they just want to get rich quick. That can be the difference between a world-changing revolutionary technology that improves the world and their little get-rich-quick scheme.
So these people, you need to trust them, because, at the end of the day, these people can make or break everything they can make or break. And I would start with the leadership because these are the most important people that are in the organization generally. They are startups.
So how many of these following components do they have and do they have a background in big tech? I don’t think working at google or any other fang company necessarily makes you a good leader or a good entrepreneur or whatever else, but I do think that, it kind of signals their competence. Have they done big things before not a make or break for me, but I do think it is important. Then this number two point here: do they have an established presence in open source? Do they write code? Do they write good code and check their Github? Look at their Github.
How often do they write the code? How often do they do things right? You know, once they start some of these projects, they don’t have time to contribute to open source anymore. So just look at their past projects. You can generally find out a lot about any founder or programmer by their GitHub profiles, and then this third point here – and this is probably the most important one – do they have a good overall reputation: google, their name, scam, fraud.
You know billy bob, the country singer, scam, right. If you find something read it because they need a clear track record, they need to have done a lot of really big, important things, ambitious things that are good. Then they also need to have done them with some morals in mind ethically right, so I would start with the two to five most important people in the project.
You don’t have to go through every single person that works there, but generally the more the better. You think they’re all pretty good people. Well, okay, all right! That’S that’s! Okay! That’S good! You probably don’t need to go all the way down to you know the lowest p the sales team right. You don’t need to go that far. Even if you have a good team that you know they got good leadership, they’ve got people that meet all these criteria or at least enough of them. Even under those circumstances, you might still have some dangerous signs now.
24) Road Map
Does the team clash with the community a lot? The community is important. This is what makes or breaks the project if the people that use it are unhappy with leadership in the direction they’re going, that’s a bad sign and then do they have a clear direction. Do they have a road map if this is just a project that just exists and they’re just working on whatever? Whenever, however, they want that’s, not necessarily good, I think a road map is very important.
Most projects do have them, but some of them don’t and I wouldn’t put a dollar into any of those, and then there is no progress during the bear market. Are they still working on this thing when there isn’t all the hype? I'd say this is another really big one if, during the bear market, they’re not doing anything like they’re, just kind of sitting waiting for the next bull run to happen, that could be a good sign, they’re just trying to get rich quick if they’re not doing anything During the bear market, I again I wouldn’t put a dollar in a project that sits still until you know, there’s a lot of hype and a lot of media attention, and then we’ve got a bonus point here. Does this project have secure code? This one is kind of walled off for software engineers, but you know, if you wanted to you, could learn the programming language that the project was written in and then apply some of what you learned to look and see.
I don’t think that’s an impossible thing to do. You would be much better off for doing so because here’s the thing one bug one back door into someone’s wallet that that project is done. If someone can get into your bitcoin wallet and they can take your bitcoin there’s nothing, you can do to stop them.
Bitcoin is going to die, it is gone. It’s not worth anything anymore because someone can steal if they can find a way to steal it. It’S done, this is going to be the most time-consuming one of them all, not everyone’s going to be able to do this one, but if you can, you should, and if you can’t you should learn how now how to use this strategy.
26) Use the Strategy
Now that’s the important part again: I’ve got the free template available to download on gumroad, go in the description, find that it’s free, and then this is what I would do right. I would keep a google doc. I would make a list of interesting projects that I think are cool and that speak to me and what I care about.
I would rate those projects in each category, so I would, would find one. Let’s say Ethereum is one on my list and then I’m going to go through each of these different categories and rate it out of five. So I’m going to go through Ethereum.
27) Important Questions
Does it have a working product that people can use? Does it have a community that that real people care about and then does it, have a good team and I would go through and I would rate okay on working product they’ve got five out of five? Oh on the community they’ve also got five out of five. Oh on a good team, they got five out of five and then I would put my money in it and I would only put my money in the highest-scoring projects if, if you’re unsure about one, I wouldn’t put a dollar in it, because the difference between A good decision and a great decision can be thousands or millions or billions of dollars, so be very careful, only invest in the best and then some other general tips.
Here everything is biased. Everything is biased whenever you read something about a different cryptocurrency or a different project. Whoever wrote it, either there’s a good chance that they own the coin and they are heavily invested in it and they want the price to go up because they’re invested in it or they don’t own any of it and they really dislike it or maybe they Owned it at one point and then they panic sold and they got burned so now they can only write bad things about it.
Everything is biased, read everyone’s opinion. Read the prose, read the cons, and then make up your mind for yourself. You are a smart person and you are going to be able to do this.
I believe in you, I believe in you, I’m not going to lie to you. It is not easy, it is time-consuming it’s mentally, taxing, it’s mentally draining and it can be stressful, but I think doing this, it’s just going to feel better when you make it when you think for yourself, you do your research for real. You find a project that you care about, that you believe in that you think is going to be world-changing, and then you put your money behind it, and then you profit. I think that’s a beautiful thing.
Thank you for Reading.