5 Ways to Look for Researching a Cryptocurrency

  Select an Image

Photo by Glenn Carstens-Peters on Unsplash

Finding the right cryptocurrency to invest in can be a daunting task. But there are some things you should look for when evaluating a coin before testing the waters with your hard-earned money. If you’re interested in trading a cryptocurrency and want to learn more, here are five things to research before diving in.

1. Find the Purpose

• The majority of cryptocurrencies are created as a reward for validating data blocks that are used for purposes outside of sustaining the currency itself
• You may be aware if you’re a Bitcoin tribalist that Bitcoin doesn’t pass this test
• This is not to say that Bitcoin is a scam, bitcoin has existed long enough and has enough demand that it can sustain itself
• No other coin participating in this game is probably capable of claiming that
• In other words, while any coin that claims to be the next bitcoin is certainly a scam, bitcoin itself is not a scam

2. Find the Whitepaper

• Cryptocurrencies shouldn’t only make generalized promises to solve issues, they should guarantee a reasonable solution to that issue
• This is where a whitepaper comes in
• This is a publicly published document outlining the project’s purpose and operation
• Even the anonymously released Bitcoin has a publicly accessible whitepaper that is still regularly read and distributed

3. Find Out Where You Buy and Use the Cryptocurrency

• You should probably avoid purchasing cryptocurrencies outside of a legitimate cryptocurrency exchange unless you’re a miner (or an experienced investor)
• While different exchanges have varying requirements for coins to be listed, you’ll be safer sticking to these exchanges if you want to buy and sell cryptocurrencies
• In some circumstances, the smart contract code and the ledger itself will make it challenging for a scam coin to move widely among genuine circles because this could expose the coin more rapidly

4. Find Out Who Makes the Coin

• Decentralization is the way to go right now
• However, the majority of reputable cryptocurrency projects will have a board of directors that is disclosed publicly or have associated organizations that support and develop the currency
• Even though you don’t need to be familiar with every board member’s name, you should at least be able to know businesses that support or use the blockchain
• Even if you don’t, you should be able to look up such people and groups online to see if they are legitimate and actually participating

• Some of the warning signs discussed in the introductory paragraphs are combined with this and are being given new consideration
• A currency worth investing in should be able to solve a particular issue, and the coin’s developers should have this as their primary objective rather than profit
• For instance, IOTA, one of the technologically ambitious coins available, trades at a fraction of the price of more well-known tokens
• Why? In part because IOTA is not designed to be a get-rich-quick scheme or even a traditional store of wealth, but rather for long-term growth
• The purpose is to accomplish a task, and the financial benefits follow