How to analyze blockchain project, the off-chain metrics you want to track. In my last video we talked about the off-chain metrics of a cryptocurrency. In this video I want to dive into the off-chain metrics of the blockchain itself, the blockchain that made that cryptocurrency.
Okay, what are off-chain blockchain metrics? It's simple, it's all the information out there about the blockchain project. What do we find out about the organization that actually designed this blockchain?
You should start with the whitepaper and the only thing I'm going to say about this is, does the whitepaper make any sense? Use your common sense. Is there a market for what they're building? Does it seem like this thing can be built? Just use your judgment on this one. If the goal of the project is to harness asteroids using blockchain technology and they're only raising a million dollars, it's probably not going to work.
Next, what can we learn about the community support for the project? This includes the developers who are building tools and services for the project as well as the people who are involved in other ways like miners, block producers (or guilds for WAX). If it's a DeFi-related blockchain, you want to look at how many people are actively engaged in using those DeFi services. Oh also, how much community created content is out there from fans of the project?
Another key off-chain metric to dig into is the quality of the developer resource tools. Does the project have a comprehensive developer portal? The resource material that developers need to build their dApp on that blockchain? Developer resources are critical but they're also very time consuming to pull together. If a project has put no time or obvious, limited effort into this area, I would be skeptical.
Next, what can you learn about the project’s funding, the financial resources of the project is definitely something you want to look at. How much funding does the team have to build what they set out to create? Does the project have the staying power to complete what they started?
Another useful metric is Twitter activity. Twitter sentiment is one of those terms people like to use for this. So how much is being discussed on Twitter about this blockchain project you're evaluating? And what is the nature of that discussion? Now Twitter is great because you're getting into real-time impulsive expressions of what people are thinking. Anthony Pompliano, a well-known crypto investor, uses a phrase for this: Twitter is the troll box - unfiltered rants, occasional insight about the blockchain project you are digging into. It's worth checking out.
Marketing is also something to consider. This includes many things like podcasts, YouTubes, written publications, presence at relevant conferences. Ask how is the team getting its message out?
Now I'm going to finish here with two off-chain blockchain metrics that I think a lot of people pay attention to but they probably shouldn't, or maybe you can take note of these things but don't read too much into them.
Okay, first, the venture capital firms that invested in the blockchain project. Now, I wish I had more time to dwell on this one. But here's what I have to say. It's fine to look at what VC firm might have tossed a few shekels into a particular blockchain project. But please do not think that fact is going to translate into some marker of success. Or even that those VCs know what they are doing. Guys, the traditional VC’s ignored the crypto space for years. They said stupid things like, “I love blockchain, but I don't like cryptocurrency.” How in the world you get decentralization without attaching a crypto to the blockchain?
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