This was originally written as a response to someone deep in a Reddit thread asking "so what should I buy, Ripple?"
I felt compelled to respond, but what I came up with was more like an essay describing my process of evaluating cryptocurrencies in general and less a useful response to the initial question.
So I'm going to post it here on its own, and see what the Steem community thinks. Thanks for readin'!
I wouldn't buy ripple. The way I see it, XRP is just a way to put a "Crypto inside" sticker on traditional banking.
Invest in projects that:
- Pursue a (preferably) proven, solution to a clearly defined problem. Solving a problem is equivalent to generating value proportional to the seriousness of the problem. Many investors are in this for a quick cash grab, but the coins we're buying and selling are representations of digital systems that solve real-world problems. If you want to invest wisely, invest in the teams, systems, organizations, and theories that have aim to solve our most universal issues. Perhaps they'll fall short, but they'll still outlast and outgrow the projects aimed solely at cashing in on the ICO boom or profiting off institutional naivete.
- Have an active github and encourage community involvement, through discussion and standard open-source submissions, if not a full-on decentralized bounty system. Seriously, look at the github. First off, make sure the code is on github (or there's a really, really, really good reason it isn't). Take note of the most recent commits - should be quite recent, and there should be a history of frequent commits. If the github hasn't been touched since the coin was launched, it's dead, no matter what the marketing says.
- Have more focus on development than marketing, and are actively and openly discussing current flaws and possible solutions with their communities. There should be community-facing development updates, not just new, more ambitious roadmaps. Buying the coin is investing in the belief that the technology will improve and grow. That comes with a responsibility to inform the community of improvements and growth in the technology, and any roadblocks currently being faced in achieving those goals. Seems pretty self-evident.
- Seem cool, interesting, and actually feasible to you. It's much easier to hodl your coins through the long dark when you believe in the real-world value they represent.
I think Monero is a fantastic example of a project that hits all the right points. Perhaps I'll be called a shill, I do own some, but I own it because I believe in it, I'm talking about it because I believe in its current implementation and its future, and I think many of the people who dig into XMR's history, community and current development come out feeling the same way.
Exhibit A, Monero (XMR)
I recommend you browse these and other materials yourself, to make sure I'm not misrepresenting or overselling the project.
Website: https://getmonero.org
Whitepapers: https://getmonero.org/resources/research-lab/Community and development meeting logs: https://getmonero.org/blog/tags/dev%20diaries.html
Forum funding system: https://forum.getmonero.org/
Subreddit and other social media communities are easy to find, highly active, and perpetually bullish.The project begins with a single, clearly defined problem - privacy is important, and Bitcoin isn't private.
Then it grows out from there like a crystal from solution, pulling in new ideas and people, continuously hitting roadmap milestones and accelerating. First security and UI improvements, then increasingly ambitious milestones as the supporting community - of users, investors, and developers - grew. Now development is community governed and community funded, the meetings are held in chat and the minutes are recorded publicly. The Forum Funding System creates bounties to pay developers in XMR for work done on XMR, and it works. The project started strong and has only gained traction and reach, and now next-generation projects are using Monero as a foundation. Take Coinhive, which has the potential to shake up the value system behind online content by mining a tiny bit of Monero via your browser in lieu of solving a Captcha problem. The number of payment platforms and exchanges accepting Monero continues to grow.
Compare, if you will, Exhibit B, TheHempcoin (THC)
Its purpose is... well I don't want to strawman, but it's fuzzy.
Go ahead and browse around their provided materials (at least what you can find) to make sure I'm not misrepresenting the project.Website: http://hempcoin.org/
Whitepaper: _________________________
yeah they promised to come out with one last month... and then they just didn't. They did post an infographic about staking on Twitter and announce a date for a hardfork.... but still no whitepaper or purpose....The community is........ https://www.reddit.com/r/thehempcoin/comments/7owuic/partnerships_verified_real_world_use_cases/
it seems split between people asking "hey the anonymous devs keep missing their own deadlines, is this maybe a scam?" and people going "shut up nonbeliever just hodl and beliiiiieeeeve masternodes will take us to the moon"Their stated goal is to be a cryptocurrency used exclusively for the purchase of cannabis and cannabis accessories within the medical/recreational market, from wholesale grower->coop to retail coop->consumer.
However, I can find no indication in any of their materials of any tangible (or theoretical) reason for growers, dispensaries or their customers to prefer TheHempCoin to any other currency outside of the implied network effect - you use it because they accept it.
Dispensaries, as far as I can tell, have no reason to accept TheHempCoin exclusively - far from it! Their interest would be in accepting as many forms of digital and physical currency as possible, to draw in the most potential customers.
So if dispensaries will, in all likelihood, accept any and all currencies, why go through the extra effort of buying a currency that won't be accepted anywhere else? Even if Hempcoin sees industry-wide adoption, dispensaries will likely still take my XMR and your ETH, but the grocery store has no reason to accept an exclusively cannabis-focused currency. Growers have no reason to accept TheHempCoin exclusively - if it's a cannabis-only coin, why would it be accepted by the power and water companies? They have every reason to accept XMR and ETH, as those have value in many applications - they can be reliably exchanged elsewhere. Why would anyone put their money in a currency that has restricted use cases?
Seems like a fundamental flaw in the planning of the system, and it indicates, in my opinion, that some shining light of human genius woke up one morning and went "Wow, crypto is getting big, and Cannabis is getting big, I'm gonna make a Cannabis Crypto and be rich!"
That happens a lot, and it's not always as obvious. Ripple, in my opinion, is the result of somebody waking up and thinking "Wow, crypto is getting big, and banks already are big... I'll make a Crypto for traditional banking systems and be rich!"
When I'm looking to buy, the first step is to evaluate the technology, the goal, the team, and the community perception. Only once a project has cleared this (and there's no brightline, what you consider useful and interesting and viable is different from what I consider useful and interesting and viable, and that's kind of the point) do I even look at the charts.
Technical analysis is useful to determine when to buy a given coin to maximize gain, but it's a pretty bad indicator of which coins represent real-world value, and therefore long-term stability and growth.
Better to narrow down the list of potential purchases to a few projects that you are eternally bullish on, and accumulate them whenever they dip.
Some projects I really like (Shill alarms blare everywhere):
Eth, because smart contracts are a fundamental building block and it has the biggest head start and the most momentum in that space by an order of magnitude
Aragon is a lovely DAO play, and I think Wings DAO has potential, too.
At least one of the decentralized exchanges (district0x, OMG, waves) will take off
One or more privacy-specific coins will grow significantly - my money is on XMR over the z-family or any of the BTC/something hybrids.
There are a number of IPFS-based decentralized internet plays. It's too soon to make a call, but somebody is going to take this space and run with it.
and then there are tons of interesting smaller scale projects with real potential. I think Voxels or something like it will become bigger than I can imagine, some of the gaming tokens will surely see massive adoption, and I see a big future for content-consensus space currently inhabited by the likes of STEEM and LBRY.
As far as I'm concerned, the important part is knowing what you're buying and why it's worth your money.
It's more than just a satoshi value and a candlestick chart. It's an idea, and you're investing in its future. Make sure it's a good idea, and that it has a future.