Lately, there has been massive influx of ICOs and Token-based projects into the cryptocurrency world with many starting out with visions of being the next Bitcoin or Ethereum(just as regular startups dream of being the next Google or Facebook).
Many of us on Steemit are aware of the new kid on the block, EOS that is promised as a new blockchain architectural marvel with the ability to scale millions of transactions per second, eliminate user fees, and allow for quick and easy deployment of decentralized applications.
Now the check is on what performance metric should we use to judge ICOs and other token-based projects?
The numerous many ICOs and Token-based projects that has flooded the market and that is still due to flood the market calls for a careful assessment of its status now and what it will be in the future, a win or a fail.
ICOs now have a dedicated Magazine and that means it is becoming more and more like the IPOs you see in the startup world with many promising you the moon only to tank out at the later stage or tank out early only to bounce and fly off into the moon.
Measuring performance metrics for ICOs and Token-based projects are meant to help you realize and understand to some extent what may become of your investment in that project. Lets ask these few questions.
Will my investment in EOS return with profits?
** Am I making the right decision?**
Am I investing because its Dan Larimer's project?
**Does a Dan Larimer project guarantee profit?
What is the transparency of this offering?
Well, you can answer these questions when you are able to do a personal Performance Metrics of this ICO.
Bear in mind that speculatory and subjective interpretations will arise based on the degree of transparency provided, and in most cases these transparencies can be incomplete.
The true and inescapable real metrics of an ICO or Token-based project becomes visible after the market launch stage.
So what do you look out for in judging the Performance Metrics of an ICO and Token-based project?
Revenue expectations. It is pertinent to seek out the true revenue expection of the organization behind the offering i.e, Price to Forward Revenues for the first 2 years. Most people tend to think income is what they should look out for in ICOs or Token-Based project offerings but its not. Revenue is key because it provides for clear understanding where the organization will be in a year or two time.
Net income. This is a company's total profit; and it is calculated by taking revenues and subtracting the costs of doing business such as depreciation, interest, taxes and other expenses. Look at the project's projected net income and compare side by side with previous other offerings and how well they fared.
Correlation of the financial performance to the market valuations. It is important to have a path between the projected financial performance and the market valuation of the offering because this will be able to explain the road map of the company. Will it become profitable in the short or in the long run?
An example is Facebook, during its IPO it had a disappointing performance but months down the line, it turned huge profits.Does the real business of the company support the longevity of the project? Which company is behind the offering and what does their business model tell you about the ICO? Will their existing business support project and be able to hold it until it turns the corner into profits? You need to know.
What is the protocol’s market importance of the offering. Protocols are a bit different and they vary to different organization. Some need protocols and and some don't, but some decentralized applications rely on an underlying protocol that only serves the application. So ask yourself what is the protocol market importance, does it need one? and why?
Will the market capitalization value help achieve valuation rationality? Forward valuations do not automatically mean a good place for the project now or in the future.
Recently the hype around the eos.io token has matured into a reality and many are confident that the man behind the helm of affairs is a genius and even if the cryptocurrency world has been experiencing some tumble, many are of the opinion this is one good investment. Though many reports have claimed it is a scam that was used to enrich Ethereum shareholders, citing the sudden hype of Ethereum and its swift crashing too. Well, it remains to be seen.
This Abstract from the White Paper may offer some insight as to why it may just be the next big thing.
"The EOS.IO software introduces a new blockchain architecture designed to enable vertical and horizontal scaling of decentralized applications. This is achieved by creating an operating system-like construct upon which applications can be built. The software provides accounts, authentication, databases, asynchronous communication and the scheduling of applications across hundreds of CPU cores or clusters. The resulting technology is a blockchain architecture that scales to millions of transactions per second, eliminates user fees, and allows for quick and easy deployment of decentralized applications"
What do you think should be done in these situations? Share your thoughts in the comment section below.