Mythical Altcoins and Where to Find Them

Ok, so you found some potential candidates. The next step is to do a deep dive into the project itself. There are a few things you should be looking for in a “healthy” project: fundamentals, tokenomics, community, and development. You can learn a ton about a project through its whitepaper, website, and social media (especially Medium and Twitter). Pretty much any legitimate project will make an abundance of resources so they can attract users and investors.

Fundamentals (Features and Legitimacy)

The first step is to look at the project’s fundamentals:

Ignore the Price
This may seem counterintuitive, but the price of your potential gem doesn’t really matter. Instead, you should be focused on the project’s market cap. The market cap is the total worth of every single token combined. The price of each token is meaningless because different projects will have varying amounts of tokens created (more on that below in tokenomics).

A token’s price is only relative to itself. A token’s market cap is relative to every other project.

Legitimate Features
The biggest fundamental a project needs is a purpose. What does it actually do? A lot of projects will trick users into thinking the project has a real purpose when it really doesn’t. Here are two common “sudo features”:

• Punishing with Deflation
  It may seem like punishing users for moving funds would be amazing since it incentivizes HODLing. But in reality, it just creates a pyramid scheme where the last person to join gets burned.
• Staking for the Sake of Staking
  Staking tokens can be a great way for projects to enable their functionality. But some projects use staking as the actual feature itself. This doesn’t make the project useful in any sense. It just creates an inflationary model.
  To be clear, this is different from something like a yield optimizer which uses your staked assets to earn more interest for you.

Crypto is the home to many of the most innovative technology being developed. But it’s also home to many useless projects that are playing with real money. You need to know how the project actually works.

Meme Coins
I know there’s going to be some disagreement, but I personally don’t invest any money in meme coins. While altcoins are pretty risky, I still want to see them flourish and be a full-functioning product a decade from now. I can almost guarantee that your favorite low-cap altcoin won’t be relevant after a few years.

I’m all for a good joke. But I’m not in crypto to gamble; I’m here to invest and develop future technologies.

Anonymous Teams
While investing in a project that’s backed by an anonymous team is defiantly not optimal, it’s not a deal-breaker. There’s plenty of projects with anonymous teams that are great projects like Pancake Swap. But if the project already has a functioning product and is continuing to develop (more on that later) there’s a good sign that the project has a long-term future. Just generally be more skeptical; though you should be skeptical of everything in crypto anyway.

Quality Marketing vs Slick Marketing
There are some crypto projects out there that have an amazing marketing team. But the project itself may not actually do much. This ties back into the legitimate features point. These projects will get tricky and hide the actual use cases of their project. You need to be ultra skeptical when researching a project and not take any claim at surface level.

Stimulating Trades
Another trick that projects will sometimes use is to trade tokens extra times to boost the trade volume. That will make it look like more people are using and trading a project than there really are. It’s something to look out for.

Tokenomics

I honestly could do a whole separate article on tokenomics in altcoins. It’s a topic that can get very advanced, very quickly. But this is a quick rundown of what you need to know. Websites like CoinGecko will usually have these statistics listed, but you can also learn more in a project’s whitepaper.

Market Cap and Supply
The main numbers that you should look into are the token’s supply and circulating supply. A token’s supply is the number of tokens that have been created. Meanwhile, a circulating supply is how many tokens are out in the ocean being traded and held by the public. These numbers are very important because they decide how scarce a token is. Yet they’re often overlooked by traders.

Often developers and seed investors will not be able to sell their own tokens until a specified amount of time. This is important to keep track of since a sudden dump will not only crash the price but also introduce more tokens into circulation.

Token Burns
Sometimes, projects will decrease their supply by burning tokens. These “burned” tokens are sent to an invalid address and are hence inaccessible to anyone for the rest of eternity (which is going to be a while). As a result, the supply of the token will be diminished.

You should, however, always be skeptical of token burns. Be sure that the project is burning tokens that it bought back from the open market and not just tokens that were sitting in reserves (and not circulating). Projects sometimes burn these reserves just for marketing.

I’m personally not the biggest fan of token burns. They’re more of a stunt to get press than a legitimate action. It often just shows that the project has made too many tokens and is now artificially compressing the supply.

Token Distribution
Finally, look into how the project’s tokens are split up. How much is held by the developers and initial investors? A well-run crypto project should have a quality token distribution setup in its whitepaper.

As I said, you can go very in-depth into tokenomics of cryptocurrencies and it definitely needs its own article in the future.

Community

It can be harder for crypto projects to build a community since there are so many other projects fighting for attention. But a quality crypto project should get some following. That could come in the form of followers on Twitter or Medium. You’ll want to really gauge how active those followers are, though. A project can have a ton of potential but phase-out of development. It’ll still have a following, but not much of a future.

A good place to start is on Twitter. Find what people are commenting on posts. A quality project that is living up to its promises will have a very supportive comment section. If there’s a lot of negative comments about the project, it isn’t a good sign.

There’s an important distinction between requests and negative comments, however. A comment asking for features shows that the people do believe in the project enough to raise their voices.

You can also check how active a community is by finding the project’s subreddit, discord, or telegram. The same that applied to the Twitter comments apply to these as well. Also, look for developers interacting and answering questions. It’s always good to see the people who are creating the project be answering questions.

Development

The final element to evaluating a project is how active its development. Many projects get abandoned by the developers or never have very dedicated developers in the first place.

Developing Features
The first place to look at development is to check out a project’s Twitter and Medium to see what new features they’re working on. Do they have a clear roadmap and are following it?

Development Activity
The other website to check is Github. With crypto’s nature for open source, the code and development for a project will probably be public. In fact, a project that’s hiding code is a bad sign. It shows that development isn’t actually open for anyone to contribute to the project.

It’s a good idea to peek through a project’s Github Repos and see how active it is. I’m not going to dive into what a typical git workflow for a project would look like, but the gist is that developers will work on side versions of the project and then “merge” their changes into the master code. Projects may not merge new code into their master branch very often. But you should still see progress.

Audits
A crypto project will often have 3rd parties “audit” their code to verify that there are no security issues or critical bugs. Seeing that a project is audited by reputable companies is a great sign. It shows that the project takes security seriously.

Source: https://medium.com/yardcouch-com/mythical-altcoins-and-where-to-find-them-925d94140fa9?source=rss——-8—————–cryptocurrency