Cryptoassets: Evaluation & Due Diligence framework (crowdsourced)_20170823
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Score 0-10KPI / Data PointSourceCommentsFurther Reading
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0.0Core Team & Advisors
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0Experiences & AchievementsLinkedInFull Bios, no contradicting information online
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0Complementary SkillsetLinkedInOrgchart, clear responsibilities, # of core team over time
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0Background checksReference Calls, https://onfido.com/, https://haveibeenpwned.comNo criminal actions, reliability, responsibility & trustworthyness
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0Sufficient professional NetworkLinkedIn, TwitterIndustry sector network, Crypto Community Network
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0Leadership & IntegritySocial Media, Coinfund SlackCulture, Mission statement, firm leadership, coworker / employee feedback, ability to build a community around their project
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Community & Supporters (non tech only - see tech community below)
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0Web Popularityhttp://www.alexa.com/siteinfo, https://trends.google.com/trends/?hl=en,Growth rates, absolute traffic, benchmark w competition
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0Sentiment analysishttps://site.cointerminal.co/, https://santiment.net/, https://www.quandl.com/, https://cindicator.com/Is overall sentiment positive <> negative; visible trends; abrupt changes in sentiment - reasons & events
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0PR & Brandinghttps://coinfund.io/, http://icoalert.com/, https://www.forbes.com/podcasts/unchained/#16735bfc5b4f, https://www.smithandcrown.com/, https://bitcoinmagazine.com/, https://epicenter.tv/, https://www.coindesk.com/, https://www.bitcoin.com/, https://tokenmarket.net/, https://www.cryptocompare.com/, https://www.tokendata.io/, https://cointelegraph.com/, https://medium.com/token-economy, https://thecontrol.co/, https://consensys.net/Coverage by top crypto media, comment sections, Podcasts, Blogs, Reddit, Twitter, ICO Platforms, Research Institutes
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0Social Signalshttps://www.coingecko.com/en, https://www.cryptocompare.com/coins, Slack, Telegram, Facebook, Twitter, RedditFollowers, Activity, Sentiment
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0Signaling by smart money Investorshttps://www.crunchbase.com/; https://angel.co/; Short list: USV, Polychain, DCG, Pantera, Blueyard, Blockchain Capital, Coinfund, Earlybird, Outlier Ventures, Coinlist, BoostVC...
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Signaling by corporate customers / partners
Website, Crpyto News
E.g. Ethereum & Microsoft Azure, Ripple & R3, Shapeshift & Overstock
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0Signaling by reputable crypto partnershipsWebsite, Crpyto NewsTransparent partnerships, e.g. Aragon & 0x, Minebox & Sia.tech, Shapeshift & Exodus
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0.0Technology
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0Project progress on code base over timehttps://github.com/, https://bitbucket.org/, https://www.coingecko.com/enForks, Watchers, Issues, Closed issues, # new commits, # contributers, # stars
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0Solid whitepaperProject WebsiteCovering Tech, Team, Roadmap, Token Distribution, Miner incentives, governance. Degree of detail, comprehensiveness, references, depth of thoughts...
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0MVP / Alpha product testing & reviewsDYI, https://www.producthunt.com/Test the product DIY; get early customer feedback
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0Quality of Codehttps://github.com/ (Stars, Comments); https://codeclimate.com/External technology due diligence report provided?
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0Proprietary Core ProductWhitepaper, GithubPatents, specific technological know how
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0Tech stackProject Website, WhitepaperUse of decentralized infrastructure (IPFS, Ethereum, BigchainDB/IPDB, 0x, Aragon, Oracles); programming languages in use
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0Tech RoadmapProject WebsiteRealistic but ambituous; high level directions; too much detail could make the project appear inflexible (problematic at early stage)
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0[New blockchain protocol]WhitepaperConsensus Algos, Scalability, Governance structures, Openness (private, public, consortium), transaction throughput, block size, state channels, sharding, fees, privacy (zero knowlege proofs, cryptography), degree of decentralization, # products built on top of protocolOn scaling decentralized blockchains: http://bit.ly/2wkW9pA
Consensus in Blockchain Systems: http://bit.ly/2x9rf0I
On sharding Blockchains: http://bit.ly/2vbCUuT
Tezos Position Paper: http://bit.ly/2w03gAZ
Ethereum Whitepaper: http://bit.ly/2x9YjGe
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0Adoption over time Reporting by core team, https://ethstats.net/# Downloads, # active customers, churn rates, cohort analysis, "credible buzz" by open source developers, ...
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0.0Market & Competition
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0Size (TAM, SAM, SOM) & Growth (CAGR)Gartner, Cbinsigighs, Consultancy Reports (BCG, McK, Deloitte)Either big market or massive CAGR over next 5-10 yrs
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0Value Chain Analysis & Market structureResearchDegree of fragmentation; Marketsizes by subcategory; power of intermediaries; price transparency; degree of automation, degree of centralization (the higher the more likely to get disrupted by decentralized networks)
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0Direct & potential competitors Pitchbook, Crunchbase, Cbinsights, QuandlOther crypto companies in the sector? Incumbents in the sector? Team, Funding, product maturity, 1st mover etc.
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0Competitive edgeResearchNetwork effects; Entry barriers (patents, exclusivity rights, regulation / licenses), Forward / backward looking lock in for customers or community
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0Go to market strategy Whitepaper, Website, ResearchCustomer target groups, product verticals, geographical market entry, Sales & Marketing Channels, growth hacks, viralities
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Business Model & TGE (= token generating event)
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0Business Model & Token DesignProject Website, White paperWhich kind of token is used (equity, utility)? Is the token an incremental part of the product? Why is a native token required opposed to using BTC, ETH...?
A gentle introduction to digital tokens: http://bit.ly/2x9mJzt
On token value: http://bit.ly/2vV5seE
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0TGE structureWhitepaper, Project Websitetransparent pre sale strcuture & terms, value creation on token or (also) on equity level?, Certainty of valuation, Cap, no central banking, future issuing plan (fixed supply, inflation / deflation), incentive structure (early supporters, miners, developers, community), reasonable vesting scheme for core team & pre sale participants, Risk of market manipulation & centralization "whales", broad distribution of tokens (accredited / institutional only <> public), maximizing walfare of biggest group Analysing token sale models: http://bit.ly/2vV9dRi
Optimal Token Sales: http://bit.ly/2vb25xt
The perfect token sale structure: http://bit.ly/2vlRzTv
On issuing & supply - the economics of filecoin: http://bit.ly/2wva393
Aligning incentives in ICOs: http://bit.ly/2vVUYMb
Toward more equitable token sales strucutres: http://bit.ly/2w0Aosz
Mining incentives & strategies: http://bit.ly/2g1QrCn
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0Use of funds & Treasure MGMTWhitepaper, Project WebsiteHigh level business case, product & tech, go to market, hiring strategy, How will capital be released? Who decides on it?
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0Trading InfrastrucutreWhitepaper, Project Website, https://www.cryptocoincharts.info/, https://cryptowat.ch/, https://coinmarketcap.com/currencies/volume/monthly/Exchanges listing the token, Hardware wallet support, Software wallet support, Integrations & partnerships with leading ecosystem players. A potentially growing coin needs to be wide spread among exchanges.
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0TGE process & communicationWhitepaper, Website, https://icomonitor.io/#/Transparent Presale, Reasonable time window, peer reviews, Q&A, proactive communication, TGE through smart contract (accessible), tracking data via events, trustless handling of contributions, conditioned start and ending of TGE, crytocurrencies accepted for participation, Focus on cyber security - has a bounty program been set up to detect bugs?
https://icomonitor.io/#/
https://github.com/EthTrader/ico-review/blob/master/criteria.yaml
https://coinspectator.com
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0TGE service providers (transparency)Websitetransparent security audits, legal audits...Best in class service providers: https://blog.zeppelin.solutions/, http://www.mme.ch/, https://www.bitcoinsuisse.ch/
https://argongroup.com/, https://www.smithandcrown.com/, https://coinfund.io/, www.bravenewcoin.com/
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0Investor rightsWhitepaperProfit (interest, dividend), Voting / Governance / Influence of token holders, Transfer rights, public reporting, Block creation rights, Contribution rights, Access rights
Token rights: Key considerations in crypto economic design: http://bit.ly/2x9wspn
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Legal & Regulatory GuidanceWhitepaper, Project WebsiteStatment of clear qualification of token for different jurisdictions, details on pending regulatory proceedings, Disclosure of different legal opinions on the qualification of the token, list of countries included / excluded from ICO, A securities law framework on blockchain tokens "Howey test": http://bit.ly/2wveMYh
EU blockchain policy initiative report http://bit.ly/2imuy1k
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Network Valuation & Asset Pricing [aplies only post TGE]
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[1. Historical Risk-Reward Profile]
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Sharpe RatioExcess returns devided by risk.
Formula: (ARR crypto asset - ARR risk free asset) / Standard Deviation
Standard Deviation = volatility.
The higher the number the better.
Understanding the Sharpe Ratio: http://bit.ly/2voFz3u
Is bitcoin the undisputed best performing asset class of the decade? http://bit.ly/2ipYR7t
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Volatility over time (monthly / yearly)http://coincap.io/price levels benchmarked against ICO, upward price trend on quarterly base. Decreasing volatility indicates a maturation of the asset.
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Price independencehttps://coinmarketcap.com/Correlation with other assets (S&P 500, Bonds, Gold, Real Estate, Oil, emerging markets currencies) and specific other crypto tokens (e.g. Litecoin, BCH vs. BTC or ETC, NEO vs. ETH)What is correlation? http://bit.ly/2wDZXBU
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Total transaction volume over time ("Investability")https://coinmarketcap.com/currencies/volume/monthly/Outlier months, Reasons for outliers, Upward Trend, % of total market trading volume. The higher the trading volumes the less votalite the asset gets.Bitcoin: Ringing the bell for a new asset class: http://bit.ly/2ipUVDt
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Global trade volumes by different fiat currencies https://www.cryptocompare.com/coinsSucessful coins are traded globally. Trade volumes in many different fiat currancies are an indicator for increasing maturity and decreasing volatility (= risk)
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= Market Cap minus utility value
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Market Cap over time http://coincap.io/includes utility value + speculative value
utility value is likely to be the bottom in correction phases
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[2. Current utility value]
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Crypto "P/E ratio"Price / "Earnings" = price / utility value. Utility value = non-trading, non speculative value. The smaller the number, the better.Answer to: Is the asset over- or underprized (NOW)What is P/E ratio: http://bit.ly/2intvhN
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Current market shares & revenues (if applicable)Team reportingsNo standard valuation methods in crypto. Different valuation methods for equity (revenue multiples, heavily depending on phase & business model.
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Network Maturity over timehttps://live.blockcypher.com/
https://etherscan.io/, https://ethstats.net/
Total # network particpants, # nodes, Mining Power, Hash Rates, # nodes, location & distribution of nodes
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"utility" transaction volume over time (monthly) https://www.cryptocoincharts.info/Total transaction volume from public ledger MINUS speculative exchange transaction volume. Tough to figure out. What are cryptoassets actually worth (Chris Burnisk) http://bit.ly/2vYAxfI
Book, Cryptoassets: the innovative investors guide: http://amzn.to/2wBM2MN
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[3. Potential future network value]
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Revenues & market share in the futureResearch, top down future market sizinge.g. BTC: 10% of global remittance markets // Sia, Filecoin, StorJ: 10% of total petabite storage x price per GB + DNS layers.
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Token Supply trajectoryWhitepaperWill the asset be scarce? How does the future supply look like?
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Upside potential, ARR over time Assumptions & CalculationsWhich revenues / market share at which point in time. Business Case logic. Difference between current market cap and potential future utility value. The bigger the difference, the bigger a potential return.
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