There are over 21,000 cryptocurrencies trading today. Of these, there are great and noteworthy projects. How can investors identify the few good ones from the majority? This article will cover five indicators of a good cryptocurrency project to hold, use, or invest in.
Bitcoin among other cryptocurrencies
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Utility
The solution presented in a cryptocurrency project is vital to understand. What problem does it solve? If there is a simple answer to this, then the reason to use it will be clear. For instance, BitcoinBTC
started as a solution for online payments. The problem was that there were largely centralized payment service providers, and if these providers froze customers’ funds, there would be little to no redress for the customers.
Ljubljana, Slovenia – may 12 Bitcoin gold cryptocurrency trading chart on smartphone close up.
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In an in-depth context, the peer-to-peer payment network was launched in the wake of the 2008/9 financial crisis. Herein, ordinary people lost homes and life savings to the collapse of financial institutions that held their funds in trust. What if there were a peer-to-peer solution that relied on an autonomous network instead of centralized institutions?
There is a lot more insight to gain from the growth of Bitcoin. In this context, it provides a peer-to-peer payment network that puts financial control in the hands of people rather than centralized institutions. A good cryptocurrency needs to have a clear reason for use.
Number of Users
Adoption is a marker of trust. While in the early stages of a cryptocurrency, it’s likely to have a few users, over time, there’s a need to see clear growth. Bitcoin initially had a few hundred users. These were people mainly contributing to its code and development.
The first commercial transaction was by Laszlo Hanyecz, who bought two pizzas for 10,000 bitcoins on May 22, 2010. He inadvertently created the day’s commemoration around the world. The 10,000 bitcoin were worth $41. Since then, the community has grown incredibly, as each new user adds their funds to the network, whether for payment, speculation, or investment purposes.
Kyiv, Ukraine March 03, 2019. Golden bitcoin coins. Bitcoin Pizza Day 22 May. crypto community … [+]
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Other cryptocurrencies have for the most part gained users based on their initial interaction or introduction to Bitcoin.
In cryptocurrency trading, most trading pairs are connected to the two largest cryptocurrencies, Bitcoin and EthereumETH
, which are the largest by market capitalization. The two are also the proverbial backbone of subsequent projects upon which other crypto projects keep developing.
Volumes or Numbers of Transactions
As for the numbers in real-time usage, the volumes of a cryptocurrency show its demand. In economics, the principle of demand and supply is core to understanding the value of a commodity. For a good number of cryptocurrencies, the supply is limited. The demand then determines the value of that cryptocurrency.
Building upon the importance of utility, or the key problem the cryptocurrency is solving, and how many people are using it in real-time, it’s possible to derive the basis of volumes being traded.
For context, the …….