Crypto

Here are some important factors to consider

Nobody can predict the future, that’s for sure. But one thing is certain: blockchain technology will become a big part of our lives in the coming years. It has rapidly grown from a skeptical space that few dared to enter into a booming technology that is being implemented in all industries.

Therefore, if you are a new investor looking to harness the potential of blockchain technology, this is probably a very good idea. The only problem is that not all blockchains are the same. Therefore, if you want to put your money on the line, careful comparison of options is extremely important.

Not sure how to evaluate your alternatives? Here are some factors you can consider.

Use case

This is perhaps the first and most important factor to consider when comparing blockchains. Read the project’s white paper and find out why it exists, the problems it’s trying to solve, and the gaps it’s trying to fill. Blockchain use cases will also indicate its future potential and therefore the extent of long-term price growth.

For example, the Helium blockchain seeks to create a decentralized network for IoT devices, and Bitcoin was launched to enable exchange and store of value that operate without any central authorities (i.e. banks). Some blockchains are even launched to solve the problems of other blockchains. For example, many “Ethereum killers” have been introduced to address the problems plaguing the smart contract network.

Transaction speed today and tomorrow

There is a huge gap between blockchains in terms of transaction speed. For example, the Bitcoin blockchain is extremely slow. It can only process seven transactions per second (TPS) and confirmations take up to 10 minutes. Ethereum is slightly faster, with a TPS of 30 and a confirmation time of around 6 minutes.

However, Ethereum 2.0 is expected to reach 100,000 TPS after switching to the PoS consensus mechanism. Therefore, the future potential of the blockchain is also significant. It must be able to scale and maintain transaction rates even if user traffic increases in the future.

Consensus mechanism

Every blockchain has a consensus mechanism. It is a protocol that helps validators come to an understanding regarding the authenticity of transactions. For example, Bitcoin uses the Proof-of-Work consensus mechanism. It requires huge computing power to confirm transactions and has received a lot of criticism over the past few years.

Newer blockchains use the Proof-of-Stake consensus mechanism. Here, instead of allocating computing power, validators must stake the native cryptocurrency of the blockchain to confirm transactions. It is much more environmentally friendly than its PoW counterpart and therefore a better investment for merchants and a viable implementation solution for businesses.

There are also several other consensus protocols, each with their own pros and cons. Some of them may prove more viable than others in the future. Therefore, it is important to evaluate the blockchain consensus mechanism before investing/implementing it.

Roadmap for the future

The blockchain project you choose should also have a roadmap for the future. This shows that the team was thinking about the project in the long term. It also informs companies and investors about the path the project will take in the future and helps them determine if that path is in line with their values. For example, Hyperledger Grid has shared on its website a draft roadmap developed by the community, as well as all the features that will be included in future releases.

Financial indicators

The numbers don’t lie. Therefore, it is also important to look at the financial performance of the blockchain. First, the market capitalization of the project, which can be used to assess its popularity. You can compare a project’s market capitalization with that of its competitors to determine its popularity.

Next comes the total cost locked (TVL) in the project. This indicates how much money is moving on the blockchain. The higher this number, the more users trust the blockchain. You can also view the price movement of the native blockchain currency. Historical price movements can give you important information about future performance.

It would also be helpful if you also take a look at the team behind the project. The previous recommendations of the authors of the project can give you a good idea of ​​its potential. However, questionable identities or pseudonyms can be potential red flags; these projects are best avoided.

Not all news on the site expresses the opinion of the site, but we convey this news automatically and translate them using software technologies on the site, and not from a human editor.

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