Investors and corporations are piling cash into blockchain development as hundreds of projects are put forward every week.
Few of the projects will become a financial success and some are just frauds dressed up as investment opportunities, but how do you sort the good from the bad?
There’s no definite way of doing so, but asking some stock questions will help rule out most of the scams.
Here are the five questions you should ask before investing:
Who’s gaining from the blockchain project?
Every trade has a winner and a loser. You want to be a winner, but at the same time make sure the deal is fair for everyone involved or the likelihood is it will fail.
Only a valid token will reward the people providing the computing power driving the blockchain.
Tip: Look at who is running the blockchain and how they make their money
Who makes the decisions?
This question has two angles – like who is gaining from the blockchain, someone makes the network decisions – and that’s probably a committee of some kind that needs to agree.
Outside the blockchain, the decision makers are the CEOs of companies taking up the technology.
Tip: You need to look at the track records of both to see how they will impact the progress of the project you are investing in.
How will your blockchain handle data?
How much space does legacy and new data need in the blockchain and is the infrastructure capable of handling it? Look at the block sizes, how to input the data and what type of system it will come from. You need a system that’s up to the job, which is why the Bitcoin blockchain is slow and creaking.
Tip: Investing in who moves the data rather than who controls it may be more profitable
The project doesn’t end with data
Information is the key to marketing. Information from data helps shape new products and opportunities.
Processing the data will uncover markets for new products and services.
Tip: Just storing data is no good, continual analysis and development is crucial
Look for speedy transactions
Everyone wants faster transactions and transaction per second are vital to developing DApps that business and consumers will take up. Multinational companies with millions of customers need fast, secure and accurate transactions, so the underlying blockchain must be sleek and efficient.
Tip: Blockchain infrastructure must support fast TPS and have room for improvement