How to Research Cryptocurrencies: Informed Investing and Due Diligence

The cryptocurrency world has become increasingly difficult to follow, as new projects and currencies seem to pop up weekly. As of November 30 2017, Coinmarketcap reports that there are 1,325 cryptocurrencies to choose from. While most investors are not up to date with even 5% of them, the majority of new investors probably only know about Bitcoin, and perhaps Ethereum.

With all this influx of new information and diverted attention, it is beneficial to keep a collection of information about the cryptocurrencies in your portfolio or the assets you might want to keep an eye out for. This way, when new information erupts, you can just add it to your document without having to compile full research every time you want to refresh yourself about the project. You can consider it as keeping a diary of cryptocurrencies you are invested in.

Therefore, what exactly should you be looking for, and how to compile this information into one document?

For this example, I have chosen NEO to be the subject of interest, as speculation suggests it could be one of the top gainers in 2018. Since NEO is a platform for other projects to code upon, the success of the project relies on adoption among people interested in utilizing their blockchain solutions. Hence, it is instrumental to keep an eye out on this adoption and ongoing projects on NEO. Pay close attention to the 4 outlined steps indicated in the first example, as those will be our guideline throughout this process.

So let’s go ahead and get some Dapps and upcoming ICOs listed in our document. For this, we will refer to the NEO Dapps page. For the purposes of keeping this article to a readable length, we will only add a few examples in each section.

Step 1: Add Identifying Information for Each Section

As a preliminary step for each section, we will include a title to identify which information is presented in the corresponding section:

NEO Dapps / Partnerships / ICOs

Step 2: List the contributor and establish their relationship to NEO (Dapp/partnership/ICO)

Elastos $ELA (strategic collaboration with NEO)

Blockchain Driven Internet

Step 3: Summarize the Project

Now let’s go ahead and write a brief summary of what the project is and how their co-operation could benefit one-another:

NEO will make itself compatible with Elastos, and Elastos will also support NEOVM, and allow the writing of smart contracts with established languages, such as C# and Java. Elastos will be an OS for the Blockchain, and NEO can help developers quickly create Blockchain applications. The combination of the two could connect different developers from around the world, forming a strong ecosystem for application development―all to better serve a Smart Economy.

Step 4: Include Other Relevant Information

We might also want some links added for future reference, so we can keep an eye on them for fast updates and information to complement this document later if necessary:

http://www.elastos.org/

https://twitter.com/ElastosI

https://www.reddit.com/r/NEO/comments/6r1a6f/neo_and_elastos_reaching_strategic_collaboration/

Optional: Do a Risk Analysis or SWOT

You can also do a risk analysis or SWOT for each project, regarding how it could undermine or boost the NEO ecosystem. For instance, when Elastos turns out to be a scam it will also reflect badly on NEO; or if it does something revolutionary, NEO will also get credit.

Another example

You can go in detail about every project and conduct full analysis, but as this is just an example, we will not do that.

Instead, we will list another partnership following the previous outlined steps (the 4 steps will always be the basis of our research in each section) and do a brief summary with links:

Ontology $ONT (Partnership with NEO)
Ontology Network (ONT) is a blockchain/distributed ledger network which combines distributed identity verification, data exchange, data collaboration, procedure protocols, communities, attestation, and various industry-specific modules. Together this builds the infrastructure for a peer-to-peer trust network which is cross-chain, cross-system, cross-industry, cross-application, and cross-device.

NEO will be the primary digital assets service provider for clearing and settlement on Ontology. There is no contract between Ontology and NEO now, though Ontology and NEO already have an established partnership. One thing on the roadmap is that in the future business scenarios on Ontology want to hold ICOs they will be able to on NEO.

https://ont.io/#/home
https://www.reddit.com/r/NEO/comments/7f8bvb/ontology_network_ama_answers/
https://www.youtube.com/watch?v=lPWwcgpc3P0
https://twitter.com/OntologyNetwork?lang=en
https://imgur.com/a/Emo4Q

Keep in mind that it would be beneficial to do this process for every Dapp/partnership/upcoming ICO. For example, The Key, Qlink, PeerAtlas, Red Pulse, High Performance Blockchain, etc. This way, you can make sure you are up to date with all the projects launching on NEO blockchain and understand their complementary roles.

Step 5: Continue the Same Process (Steps 1 to 4) for Other Contributors

Once the section on one contributor is done, we can proceed to the next. You can do this in any order logical to you. For us, the next important contributor to the NEO ecosystem is City of Zion, so we will do a summary of them in a similar fashion.

Following Steps (1) and (2), let’s go ahead and summarize who they are and what is their purpose:

City of Zion (CoZ)

City of Zion (CoZ) is an independent group of open source developers, designers and translators formed to support the NEO BlockChain core and ecosystem. CoZ primarily operates through the community Slack and CoZ Github, central places where the community shares knowledge and contributes to projects. CoZ is neither a corporation, nor a consulting firm or a devshop/for-hire group.

Next is Step (3). Once we’ve summarized what they represent, let’s go ahead and summarize how their infrastructure is built up in order to understand their recruitment process and operational efficiency:

Members:

https://imgur.com/a/Gc9jT

CoZ aims to be low barrier of entry, the process is straightforward:

Join the channel #develop.
Fork or create a project.
Publish as open source.
After a couple of contributions a CoZ council member will invite you to the proper channel for your contributions.
Receive rewards and back to 3.

Unit testing – Ongoing effort to implement code coverage for the core

Integration testing – Tools for automated testing, performance metrics and functionality validation on private test nets

Continuous integration – Automated multi-platform testing of all pull requests at GitHub.

Deployment pipeline – Automated tools and processes to ensure fast and reliable updates upon code changes

New C# implementation (NEO2) – Improve code quality, speed & testability

Next up is Step (4), where we will list all links and relevant information relative to CoZ, like we did with the previous section:

Roadmap

https://imgur.com/a/4CDhw

Other links

http://cityofzion.io/dapps/1

https://drive.google.com/drive/folders/0B4wu5lNlukwybEstaEJMZ19kbjQ

https://cityofzion.io/

https://medium.com/@cityofzion

https://medium.com/proof-of-working

https://steemit.com/@canesin

https://github.com/CityOfZion

https://github.com/CityOfZion/neon-wallet

Now that the easy part is out of the way, let’s step it up a notch.

We are quite sure you understand the process and workflow, so you can compile all information the same way and divide in different sections. For the purposes of this guide, we will now continue and start including all information we think is relevant to the ecosystem without listing individual steps.

Since personally we believe the Dev Competition to be of major importance (due to Microsoft collaboration as well as all the beneficiary projects that might be created on NEO ecosystem as a result), we will now summarize that similarly as before:

NEO and Microsoft China Dev Competition

Important notes:

The competition will open on November 20, 2017 and close at 11:59 PM Beijing time (GMT+8), March 10, 2018.

A judging panel made up of NEO founder Da Hongfei, NEO Founder & Core Developer Erik Zhang, CoZ founder Fabio, Elastos founder Chen Rong, ONT Founder Li Jun and experts from Microsoft China will select 16 winners out of all the contestants for a bounty pool worth a total of USD 490,000.

Total sign-ups: 194 Data collected as of 2017/11/28 – China (48); USA (31); India (12); Norway (7); France (6); Other (90).

Links:

https://neo.org/competition.html

Step 6: Add Key Notes from the Project Whitepaper

It is also arguably very important to understand the foundations of the projects, or to keep track of what their purpose is to see if, at any point in time, NEO goes against what they themselves set out to do. If all their actions are in accordance with what they present to the investors, there is not much basis to worry.

However if something does not add up, you might want to start investigating further what might cause them to move off track. This is why we have decided to conclude the whitepaper with some key points that we would like to keep an eye out for, and also to constantly remind ourselves what the project is about (keep in mind, again, that for the sake of this article, we will make brief pointers to what you might want to include, not include full research).

Key notes from the Whitepaper

First let’s include the link to get quick access to the White Paper in case of need: http://docs.neo.org/en-us/

Smart Contracts

The NeoContract smart contract system is the biggest feature of the seamless integration of the existing developer ecosystem. Developers do not need to learn a new programming language but use C#, Java and other mainstream programming languages in their familiar IDE environments (Visual Studio, Eclipse, etc.) for smart contract development, debugging and compilation. NEO’s Universal Lightweight Virtual Machine, NeoVM, has the advantages of high certainty, high concurrency, and high scalability. The NeoContract smart contract system will allow millions of developers around the world to quickly carry out the development of smart contracts.

Consensus mechanism: dBFT

The dBFT is called the Delegated Byzantine Fault Tolerant, a Byzantine fault-tolerant consensus mechanism that enables large-scale participation in consensus through proxy voting. The holder of the NEO token can, by voting, pick the bookkeeper it supports. The selected group of bookkeepers, through BFT algorithm, reach a consensus and generate new blocks. Voting in the NEO network continues in real time, rather than in accordance with a fixed term.

Keep adding relevant information until you are satisfied with the information you extracted from the whitepaper. For instance, you could include NeoQS, NeoFS protocol, Cross-chain distributed transaction protocol and assets exchange agreement, GAS distribution, digital identity mechanisms, etc.

Step 7: Add Your Own Analysis of the Project and Its Potential

Once key notes from the whitepaper is complete, you can conduct a small analysis of why NEO might be superior to other coins, for example Bitcoin.

For this purpose, we have gone ahead and analysed why dBFT would be beneficial over the more popular Proof-of-Work and Proof-of-Stake mechanisms:

Reasons for choosing dBFT over PoW and PoS

Byzantine Fault Tolerance alternative (or dBFT) provides swift transaction verification times, de-incentivises most attack vectors and upholds a single blockchain version with no risk of forks or alternative blockchain records emerging – regardless of how much computing power or coins an attacker possesses.

The delegated BFT (or dBFT) algorithm acknowledges two kinds of players in the blockchain space: professional node operators, called bookkeeping nodes, who run nodes as a source of income, and users who are interested in accessing blockchain advantages. Theoretically, this differentiation does not exist in PoW and most PoS environments practically.

In every verification round one of the bookkeeping nodes is pseudo-randomly appointed to broadcast its version of the blockchain to the rest of the network. If ⅔ of the remaining nodes agree with this version, consensus is secured and the blockchain marches on. If less than ⅔ of the network agrees, a different node is appointed to broadcast its version of the truth to the rest of the system, and so forth until consensus is established. In this way, successful system attacks are almost impossible to execute unless the overwhelming majority of the network is interested in committing financial suicide.

You can continue to find distinguishing factors about NEO that would make it better than other projects in the future. This is basically a section in which you try to convince yourself whether you should keep/invest your money in NEO and what the potential upsides and/or downsides might be.

Step 8: Include Past and Upcoming Important Events or Dates

Now that we are done with some analysis, you might want to add past and upcoming events and important dates in your document. Why past, you might ask? Certain dates in the past might be extremely important to remember when something major happened and affected NEO in a positive/negative way. It might also benefit to have dates listed to see what kind of progress NEO has made throughout the period of their existence, and whether it is consistent and the right path for you.

If somewhere along the line their mission changed, you can re-evaluate your position and make a choice whether to keep investing, or to pull out. Furthermore, upcoming dates are important, since they can influence the price and determine whether consistent progress is still a thing, in addition to reassurance of potential adoption in the future.

Therefore, let’s get some past and upcoming dates listed in our document. For the first date, we will show how you could explain the event to yourself as well as provide links and data to refer back to:

Events and important dates

Past events/dates of significance:

August 8th to August 12th

From August 8th to August 12th, 2017, the NEO core team, led by founder & CEO Da Hongfei will travel to Japan to explore the forefront of Japan’s Blockchain innovation. This trip represents the first in a series of trips around the world with the goal to foster international cooperation’s and to keep up with the fast pace in Blockchain innovation. Starting in Japan, the NEO core team will visit famous local Blockchain research institutions and active communities to engage in bilateral communication. NEO will meet with Japanese tech-celebrities to gain insights about the latest developments in the Japanese Blockchain and digital currency community. Additionally, Japanese local tech media will conduct an interview allowing NEO to present its development status and its latest technological innovations.

https://www.reddit.com/r/NEO/comments/6ry4s9/japan_the_neo_core_team_starts_out_on_an/

https://www.youtube.com/watch?v=SgTQ32CkxlU

https://www.reddit.com/r/NEO/comments/6ssfx1/neo_meetup_in_tokyo_august_10th_2017_2100h/

Let’s now continue adding examples of dates – you can add comments to them later on or analyse them fully with links and sources of information. For instance, when an event is over and there are some news/publications or piece of information that surfaced from that event, you can include that commentary under that event. Additionally, if some videos were presented or good reddit posts made, you can include those as well.

20th August, 2017

NEO and Microsoft Azure host a blockchain programming training in Shanghai

24th September, 2017

NEO Blockchain Programming Day – Hangzhou Station

November 12th, 2017

NEO JOY in Hangzhou: Considerations on Basic Service Facilities in Blockchains

November 18th – 19th, 2017

NEO attending China open source conference 2017

November 27th, 2017

ONCHAIN meetup NYC, Onchain’s Blockchain Project Launch + NEO Ecosystem Sharing Session

Now we will proceed to upcoming events. With these, you can also include what to expect from the date or note any rumours about it, so you can later refer back to it and add full commentary.

Upcoming dates/events of significance:

December 7th, 2017

NEO meetup Singapore

December 13th, 2017

NEO meetup at Cambridge

You could also do a full analysis or play-by-play of each event and date in order to understand exactly what positive/negative things happened during the event and how those might affect NEO in the future.

Step 9: Add Links to Important Articles or News

Now that dates are covered, we might also want to include important articles in a similar fashion for basically the same reasons – to add different sources of information and perspective to our research. Also, you might want to refer back to those articles at any given moment if concerns arise or you need a refresher about certain things. Therefore, let’s go ahead and list some informative articles about NEO:

Important Articles

Addressing investor concerns

https://medium.com/@MalcolmLerider/response-to-baseless-fud-9b7e5e2eeeea

Da Hongfei and OnChain working relationship with Chinese Government

https://finance.sina.cn/2017-04-13/detail-ifyeifqx5554606.d.html?from=wap

http://www.gz.chinanews.com/content/2017/05-28/73545.shtml

The Chinese government is reportedly preparing to allow the resumption of cryptocurrency trading in the country in the coming months, with the required anti-money laundering (AML) systems and licensing programs in place.

https://coingeek.com/cryptocurrency-trading-poised-to-make-a-return-in-china-report/

Japanese Ministry of Economy, Trade and Industry – Working with OnChain and NEO

http://www.8btc.com/onchain-ribenjingjichanyesheng

Step 10: Add the Project Roadmap

Last but not least, a project’s roadmap is a pretty important factor for any investor and should definitely be included in such a document. Roadmap provides a good guideline for the project and a timeline for the investors to keep an eye on. For instance, when a project consistently misses their roadmap or diverts from the things listed without valid reason, it is an unhealthy sign, and you might want to reconsider your position.

Here is the upcoming roadmap of NEO:

Final Thoughts

It might be overwhelming to see so much information about a project and wonder what to do with it. However, it is quite simple, really – copy-paste it into a word document and keep updating it with new influx of information. Not only will you make life easier for yourself, you’ll also be able to share it every time friends/family/co-workers/etc. ask about what X currency is.

As mentioned earlier, the key is to structure the research in a way logical to you, and keep adding sections of important information based on what you, as an investor, look for in the project.

Congratulations on having NEO as your first entry – now try to scythe for information about all the coins in your portfolio and sooner or later you’ll have full grasp of what exactly you are investing in and whether you might want to add or re-evaluate your stake.

Special appreciation goes to the reddit user “NEOcryptotrader” for sharing his collection of information about NEO blockchain and for aiding with the research provided in the article.