Evaluating Cryptocurrencies

When evaluating a cryptocurrency, industry standards and key metrics help determine its legitimacy, security, utility, and long-term viability. These standards fall into several categories: technical, economic, security, regulatory compliance, and adoption. Here’s a breakdown of the generally accepted standards:

Technical Standards - These determine the blockchain’s efficiency, security, and scalability.

  • Consensus Mechanism – Proof of Work (PoW), Proof of Stake (PoS), Delegated Proof of Stake (DPoS), Proof of Authority (PoA), etc.
  • Transaction Speed (TPS - Transactions per Second) – Measures how many transactions the network can handle.
  • Scalability – Ability to handle increased network usage (Layer 2 solutions, sharding, rollups).
  • Interoperability – Ability to work with other blockchains (e.g., Polkadot, Cosmos, cross-chain bridges).
  • Decentralization – Distribution of validators/miners across the network.
  • Smart Contract Functionality – Whether it supports smart contracts (e.g., Ethereum, Solana) and its programming language (Solidity, Rust, etc.).
  • Energy Efficiency – Measured by the blockchain’s power consumption, especially for PoW networks.
Economic Standards - These assess the financial health and long-term sustainability.
  • Market Capitalization – Total coin supply × current price.
  • Tokenomics – Supply, issuance, and distribution mechanics:
    • Total Supply vs. Circulating Supply – Inflationary or deflationary model.
    • Burn Mechanisms – Reducing supply (e.g., Ethereum’s EIP-1559, Binance Coin burns).
    • Reward & Staking Yields – Incentives for participation.
  • Liquidity & Trading Volume – Daily trading activity across exchanges.
  • Volatility – How stable or speculative the asset is.
  • Adoption Rate – Number of users, wallets, transactions.
Security Standards - These measure how resistant the network is to attacks.
  • 51% Attack Resistance – How hard it is for a single entity to control the network.
  • Code Audits – Third-party security audits (CertiK, Quantstamp).
  • Smart Contract Vulnerability – Avoiding exploits like reentrancy attacks, flash loan vulnerabilities.
  • Bug Bounty Programs – Rewarding ethical hackers for finding flaws.
  • Network Uptime & Fork History – Stability over time.
Regulatory Compliance Standards - How well a cryptocurrency adheres to legal requirements.
  • KYC/AML Compliance – Exchanges requiring identity verification.
  • SEC/Regulatory Approval – Whether it’s considered a security or a commodity.
  • Legal Jurisdiction – Where the project is based and if it faces regulatory risk.
  • Privacy Features – Whether it complies with laws or offers anonymity (e.g., Monero, Zcash).
  • Exchange Listings – Availability on regulated exchanges like Coinbase, Binance.
Adoption & Ecosystem Growth - How widely used and integrated the cryptocurrency is.
  • Partnerships & Institutional Adoption – Collaborations with enterprises, governments, or financial institutions.
  • Developer Activity – Measured by GitHub commits, updates, and active contributors.
  • DApp Ecosystem – Number of decentralized applications (DeFi, NFT platforms, DAOs).
  • User Base & Community Engagement – Growth in active addresses, transaction count, social media activity.
Privacy & Anonymity Standards - For privacy coins and those focusing on confidential transactions.
  • Transaction Obfuscation – Techniques like zk-SNARKs (Zcash), Ring Signatures (Monero).
  • Coin Mixing Services – Use of mixers like Tornado Cash.
  • Regulatory Compliance Conflicts – Privacy coins often face bans due to anti-money laundering laws.
Governance Standards - Who controls decisions and network upgrades.
  • On-Chain Governance – Voting mechanisms for protocol changes (e.g., Tezos, Polkadot).
  • DAO (Decentralized Autonomous Organization) Involvement – Community-led governance.
  • Transparency – Publicly available roadmaps, open-source development.

Speculative Cryptocurrencies - (Lacking Purpose)

Given the fact that block-chain technology is still in its infancy phase, it is extremely important that we maintain an unbiased opinion when looking at potential projects for investment. One of the biggest mistakes that most crypto "experts" make is to look at every project through the same lens.

If you have done any sort of research on crypto projects, you will quickly realize the industry for the most part is like the wild, wild west. You will hear terms like Decentralized, Tokenomics, Smart Contracts, and Digital Gold... but at the end of the day you really need to ask yourself what does this have to do with the functionality and real-world use of the project?

Take Bitcoin (BTC) for example. What purpose does the project really serve? Yes, Bitcoin is mainstream, and you hear a lot of hype everywhere you turn. It has "Institutional Investment" and adoption. The SEC even gave it a pass when they approved the asset for and ETF. But at the end of the day, Bitcoin is nothing more than digital vaporware.

Why do I say this? Can you tell me exactly what Bitcoin does? I will go one step further and ask does it really do anything well?

Proponents will claim it to be "a store of value", "a hedge against inflation", and even declare it to be "digital gold". They will stand on their soapbox and shout that it is the only truly decentralized crypto asset out there. I have a page on this site dedicated to Bitcoin. If it is an asset your are thinking about getting involved with, I urge you to read it before doing so.

The whole point of this is to make you aware that there are crypto projects out there that fall into a category that call "Speculative Cryptocurrencies". This category includes projects that are technically cryptocurrencies but do not meet the fundamental standards for long-term viability.

Technology & Infrastructure Weaknesses
  • No Independent Blockchain – They are token-based projects relying entirely on existing blockchains (Ethereum, BSC, Solana) without contributing new functionality.
  • No True Decentralization – Many are controlled by a small number of wallet addresses.
  • No Development Activity – Lack of meaningful GitHub commits or updates.
Economic & Market Red Flags
  • High Inflation or Poor Tokenomics – Excessive supply with low demand mechanics.
  • Pump-and-Dump Potential – Prone to rapid price surges followed by crashes.
  • Liquidity Manipulation – Some rely on market makers or bots to simulate activity.
Security & Trust Issues
  • Anonymous or Unverified Team – Lack of public accountability.
  • Vague or Recycled Roadmaps – Many reuse buzzwords without clear deliverables.
  • No Smart Contract Audits – High susceptibility to rug pulls and exploits.
Adoption & Use Case Problems
  • Purely Speculative Use – Exists only as a trading vehicle with no functional adoption.
  • Meme Coin Dependence – Relies on viral trends instead of tangible innovation.
  • No Ecosystem Growth – No partnerships, developer activity, or third-party integrations.
Final Thoughts
Cryptocurrencies are measured by these standards to determine whether they are:
  1. Reliable – Secure, decentralized, and functional.
  2. Sustainable – With a strong economy and long-term viability.
  3. Compliant – Operating within legal frameworks.
  4. Adoptable – Gaining users, developers, and institutional support.
A project that scores well across these metrics is more likely to succeed.