In the previous articles we looked at the initial stages of a framework for analysing crypto projects, if this is the first time you're reading one of these articles I urge you to head back to the beginning:
The goal of this project is to use this scoring mechanism to help determine if coins/tokens are a good fit for my goals and portfolio. Primarily I'm considering smaller token holdings and am keen to see if these make sense to Hodl, Sell or Consolidate. So far (using the Electroneum project as a guinea-pig) we've considered elements the following (all out of 5):
- Community/Development, where the score was 2.6
- Track Record, where the score was 3.5
- Cost/Value, where the score was 2.2
In the last of the 4 framework articles (I it will take a little more to dig into my findings), we're going to look at Active Participation. This article is going to be a little shorter than the previous ones as it is less about digging into the numbers and gathering data on charts. Instead this time we're going to look at real life activity with the specific cryptocurrency, this allows us to add a bit of depth to the previously 'objective' approach and bring in a little more subjectivity.
As with the previous article I welcome any feedback/suggestions from readers, particularly if you think there are any gaps in the information provided/used. This is very much a work in progress and an opportunity to look at the vast amount of resources out there. The goal is to try and use these methods to build a method for review of a project in order to help make decisions about future investment. Remember that this isn't financial advice, you'd probably want to get that information from someone more qualified!
Before diving in, I wanted to quickly show the overview again of the process and the grading system. The goal of grading the 4 individual elements is to be able to bring them together to give a general score that can be used to help determine if it is best to Hodl, Sell or Consolidate (HSC) an asset/project (basic framework below).
To achieve this goal we're going to be grading each item that is reviewed on a scale of 1 to 5, then take the mean value of these to give us the element that would go into contributing to the overall HSC-Score.
- 5 - Very Favourable
- 4 - Favourable
- 3 - Neither Favourable nor Unfavourable
- 2 - Unfavourable
- 1 - Very Unfavourable
Category 4: Active Participation
So this first section is all about the actually holdings. Thinking predominantly here about the following:
- Value of the holding? What is the current market value of it and does that make it qualify as "Dust" (sub $1) or could you buy lunch, movie tickets, a lambo, a yacht... that sort of thing.
- What is the relative size of the current holdings compared to the rest of the portfolio? So here we're interested in finding out where does it sit on the totem pole in portfolio world, is it reasonably insignificant or would making decisions for these funds affect the performance of the portfolio a whole? Talking percentages and then ranking really here.
- How long has it been held for an how confident am I in the current storage solution? Interested here in think about the "if this was a long term storage solution, would it be suitable?". Have the coins/tokens been sat there gathering dust or, as is mostly the case, gathering nothing but the ever changing value of the crypto universe
- Finally, are there any passive benefits to holding? What we're looking for here isn't just staking to earn more (that comes in the next section). No this time we're thinking about are there any bonus' for keeping funds in this wallet or any wallet. These could be things like preferential rates for other transactions, to pay fees perhaps or maybe there is a minimum requirement to keep the wallet active.
Test Case (ETN):
So for ETN, I'm currently holding 337.35, I know peanuts, in real terms this is around ~$2. So we're not far from dust territory here which is around 0.04% of my current portfolio and is number 23 of 26 different tokens/coins at my disposal. It has been at that level for around 2 months now, just having the funds in the mobile app wallet doesn't give any particular benefits.
Next up it is worth considering current earnings, either passive or active. For this section it is a case of looking at what the behaviour of the holdings have been (particularly over the past few 6-12 months). Remember we're considering our active participation with the funds in order to rank them so there are a few factors to look at here:
- Is it mined and are you mining these coins/token? Predominantly the domain of Proof-of-Work algorithms, but also if you're doing something like browser mining or using folding@home to earn funds. This is an active process and can give us an indication of how committed we are to going out and getting more of them.
- Is the this a coin stakeable coin? This is more passive but in most respects is the same as mining. Here we're looking at the process of growing the holding and in the case it can be as easy as sitting back and forgetting about it.
- Is the coin/token being used to farm another token? Sometimes you're not too fussed about growing the first holding but you may be interested in farming another coin by using the first to add liquidity. This invariably also earns you more of the first thing (through fees) but tends to be a tag-team approach, it gives the holding purpose.
- Are you earning or have you earned regularly though airdrops? Everyone's (and I mean EVERYONE'S, even though who have not heard of it yet) favorite meme coin is one of these. The BAN team are the airdrop kings and if you're involved in a program like this, where regular airdrops are a reality this can be a great way to build up a smaller holding. When considering airdrops it is also worth looking at the life of the project, airdrop (BAN being the exception) tend to be early in the life of the project or as a product of another company selling publicity so factor this in when considering the likelihood of earning more using this method in the future.
- Finally, earning through doing. This is more about earning the coins/tokens through doing task. This could be faucets, could be blogging (Publish0x), could be Banano Jobs, Coinbase Earn etc. It is really any other way that we think it is possible to earn these funds.
Test Case (ETN):
In terms of mining/staking/farming there was previously an incentivized program to get users to join. This was effectively a referral program with a 'slow release airdrop', that was sold as 'phone mining'. I received payouts from this program in January when I signed up and then Feb, Apr and May (the previous threshold was 100 ETN). Since then the program was discontinued (without much warning for users) so the final payment of whatever was 'mined' to that point was paid in Jun ~30 ETN. To my knowledge, outside of AnyTask (a contracting program) there is any other way to earn ETN at present and no airdrops that I am aware of.
Now after looking at the amount of holdings we have and if we're earning them (income) it is important to ask ourselves why we've got the coins/tokens and to establish if there is a purpose or use case for them outside of hording them. The most common use for cryptocurrency (outside of speculative trading) could be p2p transactions, paying for things. However, there could well be other reasons for holding the tokens. For example, a number of coins that are staked give voting powers, or they could be to perform actions on the blockchain to pay miners or for interactive with smart contracts (Ethereum). There could also be coins who's purpose is to store and earn value, Statera for example. What we're really looking to find out here is what are the designed/recommended/panned use cases for the cryptocurrency on the project? and are we using it for that purpose?
Test Case (ETN):
For this section it is important to consider use cases. As it stands the ETN network have built some solid use cases into their project goals. Firstly there is the AnyTask program which is a contracting program to allow individuals to pay or earn ETN for specific task like designing a website, or making some custom graphics etc. Next up there is the top-up phone scheme that allows (on most major networks and over 140 countries) to use ETN to buy airtime. There is also the ETN everywhere which is aimed at local businesses being able to accept ETN as a payment method, this one covers 171 countries, 2013 currently. Finally there is ETN donate where you can send ETN to go toward good causes.
So, the $2 question, am I using any of these services?.......drum roll........No, not currently. My mobile is monthly payments rather than top-up and it is unlikely that I could find time to list myself on AnyTask (though it would be fun to offer up my programming services).
Most of us in the crypto-community believe that there are some great ideas out there. Sure enough there are some massively clever people developing these ideas. However, the best idea in the world doesn't always mean that a project will be a success. This last section, out of all of the one that have been mentioned above, and in the earlier articles, is the by far the most subjective. By this point in our research we should have gathered a lot of really useful information about the project being assessed. Just going though all the steps to this point is a massive journey and with all of the newer information you may have started to form an opinion about a project. This section allows us to add our 'gut feelings', 'hunches', '2 cents' or 'opinion' into the mix as well because it is important to consider this in with the more objective information.
What we want to know is "What do I really think about the project?", "Do I agree with the direction of the project and does it fit with my personal goals/ideals?". It may sound a bit flimsy to add something more emotional into what has ostensibly been an objective process until now. However, I think it is important to remember that when you form an option about something based on as much information as we've seen, you should question if you're the only person who would reach that same opinion. If you believe that others would too, this can in fact give you an idea of external perception of a project. I'm not saying here to ignore the previous facts/findings. Instead it is more a case of "based on all this information in front of me, what do I think?"
Test Case (ETN):
Right, so I've built up a lot of information now about this project and it is important to consider and condense my opinions. Despite my very minimal balance I think ETN is a good project. Yes there is centralization, and yes they have changed things without keeping the whole community in the loop. However, their goals seem to be fair and honorable. I like that they are building use cases into their project rather than just putting forward another currency without giving it a platform to flourish.
Okay, we've looked now at the elements of the active participation pillar, part 4 of the overall framework. Previously, we've been concerned about objective project views and have consider markets, development, community and all aspects about the project from an investment perspective. This time, however, it has been much more of an introspective review. Checking in with our holdings, looking at sources of income and considering how invested (emotionally or mentally) we are with the overall project in light of the information reviewing in the other pillars.
I'm not going to bring back the other scores jet and put them all together into a final Hodl, Sell Consolidate rating, I'll need to have a bit more thinking about how best to do that along with some back of the envelope maps/sketches and ideas. So for now here is a summary of how the ETN test project looks.
While this isn't quite dust is is borderline. Unfavorable here means that I'm really not invested heavily and therefore any changes to this investment wouldn't adversely affect my portfolio as a whole (which in itself can be thought of as a positive).
Again, this is another very low score here. This is because outside of the original 'mining' of this coin there are no ways to grow the current holding passively (no staking/farming) or actively (due to centralized mining) without getting actively involved in buying ETN or earning through AnyTask. This isn't an unfavourable score for the Electroneum team though, but more an unfavourable score for my situation.
Despite some excellent use cases being put into the project team, the lack of interaction with these shows that they don't fit with my current personal goals and uses for cryptocurrency. When it comes to just holding funds, the lack of staking etc make this coin a really bad choice (in my case) for a holding fund. Being at the mercy of the market conditions is not enough here I think to justify the use being "saving" fund. Which means outside of a moonshot I'd not be making or getting the most out of the coins.
Finally, it isn't all doom and gloom for the ETN project in this article. I actually really like the amount of work by the ETN to team make a good project, give folks reliability (through centralized NGO mining), offer up use cases and finally really try to reach out and have a positive impact on the unbanked and rural communities. I like the project and I think it could have a solid future ahead. Does that future include me? Perhaps not right now, but I don't see it out of the realm of possibility.
Active Participation: 1.75
Wow, this one looks harsh at first glance but I think is a true reflection of my active participation in the Electroneum project. Remember that this time around we're judging by our own unique situation. Which is I think is critical because until now we only looked at what is available to everyone. This time it was about looking at what is available to just me and trying to build a mental picture of the place this project has among the multitude of other projects. Suffice to say, it is predominantly a voice in the crowd when it comes to the portfolio (a very quiet, almost inaudible, voice at that).
Definitely, shifted gear this time with the approach which is right I think. Before now the focus had been on objectivity and data gathering. For this article I found it to be much more a summary of reality. Apologies, if this one is a bit wordy and doesn't have as many cool charts. As with the previous articles, I'm open to any suggestions/ideas. Point out any gaps, or incorrect assumptions, it is difficult to review your own work critically sometimes. If you are aware of any other resources by all means share them.
Hope you enjoyed the article and it gave you some food for thought, good luck y'all!