Monday, November 9, 2020

On diligencing crypto projects [notes]

A collection of links/notes re: evaluating crypto/DeFi projects for investment. 

Edit 6-8-23: Hindsight 20/20. I now have a hard time taking any of this seriously. 

The Bull Case for DeFi | Vance Spencer - Bankless Podcast

  1. Focus on "who" is building (talent magnets, perpetual optimism, work ethic, integrity)
  2. Use the protocol, get involved in the community

7 indicators every #DeFi investor should be using to evaluate projects - Spencer Noon

  1. Total Value Locked / Fully-Diluted Marketcap
  2. Price to Sales (aka Marketcap / Revenue)
  3. % of Token Supply on Exchanges
  4. User Growth (aka Unique Address Growth)
  5. Token Balance Change on Exchanges
  6. Non-Speculative Usage
  7. Liquid Inflation Rate

What we look for: the 9 core value propositions of crypto networks - Jake Brukhman (CoinFund)

9 core value propositions that, in aggregate, make crypto networks a transformative innovation that will outpace legacy products

  1. Permissionlessness, censorship resistance
  2. Borderlessness, global access
  3. Public governance, governance-as-software
  4. Political decentralization, regulatory arbitrage
  5. Capture resistance
  6. Mutualization, secondary markets
  7. Privacy, security
  8. Trustlessness, outcome certainty
  9. Cryptoeconomics, recursive incentives

Our Process for Evaluating New Tokens - Nick Tomaino (1confirmation)


  • Who is the founding team behind the project? 
  • Is the team exceptional technically, inclusive, transparent, objective and capable of fostering a vibrant global community?
  • Founding team is evaluated based on
    • History of success, demonstrated ability to overcome obstacles to success and strong desire beyond money
    • Attract and surround themselves with top technical talent who are inspired by vision and leadership
    • Obsessive about the problem they’re solving
    • Mature thinkers — deeply thoughtful about problems and realistic about growth plan
    • Team is uniquely suited to tackle the technical problem


  • Does the product solve an important problem for a segment of people today? In the near future? (that segment can either be small with potential to grow or large)
  • The product assessment is based on:
    • The technical specification that describes the product. Is the technical specification thorough and does it demonstrate mastery of the subject matter?
    • At least two customer or potential customer reference calls — are there people out there who want and need this product right now?
    • Does the product benefit from network effects?
    • Is there a core technical or product advantage that is likely to lead to competitive differentiation?
    • Does the product surprise and delight users?


  • Is there a community developing around the project or does there appear to be a group of people within an existing community that values what the new network will offer? 
  • Does the founding team demonstrate the potential to foster a vibrant and healthy community long-term?
  • The community assessment is based on:
    • Reddit community (# of subscribers, daily engagement)
    • Slack, Rocketchat, Gitter, Telegram (# of members, daily engagement)
    • Has the founding team demonstrated the characteristics (inclusive, transparent, objective, etc.) necessary to build a healthy community? 
    • Have the public or private interactions by the founding team been balanced and unemotional, or have they been emotional and irritable?

Token Mechanics

  • Is the token a usage token, a work token, a security token, or a combination? 
  • Token mechanics are evaluated based on:
    • If it’s a usage token
      • Is the digital service being offered useful and does the network underlying the digital service aggregate resources (hashing power, file storage, etc.) that will differentiate the service in the long-term?
    • If it’s a work token
      • is there a strong network emerging that wants to contribute and is the UX well thought through? 
      • And is the service offered useful to people?
    • If it’s a security token
      • is there some technology underlying the security that gives the token a long-term competitive advantage?
    • Is the team distributing the token in a fair and equitable manner, considering all market participants and optimizing for long-term usage of the product rather than short-term fundraising?

Update from Nick Tomato 8/14/20 

More emphasis on team & community, over product & token mechanics