Identifying Successful Blockchains

in #cryptocurrency7 years ago

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There are several variables to consider when trying to determine the value of a blockchain.

DecentralizationApplicationInflationSpeedCommunity

If you can find a cryptocurrency that has all of these qualities it's guaranteed to be a sure winner. There are even quite a few good ones that won't have them all.

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Decentralization

Make sure the blockchain is spread between many different people. If the blockchain was pre-mined at inception this could be an indicator that the developers or founders intend to sell out the blockchain at the first sign it's value goes up. This would spell disaster and possibly cause the death spiral of the blockchain. If no one entity is in control of a massive amount of coin it's less likely you'll have to worry about a large selloff. Also, a decentralized blockchain makes for a cryptocurrency that's less prone to exploits like double spending and unintended forks.

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Application

What does the cryptocurrency do? Ripple is connecting big banks. The Golem project is a world wide super computer for rent. Steemit revolves around creative content. Some coins focus on privacy. A lot of coins out there are all trying to do the same thing. This is a bad sign. It's unnecessary competition. I believe the future of cryptocurrency is one crypto to one application.

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Inflation

How many new coins are getting created? If inflation is too high it spooks investors. If it's too low then there may be too little incentive to be a part of validating the blockchain or to participate in the community. Some blockchains have zero inflation or will have zero inflation in the very distant future. This doesn't necessarily mean they are bad coins. They may just work a bit differently. The Golem project has no inflation. The only way to get coins is to buy them or rent out your computer to the super computer. Regardless, this is a statistic that should not be ignored.

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Speed

How fast can new blocks be confirmed? This is one of Bitcoin's worst qualities. Bitcoin takes 10 minutes, Steem takes 3 seconds. Included with speed is also scalability. If the blockchain sees increased popularity will it be able to handle it without getting bogged down?

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Community

Arguably the most important factor. Who is using the coin? Who are the developers? Who are the founders? Are these people dependable? What are their short term and long term goals for the coin? Could you see yourself being a part of it all? It's not required that you want to be involved but it can't hurt if you do.

Fundamentals

Using these fundamental principals of The Blockchain you'll be able to research a cryptocurrency and determine if it's worthy of your support or not. In the coming weeks I'll be doing more in depth research on my favorite coins and ones that I'd like to know more about. I hope you'll join me.

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