Provisional Evaluation framework for Digital Assets, in particular for cryptocurrencies
Overall goal of this model is to come up with a rational approach to evaluating Digital Assets, in particular public cryptocurrency projects. Our list of evaluation criteria is aimed at long term (+10y) viability prospects, and is set up in declining order of importance, whereby the next step in the analysis can be skipped if the previous step fails to clear the minimum threshold. Idea is to be cost effective and avoid overinvesting research efforts in projects with an high likelihood of failure.
Digital Assets are scored on a scale that goes up to 1,000 points. Projects that achieve the “minimum standard” for a given criterium are awarded a minimum of 25% of the total available points; if they achieve “medium standard” they are awarded at least 50% of total available points.
1/ Developers (250 points)
Who is actively contributing code to the project? What is their pedigree? Who has done code review? Who has provided technical feedback on email lists or other platforms? Cryptographic protocols are unlike startups in that fundamental design flaws are extremely difficult to fix as that hurts adoption, makes development on the platform less attractive, and increases centralization.
Minimum standard: The top 5 developers do not include people who have been actively involved in shady / scammy cryptocurrency projects.
Medium standard: At least one top 10 contributor has made previous significant contributions in fields such as cryptography, mathematics, computer science, Bitcoin, or open source platforms.
2/ Security standards (150 points)
What security standards are being used? In the case of experimental technologies at work, is there a scientific basis that supports their security properties? Is there a clear path towards decentralization? Are the attack vectors actively being vetted and improved?
Minimum standard: No use of pre- or pseudoscientific technologies in the architecture.
Medium standard: Reasonable selection of technology suite, endorsed by at least one reputable Bitcoin developer or high level cryptographer.
3/ Sound economics (150 points)
“Why does this need a token?”. Is the additional friction justified if there is a new token? Do the transaction fee revenues generate sufficient security over time? Do the chosen parameters imply economically sound trade-offs?
Minimum standard: Absence of deceptive claims, e.g. that security comes at zero cost.
Medium standard: Reasonable claims about how token will complement/improve upon Bitcoin
4/ Scaling prospects (150 points)
Is there a credible roadmap towards scaling? Is the token likely to remain fungible, i.e. does it have sufficient divisibility and privacy built in? The fact that the Bitcoin white paper didn’t contain these prospects isn’t an argument to not require them today – new protocols are competing with Bitcoin, which is already scaling.
Minimum standard: No unproven pseudoscience
Medium standard: Modular approach to scaling
5/ Code review (150 points)
Does the code contain indications of incompetence or breach of industry standards? Does it reflect a healthy amount of peer review or not?
Minimum standard: no glaring bugs
Medium standard: reasonable adherence to industry (open source) standards
6/ Legal risk (100 points)
Can the token be seen as an unregistered securities offering? Are developers at risk? Are the promotional efforts within legal bounds?
Minimum standard: If there’s no identifiable utility, it’s not called a utility token
Medium standard: Reasonable likelihood of decentralization in the network
7/ Partners (50 points)
Does the project have relevant and credible partners? Is it promoted in an ethical way?
Minimum standard: No serial scammers, convicted felons in the official partner list.
Medium standard: Partners with real world credibility that reasonably will provide additional value to the project’s long term mission.