Investing in a Cryptocurrency

I believe the Blockchain is a truly revolutionary technology which can impact many industries in the future. Crypto-tokens are essentially the store of value of a particular application of the Blockchain. Since the underlying technology is robust and sustainable, the currencies built on it are also the same.

To make an investment in a cryptocurrency, I would recommend the following steps:

1. Check out various currencies and read about the underlying Blockchain applications.

2. Shortlist a currency which has a clear, concise and understandable use-case. The use-case should be around a real world problem, where the application of the Blockchain has the potential to add value.

3. Read about the currency – the total supply, distribution structure, mining rewards, consensus mechanism etc.

4. Checkout the team behind the currency. The team should be a good mix of people having the necessary skills and experience to execute.

5. If all seems fine, go further. Else go back to Step 2.

6. Try to arrive at a fundamental value for the currency. Check out my post on this. If this is difficult to do, check out any comparable currencies and compare their metrics (price and quantity traded) to arrive at a value.

7. If the market value is fairly below the fundamental value calculated above (atleast 30-40%), INVEST!