All credit goes to u/barkingthought on Reddit. (https://redd.it/7n2ddn)

Cryptocurrency has been around since 2009 and just recently it started creating headlines and many new investors have entered the market and with the huge influx of new coins and ICOs, it can be a daunting task to choose a coin to invest in. There are a few important factors to consider before investing and I am going to try to simplify the process as much as possible.

What is the coin trying to accomplish and can you believe in it?

Any cryptocurrency worth your time and money has to have a purpose whether that be storing medical records or buying clothes. A common place to find this information is on the coin’s website (e.g. bitcoin.org). Now that you have identified the purpose of the coin ask yourself: “Does this seem practical? Do I think it has a place in the real world?” If so, your off to a great start already, you have found a coin with developers that have a vision and a problem to solve.

2. How do they plan to accomplish it?

You can have an amazing goal for the coin to accomplish such as ending identity theft but how do they plan to accomplish that goal? Do they plan to store all your information on a private blockchain or do they plan to create smart IDs tied to your fingerprint? You can find out all of this information in great detail by reading the coin’s whitepaper, commonly found on said coin’s website (e.g. bitcoin.org/bitcoin.pdf) if there is no whitepaper that is a clear signal that the developers haven’t put in the required time and effort to bring their idea to fruition. Read through the whitepaper and assess the feasibility of their plan. An unrealistic plan could be along the lines of: “We will get the United States Government to adopt our blockchain identity technology.” but a more realistic one could sound like “We will present our idea to local governments around the world and convince them allow the use of our product to identify themselves.” An ambitious goal still but not completely out of the picture. Whether or not their goal is too ambitious is up to you and the ambitiousness of the project can often determine how risky of an investment is.

3. When do they plan to accomplish it?

By this point, the coin you are surveying has identified a problem, devised an effective way to solve it. All of that means nothing if they don’t have a time frame to get it done. The best way to find out their time frame for accomplishing said goals is with their roadmap (commonly located on the coin’s website). A roadmap is a broad timeline that encompasses almost everything the coin has planned for development for the next year or two. If the coin has been around for more than a year you can look at their past roadmap and see if they accomplished their goals on time. If the goals aren’t being accomplished on time try to find developer’s responses to missing the deadline. Delays are inevitable sometimes but the important thing is if the developers have a good reason for being late and missing a deadline. If they don’t have any released statements then that is a red flag, missing one deadline isn’t the end of the world but if there is no transparency that indicates that the developer might not care enough about his/her coin to at least make a statement about missing the deadline.

4. Who is developing it?

With the influx of new coins coming in and lots of money getting pumped into cryptocurrencies many people are creating coins for the wrong reason, people who are just trying to earn money off new technology (new to the general public at least) instead of trying to fix problems in our sofciety. A common practice is to see what other coins the developer(s) have worked on and to see if they abandoned the projects midway or if they have a bad history of missing deadlines, lack of transparency or making unprofessional comments on other projects. If the developer has no other history developing cryptocurrencies check their background in technology and science, you don’t want a music major with no other degrees being the coin’s CTO (*cough *cough Equifax) or a geologist being the lead developer. Along with ensuring the knowledge and credibility of the developers another factor to consider is the size of the development team. There are many projects that have many innovative ideas in the pipeline but new technologies and improvements aren’t getting implemented fast enough because there is often only 1 developer. The development team should have enough developers to push out updates in a timely manner and make sure the coin keeps moving forward.

5. Where can you purchase it?

One of the most integral things for a coin to achieve widespread use and exposure is being listed on a reliable and a high volume exchange. Many users like me don’t like to spend a lot of time to sign up for a smaller exchange, give them my private info, send my Bitcoin there, wait for the Bitcoin to confirm and then buy the coin in question. That’s a lot of effort to buy a coin unless the coin is the next Bitcoin or Ethereum many people don’t want to spend all that time and end up just waiting for the coin to get listed on their favorite exchange, something that might never happen. If a coin is listed on a large exchange is one of the biggest price drivers both short term and long term and can make or break a coin’s exposure to the public.

Now What?

Now that you’ve found a good coin and probably invested some money into it the only thing left to do is wait. Some people decide to start shilling their coin everywhere on Bitcoin Talk, Reddit, and all over twitter. Shilling is like medicine, when used in moderation it can be beneficial to your health but when overused it can put your health in critical danger. If you shill just enough then you can bring more investors to your coin, but if you shill too much it can hurt your coin’s reputation and potentially drive away investors. Remember that if you have invested in a solid coin then it will eventually increase, no need to get 50% gains overnight and try to chase trends. In the end, only coins that live up to their name will stick around.