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A brief Crypto investment guide

In the sector, there are many cryptos that represent blockchain investments: Bitcoin, Ethereum, Tron, Neo, just to give a few examples.

These constitute different DLTs, with different programming languages, different possibilities to support smart contracts and transactions per second.

Remember that cryptos are defined as such because they have a proprietary blockchain as in the cases mentioned above; on the contrary, tokens are those that rely on other blockchains, such as the ERC20 tokens that use Ethereum technology.

However, if you want to invest in a crypto (or maybe a company developing blockchain-related services, such as Oracle or IBM) – what factors should be considered?

We try to give some general indications on the guiding factors that should be considered relevant when choosing an investment in the sector, bearing in mind, however, that the assessments should always be made on a case-by-case basis, considering the company project as a whole.

In fact, we are in the presence of startups and therefore to anticipate the growth it must be understood if there’s any worth behind the idea and the project.


First of all evaluate in what kind of blockchain you want to invest, especially from the mining point of view. Is the mining centralized? Or is it decentralised? Or maybe there’s no mining?

This last element is very important because it actually serves to divide the investments between:

1) Companies that use a blockchain only as a cloud management tool, for example, some tech giants;

2) Companies with centralized mining;

3) Companies with decentralized mining.

The law of Metcalfe

Metcalfe’s law was used in the past to calculate the value of telephone and computer networks, but today it can also be applied to the calculation of the implicit value of a blockchain.

The formula states that the effectiveness of a network is proportional to the square of the nodes connected to it. Put simply, it means that a network works well if it is used.

Applied to cryptocurrencies, however, the law should be slightly modified: instead of nodes, it is more correct to talk about active wallets.

In fact, blockchains have nodes, which in themselves are already a very good figure to take into account if you are considering the spread of the network, but the wallets are an even more significant figure to understand the popularity of a crypto.

In essence, this calculation gives rise to the logarithm of a ratio between the market value on a given day and the moving average of the values calculated by Metcalfe’s law in the previous 30 days.

This is an indicator that can show whether or not we are in the presence of a market bubble of a crypto representative of a blockchain.

Of course, this evaluation only makes sense for those distributed and/or minable cryptocurrencies. For companies using the blockchain as a tool, it may at most serve as an overall valuation of the related business unit.

Which project is linked to a blockchain

Is the blockchain just a tool to pay for services or raise funds, or is it the basic element of the business project analyzed?

We have seen recently that some projects, such as Tron and Eos, have changed blockchains as the company project has been implemented.

So be careful if you are investing in the definitive blockchain or in its mere financial instrument.

What data can enter the blockchain?

The blockchain was created as a transaction database and then evolved into a more complex form of database in which you can save more complex and truly heterogeneous data: from graphics to production data, etc. …

But what is important is the interface with which these data are saved: if it is complex we will have less ease of use of the DLT at the retail level.

How to access data on the blockchain

What interface is needed to use the data and where will it be used? A greater complexity of the interface of use, in this case as well, will limit the diffusion of the use of that blockchain.

How efficient the blockchain is

A problem that arises a lot today is that of scaling, that is, the transactions that a blockchain is able to support.

The meter of this quantity is the TPS, Transaction per Second. With Bitcoin, it is between 2.3 and 3.7 TPS; for Ethereum it is above 8 TPS, while Eos promises to exceed 3000 TPS.

This is something important but not the only factor, otherwise, it would make no sense, for example, to invest in bitcoin.

The Consensus

If a blockchain is decentralized and there are several miners, how is the blockchain governed? How is the right to vote distributed? Are there any representatives? Is there a foundation? In short, an important aspect is a governance that when merged with DLT gives a revolutionary piece of technology.

Fabio Lugano
Fabio Lugano
Graduated with honors from Bocconi University, Fabio is a consultant for companies and wounded shareholders of the Banche Venete. He is also the author of "Scenari Economici", and lecturer and analyst of cryptocurrencies since 2016.