Do you ever marvel why most cryptocurrencies rise and fall collectively like a herd?

Seemingly, there is no discrimination between good and unhealthy coins, and the foundation cause is a scarcity of discrimination between good and dumb money. In concept, smart cash will discover the higher coins, as a result of their information signals are better. But when nearly all of investors are from the dumb cash class and producing a disproportionate amount of commerce activity, the supply/demand dynamics are messed up.

In truth, there is an absence of considerably seen traction metrics for these coins, and never enough credible valuation metrics that may be universally applied. Speculators don’t care for these metrics. The only Kool-support they drink is a belief that skies are the limit, and price multiples grow on trees.

That’s why I am always on the hunt for tokens that are literally used, and have been saying:

We are in dire straits for token usage metrics, not simply to vindicate the "utility token" moniker, but in addition to eventually bring some sanity into how we may evaluate some of these coins.

In the long run, I believe that not all coins are equal. And never all coins deserve the identical valuation metrics. Super tokens like Bitcoin or Ethereum are multi-objective, and they could deserve extraordinary multiples in part as a result of it helps them secure their sovereignty as bona fide consensus protocols with robust crypto-economic defenses in opposition to theoretical attacks. (though with POS the assault equation modifications a bit.)

Aside from technical protocol coins, most different coins will probably be extra closely aligned with finish-person traction as the primary correlation elements for their valuation. This includes all flavors of app coins together with the upcoming variety of so-called governance coins.

The purpose of a coin is to create economically valuable enterprise models directly or indirectly by way of the ecosystems they engender.

Blockchain-based transactions are arguably a key traction metric.

After all, market prices could be influenced by news as a substitute of usage exercise, or they are often artificially influenced by lopsided token distributions that affect value elasticity because of the scarcity of the buying and selling pool. But these are short term, coin valuation metrics centrally manipulated tactics that finally run their course. You can amplify and concoct your information for thus lengthy before that sport is up, and you'll lock your reserve tokens for therefore lengthy until finally your Token financial models catch-up with reality.

When you have a look at CoinMarketCap, you get a macro view of the market, but if you look laborious on the venture levels, the actual traction will be revealed from the bottoms-up metrics associated to real utilization. Below is an inventory of the Macro vs. Traction View metrics, as I see them.

The Macro View is Top Down whereas Market Reality Traction occurs Bottoms Up by way of Outcome and Activity metrics.

Macro View

- Market Cap
Daily Trades
- Amounts raised
- Number of Coins
- Number of Apps
Traction View

Outcome Metrics

- Active Users (Daily, Weekly or Monthly)
- Total transactions (quantity)
- Value of transactions (worth)
- Balances in smart contracts (worth)
- Transactions to/from contracts (quantity)
- Value of transactions to/from contracts (value)
- Blockchain rewards to users (value)
- Wallets worth (value)
Activity Metrics (numbers)

- Unique addresses
- Active addresses
- Wallets
- Nodes
- Transactions per second
- Blocks per hour
- Developers
- API calls
- Software downloads
- Repositories
- Commits
- App downloads
- Clients
Here is my favourite (brief) list of traction metrics (Testnet transactions don’t depend):

Ethereum: 52% of transaction sorts going to sensible contracts (Source: Amberdata)CryptoKitties: 2.8 Million good contract transactions in first 6 months (Source: Dappboard)0x: Over 100,000 lifetime trades (Source: 0x Tracker)

Until there are actual revenues and earnings (if that applies), I’d wish to see more traction metrics from blockchain companies. We have to see them quickly.