A very brief survey of the Altcoin Landscape
The market cycle which began in late Q3 / early Q4 of 2020 has already brought about significant changes in the adoption of blockchain technology — with cryptocurrency at its core.
We’ve seen large financial institutions beginning to prod at the adoption of cryptocurrencies as part of the products offered to their clients, national governments beginning concrete experimentation around CDBCs (central bank digital currencies), and more recently regulators beginning to take a more prominent stance with regards to the integration of this new financial system with the existing one. The general sentiment around both blockchain and crypto is that they’re here to stay — driven primarily by the adoption and use by large traditional players of the main currencies which move crypto markets — Bitcoin and Ethereum.
Those who’ve had more than a toe dipped in this space for a while now are well aware that the DeFi and altcoin scene is ‘where it’s at.’ In this space, projects range from DeFi protocols backed by top-in-class venture capitalists with billions of dollars worth of locked assets — typically multitudes of other, smaller crypto assets, to tiny startups attempting to bypass the traditional fundraising route by promising their users tokens as rewards for contributions to the networks they establish — the ‘better than free’ business model. This is a considerable range of projects and products, built upon the new financial rails which DeFi and blockchain have brought about. A third category of ‘projects’ has been intentionally left out — scams, rug pulls, and empty promises created by anon teams attempting to leverage the fact that investing in cryptocurrencies does not require KYC for buyers and sellers alike. Crypto is a risky, but potentially very rewarding game, which the recent regulatory wave is deeming may be a little too risky for the average investor.
So how do investors gauge if a tiny cap altcoin project is worth investing in?
The answer to this lies in DYOR — ‘do your own research’ — a process which is akin to bonafide due diligence on an upcoming or recently launched altcoin project — which at present requires a thorough analysis of a multitude of social and informational channels — the website, the lite paper, the token distribution, the Twitter announcements, the telegram engagement — for meme tokens ran ‘by the community’ it stops there — for legitimate projects investors typically look for a working product or at least the potential for a working product with a legitimate business model to back up its operations. This category of projects is typically known as ‘gems’ and in the current landscape only very rarely comes about at a time when the project is still nascent, and where returns by the platform increasing intrinsically in value over time are likely.
DYOR is a costly process, in terms of time as well as potentially irrecoverable funds in case of a non-legitimate project, and requires a multitude of channels for inspection to be carried out satisfactorily. Enter ECHO. The ECHO app is a platform for discovering tiny cap altcoin projects with legitimate utility with particular attention for those projects whose business goal is a social, environmental, or community-related and philanthropic cause. ECHO rewards its users for contributions like signaling a project to the platform, commenting in a project’s favor, viewing token project team advertisements, as well as staking.
Rewards are great, but is there really a need for this? The ECHO community agrees that DYOR is typically costly at the very least in terms of time, so a solution that can help crypto enthusiasts and others looking to enter the space is seen as beneficial. Additionally, a very brief analysis of CoinGecko data on listed tokens (which hence have some form of ‘legitimacy’ even as meme coins) seems to suggest there is still much to be desired in terms of appropriately categorizing altcoins — with enough granularity — and based on user’s interests.
We begin our analysis by inspecting the qualitative data from the CoinGecko V3 API to arrive at a brief characterization of sentiment and trust for categories of altcoin projects. The results that follow are not meant to be interpreted as quantitatively nor as methodologically rigorous — if you’re used to reading fully flushed out data science articles then this will feel like nothing more than a teaser.
Coingecko has data from (at the time of writing) around 8300 altcoins (including tokenized derivatives), and already provides relatively rich qualitative data in terms of market liquidity, presence on social media, product development, sentiment, as well as additional proprietary metrics including trust.
Out of the 8300 altcoins, it is possible to retrieve qualitative data for 5713 tokens (accounting for some basic preprocessing). Of these, we restrict it to those which have an explicit ‘category’ label. Each token can be labeled as belonging to one or more categories amongst an exhaustive list of 107 categories, some of which however contain a single token.
The number of tokens that are officially categorized amounts to 2269 tokens, roughly 40%. This result is in and of itself significant — 60% of listed tokens are not categorized — underlining the importance of a platform that provides a single source of truth for appropriately categorized token projects.
The remainder of this very brief qualitative analysis is carried out on manually selected groups of categories out of the 107 — falling under six main buckets: Entertainment, Social, DeFi, Blockchain (protocol), Business, and Meme, comprising 895 tokens. We select category constituents to maintain a comparable sample size and exclude derivatives.
We then compute per-group summary statistics of the numerical variables which CoinGecko uses to summarize the qualitative (non-price) information on a token, and group them to arrive at the following table:
Table 1. Qualitative description of values of each qualitative variable bucket, normalized across categories
While the results obtained here are implicitly dependent on the selection of tokens belonging to each category and the set variables selected to represent each qualitative aspect of a token project, a simple result emerges: legitimate projects with strong fundamentals are protocol-level projects which bring about blockchain-level innovation. Meme tokens have great community support (FOMO) but no real utility.
The results of this very rapid landscaping of the altcoin scene can be interpreted as attesting to the maturity and mainstreamness of crypto and blockchain — from a fringe asset class to the next big thing after the internet?
Many businesses within the social and entertainment sphere are migrating from more traditional business models to the introduction of crypto-economics, and many new businesses that could not have come about were it not for existing DeFi rails are attempting to establish themselves with crypto-economic models from the get-go. It is the latter of these categories we aim to bring into the limelight and make discoverable through ECHO — creating a virtuous cycle of discovery of legitimate projects created by competent and professional teams, who focus on creating great products for their community, comply with regulation, and innovate. ECHO users contributing to this will be rewarded in ECHO points, convertible to ECHO tokens, with a percentage of rewards being sent to a community-chosen charity!
Are you interested in being listed within ECHO’s ecosystem? Then join https://t.me/dyored to receive vetted tokens straight to your inbox!
ECHO Technologies Ltd.