How We Do Coin Analysis Part 2/2In this part of Masternodes Monday, Leon continues from "How we do coin analysis Part 1/2" and explains what to look out for when researching the coin's project. Click here to watch Part 1.
1 How they Govern their BlockchainIn my perspective, the coins ecosystem is like running a small economy, you literally create the coin which means creating a currency. Pump and Dump schemes are virtually everywhere but in order to remain sustainable you need to govern the currency you're running.
1.1 Block RewardsA block reward refers to refers to the new coins that are awarded by the blockchain network to eligible cryptocurrency miners for each block they mine successfully. For example, Dash uses masternodes for its mining system and the block reward is divided into 3 parts:
- 45% of the block reward and it goes to the miners.
- 45% of the block reward, goes to the masternodes.
- 10% of the block reward goes for funding of the Dash project.
1.2 Rate of DecayThe Rate of Decay in this context refers to the time taken to mine a certain percentage of the total pool of coins. For example, it takes you 1 month to mine 50% of the total coins, therefore the rate of decay is really high and you should start thinking about running off. Hence, you need to make sure that the amount of decay is at a sustainable rate whereby you can't acquire a high percentage of the total coins (from mining) so quickly.
1.3 Unreasonably Limited Supply of Coins.If I were to create my own coin, I never believe in limiting the supply such that the price will intentionally be high. Let's say I created a LeonCoin with a supply of 10 coins, due to this limited supply and high demand the price will be really, really high. That's just bogus. Make sure that the mineable supply of coins doesn't decline too fast such got nothing else to get out of it. You'd want to make sure the block rewards are not too front nor too back.
1.4 FungibleHowever, there's something called non-fungible coin. If you're specifically trying to sell that one asset, like a non-replaceable and unique special coin it's called a non-fungible coin. I wouldn't use a limited supply strategy to stir the price up. It just doesn't work because you can't bring the price up as there's no one to buy from and no one to sell to.
1.5 Business ModelThe final check is to analyse their business model to see if it makes sense. Head over to their website and see if their $4,000,000 is justified. If you find this video useful, do leave a comment below and share this with your friends and family. Also, to not miss out on the exciting updates that we are going to have in the future, do join our Facebook group, and we have posted the link below. Till then, see you guys. https://www.facebook.com/groups/masternodesmovement/
How We Do Coin Analysis Part 1/2On this week's Masternodes Monday, Leon shares his views on the things he looks out for in a coin.
1 Getting StartedInitially, we looked at LogisCoin (LGS) but decided not to do it because the volume was very low last time. But since one of the viewers suggested to do LGS, then we'll go ahead and use it as an example. I'm gonna walk you through my thought process, how we select the coin, and how we come into a decision.
1.1 VolumeFirstly, analyse the volume. In masternodes.online, sort the masternodes by volume and scroll down the list. Currently, LGS coin has a market cap of 4 million and a volume of 2 million. It's a bit too good to be true because the volume is half of the market cap which means half of the company is being traded. If you look at Alibaba, they don't have 50% liquidity. Visualize that despite their 400 billion valuations, they don't get 200 billion daily. So we need to keep a lookout for that but let's put that thought at the back of my head.
1.2 Masternode Worth/ Cost to StartSecondly, I look at the barrier of entry, which is the cost it starts. Let's say my budget is less than $10k, and this thing is only $8k to start. As you can see from the last column here, it is within my budget. [caption id="attachment_259" align="alignnone" width="607"] *At the point of filming, the masternode worth was $8,000+. On 11 December 2018, it dropped to $600+. Wowzers.[/caption]
1.3 ROIThen thirdly, I look at the ROI. It's not my first priority. At the moment, LGS's ROI is 670% a year, which means that I can break even in 54 days which is really good. In less than 2 months, I'm able to break-even.
1.4 Number of Active MasternodesIf I'm still skeptical after looking at the ROI, I check how many people are doing it. If the masternode is under the assumption that it's so good, I would expect that there will be over a hundred active masternodes as people would've jumped in.
1.5.1 Locked Coins71% of the LGS coins are locked, I'm walking down the list of masternodes steps, analyzing and thinking. I didn't even look at any whitepaper yet, I'm just looking at the surface stuff. So the coins have 357 masternodes and 71% of the coins are locked. What does that mean? It means that it's like a moratorium. A Moratorium is like a lock up/lock in period kind of thing.
1.5.2 Locked Coins Good or Bad?It can be good or can be bad. Or it can go both ways. Usually, coins that have founders who want to hold it for themselves such as Ripple (XRP) may be good because the guy is very incentivized to make sure that the coin succeeds. Again I'm not condoning, I'm not saying that this is good or bad, it's my opinion. It's a correlation of higher percentage of equity, the more the founder holds, the more incentivized he is to grow the business. Unless it's like Grab (popular ride-hailing firm) where owning 10% of the company is worth like, 10 billion dollars. Then you're still incentivized because your effort is equivalent to 10 billion dollars. Back to LGS. He's holding a very big portion, 71% in LGS. Is that a good or bad thing? It really really depends. I would say that generally, if it's a masternodes game, it's quite good. There are exceptions of course because if the guy is out to sell all the LGS coins that he owns means he's just out to make a quick buck. If the coins are locked at anything more than 80%, there's a chance he'll cash out, drastically dropping the price of the coin.
1.6 Price of CoinsNext, without even looking at the whitepaper yet, I will look at this! [caption id="attachment_271" align="aligncenter" width="629"] Graph was captured on 11 December 2018, therefore it does not reflect exactly what Leon said prior. [/caption] Most of the time you can't get much from the chart because the coins are usually quite new. For this coin however it started on August and the price is still quite healthy. When we look at this two months ago when we started out, it was lacking liquidity that's why we put LGS on one side because we are not going to play coins that are very low in liquidity but very high ROI. This coin has much higher ROI then. Back then we thought it was a scam. But it proved us wrong. So, logically speaking we should try to look at it. My verdict, to build or not to build? I mean after looking at these 60 days, still quite healthy. You get some kind of returns. I'm a bit more skeptical because I have to be right? It's our own money. So what I'll do is I'll try to open the website and see what's going on. As for the final step, we're going to look at the business model and everything. (Head to How We Do Coin Analysis Part 2/2 for the next part!)
Mining For HumanityI have a friend called Aaron. He runs this Cryptosphere, I mean that's for another day, just a quick shoutout to Aaron, Cryptosphere. They use to be called Mining for Humanity where he literally donates his earnings, and we're going to be part of it as well. That means some of our earnings are donated to charity because these earnings are earned through the market, right? We are privileged enough to earn money through the market so we're going to give up some to the charity. We're going to give up to 20%. So if you're going to join me in my cause, please do because I think profits are meant to be shared with the less fortunate. We are really quite privileged to be able to sit here with iPad, aircon, laptop right? Like we can run out.. We can pursue our dreams daily but there are people who are unfortunate out there. If you find this video useful, do leave a comment below, and share this with your friends and family. Also, to not miss out on the exciting updates that we are going to have in the future, do join our Facebook group, and we have posted the link, in the description, below. Till then, see you guys. https://www.facebook.com/groups/masternodesmovement/