Here are some critical factors to consider

No one can predict the future, that’s for sure. But one thing is certain: blockchain technology will be a big part of our lives for years to come. It has quickly gone from a skeptical space that few dared to enter, to a burgeoning technology that is being adopted across industries.

Therefore, if you are a new investor looking to tap into the potential of blockchain technology, it is probably a very good idea. The only catch is that not all blockchains are created equal. Therefore, if you want to put your money on the line, a thorough comparison of the options is extremely important.

Not sure how to evaluate your options? Here are some factors you can consider.

Usage cases

This is perhaps the first and most crucial factor you need to consider when comparing blockchains. Go through the project’s whitepaper and find out the reason for its existence, the problems it seeks to solve, and the gaps it tries to fill. The use cases of the blockchain will also indicate its future potential and thus the extent of price increase in the long term.

For example, the Helium blockchain is looking to create a decentralized network for IoT devices, while Bitcoin was launched to provide an exchange and store of value that operates without any central authority (i.e. banks). Some blockchains are even launched to solve the problems of other blockchains. For example, a number of ‘Ethereum killers’ were introduced to solve the problems plaguing the smart contract network.

Transaction speeds, now and in the future

There is a huge gap between blockchains when it comes to transaction speeds. For example, the Bitcoin blockchain is extremely slow. It can only process seven transactions per second (TPS), with confirmations taking up to 10 minutes. Ethereum is slightly faster, with a TPS of 30 and a confirmation time of around 6 minutes.

However, Ethereum 2.0 is expected to reach 100,000 TPS after the transition to the PoS consensus mechanism. Therefore, the future potential of the blockchain is also important. It should be able to scale and maintain transaction speed, even if user traffic grows in the future.

Consensus mechanism

Every blockchain has a consensus mechanism. This is a protocol that helps validators reach a mutual understanding regarding the authenticity of transactions. For example, Bitcoin uses the proof-of-work consensus mechanism. This requires enormous computational power while verifying transactions and has seen a lot of success in recent years.

Newer blockchains use the proof-of-stake consensus mechanism. Here, instead of using computing power, validators must pledge the blockchain’s native cryptocurrency to confirm transactions. This is much more environmentally friendly than its PoW counterpart and thus a better investment for merchants and a viable implementation solution for businesses.

There are also several other consensus protocols, each with their own advantages and disadvantages. Some of these may be more viable than others in the future. Therefore, it is important to evaluate the consensus mechanism of the blockchain before investing/implementing it.

Roadmap for the future

The blockchain project you choose should also have a roadmap for the future. It shows that the team has thought long-term about the project. It also keeps companies and investors updated on the path the project is taking in the future and helps them determine if this path aligns with their values. For example, Hyperledger Grid has shared a community-driven tentative roadmap on their website, along with all the features that future releases will include.

Financial calculations

Numbers don’t lie. Therefore, it is also important to look at the financial calculations of a blockchain. First is the market value of the project, which can help you gauge its popularity. You can compare the market value of the project with its competitors to find out if it is popular.

Next up is the total value locked (TVL) in the project. This indicates how much money is moving around on the blockchain. The higher this number is, the more faith users have in the blockchain. You can also look at the price movements of the blockchain’s native currency. Historical price movements can give you critical insight into future performance.

It would also help if you also looked into the team behind the project. The previous credentials of the minds behind the project can give you a good indication of the potential. However, questionable personalities or pseudonymous identities can be potential red flags; these projects are best avoided.