DARE Methodology, Grades, and Evaluation System
The Digital Asset Report and Evaluation (DARE) is a standardized, dynamic approach to evaluating blockchain-based projects and identifying value in the associated crypto-assets. The report is the result of an exhaustive research and analysis process based on seven fundamental factors.
Based on a weighted grading of these seven project fundamentals, a verdict and letter grade conclude each report, which is followed up with periodic updates, released over a quarterly basis.
The analysis, verdict and accompanying grade reflect our opinion on the long-term value prospects of a given token based on the current state of project development and indicators of future commercial viability.
The state of product development and indicators of commercial viability derive from an analysis of seven principle project fundamentals- market opportunity, underlying technology, ecosystem development, token economics, core team, and roadmap progress.
The underlying methodology involves both quantitative and qualitative analysis to ensure that we produce the most accurate picture possible at the time we conduct our evaluation.
Our first look at a token or cryptocurrency employs the Initiation report as a vehicle for delivery. Initiation reports provide readers a comprehensive analysis of the project fundamentals and draws hard conclusions from our assessment. The details of the Initiation report include a project summary, project introduction, presentation and analysis of seven key project fundamentals, concluding with a grade and final verdict derived from our weighted evaluation system.
Each initiated token or cryptocurrency will undergo a sequential reevaluation, with Update reports presenting the latest, most relevant analysis on a quarterly basis. The content contained in the update report is confined to analysis of changes in project fundamentals that influence the long-term value prospects of the token or cryptocurrency.
An updated project grade and verdict are provided based on a reassessment of the seven factors underlying our methodology. Grades assigned to tokens or cryptocurrencies in Update reports can reflect a change in our opinion of the project or provide a reaffirmation of the Initiation report.
We consider the project-asset paradigm from seven key angles: market opportunity, underlying technology, ecosystem development, token economics, core team, and roadmap progress.
The evaluation examines the current state of the project, how it relates to the initially stated goals, and provides an analysis of each fundamental to approximate an accurate outlook for the future. These factors are all, in some way, codependent, so they are analyzed both individually and in the context of the overall scope and progress of the project.
The evaluation process utilizes a proprietary scoring system comprised of weighted variables based on the follow project fundamentals.
It is important to examine the market opportunity of each blockchain project to determine the prospects for future growth. The market opportunity(s) of a given project are assessed according to the addressable target market size and competitive advantages, if any, held by the project. The addressable market size is a reflection of the potential number of consumers and valuation of the target industry of the project. The competitive advantage(s) of the project and closest contenders both within and outside the blockchain space are weighted heavily in the analysis of the market opportunity.
- addressable target market size
- attractiveness of product
- existence of industry leaders
- moats or windows in market
- competitive advantage of project
Technological development is a central aspect any blockchain-based project. Here we assess the functionality of technology and quality in comparison to competing projects. The ideal project will have relevant technological solutions, keep on track with the stated milestone schedule and consistently produce quality code. The evaluation incorporates, but is not limited to:
- network components (i.e. structure, consensus, throughput)
- GitHub activity
- pace of development
- relevancy of tech
Blockchain projects are highly dependent on network effects. It does not matter if the project is very innovative, if its acceptance in the community and the market is low. This is especially important for network projects that are being built for future dApp development and rely on exponential ecosystem growth for success.
We take a comparative look at variables such as number of active addresses, on chain transactions and number of community supporters to determine the health and potential of the ecosystem. The number of existing dApps and quality of partnerships are other variables taken into consideration to assess this fundamental.
Of great importance to any ecosystem is the level of decentralization- to establish this, we ascertain the spread of assets, structure of governance and role of validators in the network. An ideal project will have proven partnerships and active dApps on its network, and a strong community of supporters and developers to foster expansion.
The network architecture should also be in line with the target level of decentralization. In its entirety, the evaluation incorporates, but is not limited to:
- network analysis (dApps)
- comparative size and quality of community support
- social media
- asset allocation and on-chain data analysis
Examination of the token economics begins with a comparative analysis of the project market cap with respect to its relative position to other projects. Analysis also includes evaluating the role of the token, potential drivers of demand, and other factors that may lead to appreciation in value over time. Assessment of the token economics primarily incorporates variables such as:
- market cap of project
- role of token and demand potential
- drivers of value
- relevant news
- incentive mechanisms
Here we consider price volatility risks associated with underlying asset. Token performance is weighted slightly lower than the other fundamentals because of the more transient and dynamic nature of price movement, volume and liquidity.
We look at the price and volume performance trends of the tokens in the context of the overall market, as well as, individual project dynamics. It is important to note that while volatility reflects risk, it is not necessarily an accurate indicator of the commercial viability of the project or long term value of the token. Liquidity risks associated with underlying asset.
The ideal project will have an asset with positive long, medium and short-term price momentum, in addition to strong, steady volume on major exchanges with a low level of vulnerability to price swings. The evaluation incorporates, but is not limited to:
- trading data analysis
- relevant news
- social media
- token economics
- value modeling
The core team takes into consideration the influence of the leaders and central developers on the prospects of a given project. Team competency and capability are assessed according to an analysis of their credentials and the espoused ambitions of the project.
In addition to credentials that are backed up by strong evidence from a demonstrable track record of prior successes in previous business and engineering pursuits, the size and balance of the team are also assessed in relation to the goals and scope of the project. Moreover, the overall stability and sustained growth of the team are used as indicators of project viability.
Variables which are factored into the core team score include, but are not limited to:
- team credentials
- changes to lead personnel
- size and balance of team
- evidence of instability
- team growth
The espoused goals laid out by the team, the initial plan and updated iterations of the roadmap, represent crucial indicators of the ability of the team to deliver on promises in addition to providing a critical metric of commitment to the project. Timely delivery on milestones is assessed, in addition to upcoming catalysts or windows of opportunity that could prove crucial to the long-term project prospects. Accountability of the team is also taken into consideration through an evaluation of the team’s communications with the community, and are given additional weight when evidence is available to corroborate claims.
- roadmap evaluation
- upcoming catalysts
- team communications
- progress announcements
- upcoming milestones of competition
Explanation of Number Score and Grading System
Token evaluation is based on the aforementioned set of fundamentals which are weighted to produce a corresponding letter grade derived from the numerical score. The ratings scale is based on an accumulative score from our proprietary weighting system indicating commercial viability and long-term prospects of the underlying asset.
The grading ranges from A+ at the top of the scale to F at the bottom. An A+ is assigned to a project with excellent fundamentals and prospects for the underlying asset. At the other end of the spectrum, and F is assigned to projects which exhibit exceptionally poor fundamentals and absolutely no prospects for the underlying asset.
We consider any token rated at B- (70%) or above as investable for the applicable period which our report addresses. At this threshold, the project exhibits indicators of a favorable risk/reward ratio. To reach this threshold, the project must be fundamentally sound according to each factor we take into consideration- market opportunity, underlying technology, ecosystem development, token economics, core team, and roadmap progress.
As the fundamentals of each initiated token or cryptocurrency project change over time, Updates will contain a letter grade which reflects our latest evaluation. This letter grade can move up, down, or remain the same according to the most recent numerical score derived from our reassessment of the project.
Commercially successful project with a exceptional fundamentals; a thriving ecosystem and large-scale adoption support high level of token price stability. The token is utilized by a large community of supporters and value is highly tied to exceptionally strong fundamentals. The governance model of the network fully reflects the aim of the project. Long term prospects for project appear excellent based on a demonstrable track record of sustained growth and usage.
Commercially viable project with a robust fundamentals; positive ecosystem growth and widespread adoption with high level of token price stability. The token is utilized by a community of supporters and value is predominantly based on actual usage of the network. Long term prospects for project look very positive based on consistency of track record.
Technologically relevant and commercially viable project exhibiting early stage signs of adoption- while adoption at scale has not occured yet, a strong track record of achieving goals in line with roadmap indicate risk level is low. Project has made significant strides toward decentralization of the network, though mitigating factors may still persist.
Project typically exhibits strong tech development and ecosystem growth progress in line with all milestones but has yet to prove commercial viability or gain adoption. Project development has been consistent in moving toward proposed governance structure of network, though full implementation has not yet occurred. Token retains moderate level of vulnerability to adverse market conditions.
One major progress indicator (tech development or ecosystem growth) is typically advancing well in accordance with roadmap but the other is lagging behind; upcoming catalysts signal potential for positive price trend. Project remains highly susceptible to adverse conditions in the market and token price is moderately volatile.
One major progress indicator (tech development or ecosystem growth) is typically advancing well in accordance with roadmap but the other is lagging behind; no upcoming near-term catalysts strong enough to signal potential for positive price trend. Project still retains significant susceptibility to adverse conditions in the market and token price is moderately volatile. Examples may include a technologically sound project with little prospect of adoption due to shortage of marketing resources OR a popular token behind on tech development because there aren’t enough devs or projects in ecosystem.
Project exhibits moderate indications of progress but still faces above average level of risk; token price is highly volatile, prospects for adoption are uncertain due to factors such as poor marketing, lack of developers or dApp projects, irrelevancy of tech, or critical governance issues.
Usability issues present substantial issue for token; significant uncertainty, but project still demonstrates moderate progress on development or ecosystem fronts, having passed important milestones, albeit with delays. Adverse conditions in the market pose major risk to value of token.
Project has failed to pass several crucial milestones, leaving progress largely stagnant; while vulnerable to adverse external market conditions, the project still retains potential for turnaround. The value of token is predominantly based on speculation and potential for price volatility is high.
Project has missed majority of important initial milestones. Underlying tech is irrelevant and community support for project is low. Track record shows any upcoming milestones which may play role as a catalyst for progress will likely not be achieved. Token price is very susceptible to adverse market conditions and exhibits persistent volatility, resulting in substantially high level of risk.
Consistent failure to deliver on promises with no verifiable signs of progress, leading to significant degree of uncertainty. Underlying tech is unproven and community support for project is marginal. Track record shows any upcoming milestones which may play role as a catalyst for progress will likely not be achieved. Token price is very susceptible to adverse market conditions and exhibits persistent volatility with low level of liquidity, resulting in substantially high level of risk.
Project and token performance exhibit tell-tale signs of failure with little chance for recovery. Evidence of underlying technology either demonstrates poor implementation or is non-existent, with no sign of network transactions beyond speculatory trading. The ecosystem of users and support for project is declining and untenable with no upcoming catalysts. Token price is purely based on speculation, persistently volatile, and liquidity is exceptionally low.
Project has outright failed and prospects for turnaround are non-existent. Token cannot be used for its intended utility on the network and community support is near zero.