Crypto Metrics You Should Know

There are plenty of crypto tokens out there that have earned their value through the utility they provide, whether in the form of lower fees or greater scalability. But how do you know which metrics matter most to you? Let’s look at five key metrics to help you compare different tokens to each other.

Common Metrics for Crypto

Cryptocurrency is an emerging market and trying to navigate it can get complicated. The language can be technical, but it starts to make sense as you expose yourself to it. Many people only know of Bitcoin or Dogecoin when they begin their research. Discovering the thousands of different crypto tokens that exist can become overwhelming very quickly. However, there are common metrics you can use to compare one crypto token to another. These include scalability, supply, fees, transaction times, and blockchain features. Let’s take a look at each of these.

Blockchain Technology

The blockchain is a powerful and disruptive technology. However, when talking about what blockchain is, there are a lot of variables at play. While blockchains are best known as the underlying infrastructure for crypto tokens, they can provide other services. You want to know what uses a given blockchain has, like supported smart contracts, and whether you can build decentralized (dApps) on them. For example, Ethereum is popular because any dApp built on Ethereum is compatible across the blockchain.

Different consensus algorithms can validate transactions on a blockchain network. One of these algorithms is proof-of-work (PoW), which involves miners using their computing power to solve complex mathematical problems to verify transactions on a network. 

Another algorithm is proof-of-stake (PoS), which requires users to stake or hold onto their tokens for a certain period before using them. This method incentivizes token holders to keep tokens rather than sell them off, as they would earn more over time.

PoS also drives down the blockchain’s environmental impact. Instead of mining servers functioning as nodes, ‘stakers’ act as the nodes. That allows the network to remain decentralized without relying on miners, which consume a lot of energy

Blockchain native tokens

If you’re only looking at crypto tokens, you’ll still want to investigate their blockchain. BTC is the native token for the Bitcoin blockchain, but there are other tokens relying on it, like CityCoins. Similarly, ETH is the native token for the Ethereum blockchain. But popular Metaverse token MANA, used across Decentraland, is built on Ethereum.

SHIBA INU (SHIB) is also built on Ethereum, even though it doesn’t have Metaverse applications… yet. Whether a token is native to a blockchain or not can give you insight into the online environment you can use it across. That means whether it has uses outside of peer-to-peer transactions as a store of value. While this metric doesn’t necessarily reflect the value of a crypto token, it provides insight into the project’s long-term advantages.

Transaction time

Transaction time is crucial among metrics used when comparing blockchains for different crypto tokens. Some blockchains have faster transaction times than others, and some blockchains allow for more transactions per second. If you’re building a dApp or smart contract, you’ll need to find one with fast enough transaction times that users won’t get frustrated by waiting for their transactions to be confirmed. An example of a blockchain with slow transaction times is Bitcoin: it can take hours for your transactions to be verified. Depending on the exchange you choose, you can also pay higher fees to reduce transaction times.

Fees

When investigating crypto, you need to consider fees. There are typically three types of fees: transaction, withdrawal, and deposit. It’s essential to look at all three before buying a token. You also want to know whether there is a limit on how high fees can be for a token. ETH, for example, uses “gas fees.” Smart contracts calculate fees based on energy spent on a given transaction. If the fee is too high, you might want to wait until traffic on the Ethereum network dies down to lower its cost.

Supply

Supply refers to the number of tokens created and distributed over time. Depending on the rate at which they enter circulation, supplies are either inflationary or deflationary. If there’s an inflationary supply, each token in circulation will be worth less because there will be more of them on offer over time. Dogecoin and Shiba Inu are examples of inflationary tokens since they constantly increase the amount in circulation. Burning tokens has become a popular measure for growing or maintaining the price of deflationary tokens.

If you’re looking at crypto tokens to invest in, it’s crucial to consider supply. If there are fewer coins in circulation, it may be a sign that demand for these tokens will increase over time. For example, Bitcoin has a max supply of 21 million BTC and an estimated current circulation of 19 million BTC. Litecoin is another cryptocurrency with a max supply of 84 million LTC. In contrast, Ethereum has no such limits on its ETH supply.

Scalability

Two main metrics gauge a crypto token’s scalability: transaction volume and throughput. The metric you choose depends on what your needs are. If you want a token to use as a digital currency, then transaction volume should be a metric you look at because it will give you an idea of how many transactions can happen over time. Throughput will tell you how fast the blockchain processes transactions; it’s not as usable for everyday purchases if transactions take longer.

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