Is a Token Going to Last? Look at Its Coders
Today’s cryptocurrency world is defined by volatility. Last year, the price of Bitcoin skyrocketed by almost 2000%. Smaller, less mature coins saw their valuations rise and fall even faster, sometimes just a few days after being listed on an exchange.
In this environment, how do you evaluate a token’s long-term value? Social media feeds and online forums can easily be manipulated to sway investor sentiment and prices. There are organized pump and dump groups on various messaging apps. Twitter is rife with fake accounts impersonating crypto thought leaders. Then there’s the simple uncertainty of new, untested products and technology.
A better indicator of a token’s longevity may be activity on GitHub, a software development and collaboration platform. Many blockchain and cryptocurrency projects, especially those that are open source, use GitHub to share code.
Bitcoin, for example, despite its ups and downs in fiat valuation last year, has a robust track record on GitHub. Over the last three years, Bitcoin’s code repository has seen regular activity from its development community, which doesn’t seem to take breaks at all, with the exception of Easter. This doesn't necessarily mean that Bitcoin’s price will hit US $250,000 by 2020, as some crypto investors have speculated, but Bitcoin’s GitHub activity does demonstrate significant community backing and commitment to the token’s underlying technology. In other words, Bitcoin isn’t likely to disappear anytime soon.
"From what we observe, a good activity [on GitHub] indicates that the project will stick around in the long-term," says TM Lee, co-founder of crypto analytics company CoinGecko, which uses GitHub activity, among a number of other metrics, such as the token’s social media presence, to rank and score tokens.
Dogecoin, a canine-inspired token that was created as a joke, has shown surprising resilience. Dogecoin’s market capitalization is more than US $350,000 at the time of writing, thanks to a few dedicated volunteer developers. Now the token is in danger of dying, as there haven’t been major updates to Dogecoin’s GitHub since 2015.
Of course, an active GitHub repository is in no way a prerequisite for tokens to reach a large market capitalization. “A coin can do well both in terms of market capitalization and liquidity, but lack in terms of any developer activity, community, or public interest,” points out Lee. “ In such situations, most [...] of these coins introduce short-term volatility."
Still, in looking at the GitHub codebases of the top 14 cryptocurrencies by market capitalization, it’s clear that quite a few show consistent development activity last year and this year, in spite of price volatility.
EOS, a smart contract project that has been compared to Ethereum, has seen a strong uptick in GitHub activity in the past year, especially in the last few months as the project prepared to release its mainnet or primary blockchain network in June.
Last month alone, 66 developers changed more than 13,000 files in the EOS codebase, showing the frenzy of work required for their platform launch. In contrast, Bitcoin’s GitHub repository, which is much more mature and stable, saw a little more than 200 files changed in the same period.
The launch of the EOS blockchain might have boosted the EOS token price too, which correlates positively with push and pull request activity on GitHub, as both commands are related to updating the codebase (see glossary at the end of the article).
That being said, development activity for some top cryptocurrencies has almost no relationship to their price. Tron, another smart contract platform that launched its mainnet in June, saw its token value drop slightly in the month leading up to its product launch, despite a surge in GitHub activity.
GitHub activity is also more important for some tokens than others. For smart contract platforms like Cardano and EOS, it’s vital that third-party blockchain developers get involved and support their technology, or even launch their own tokens or applications on it. It can also be a security issue if not enough people are running nodes to secure the project’s blockchain ledger. In these cases, the company behind the blockchain throws a lot of weight behind attracting developers, such as organizing hackathons, workshops, and other events.
Ripple, a currency remittance and settlement network, focuses on financial institutions, such as banks and payment providers, which are less interested in adopting a public blockchain. That’s probably why its token, XRP, has a comparatively light presence on GitHub, while maintaining a high valuation. The project also has noticeably fewer active contributors. For example, in the last month, just seven developers pushed changes to Ripple’s main codebase, compared to 34 and 29 for Cardano and Tron, respectively.
"Among tokens, protocol or network-based tokens that are decentralized in nature tend to see a higher [code repository] activity,” explains Lee. "They benefit by having the software, typically nodes, run in as many places [as possible]. It's like a network."
That means that direct development activity comparison between tokens may not be the best overall metric, he says.
In the end, there’s no one factor that defines a token’s worth. After all, an active GitHub repository in no way guarantees quality code. That’s why a number of sites and companies are pulling from all kinds of data sources, including token liquidity on exchanges and activity from online communities such as Reddit or Facebook, to estimate and score a token’s quality and value. No one has cryptocurrency investment down to a science. But if you are looking to evaluate a token’s long-term viability, that token’s GitHub activity is worth taking into account.
A Brief Glossary of Github Terms:
Commit Comment Event: triggered when a commit comment is created.
Create Event: represents a created repository, branch or tag.
Delete Event: represents a deleted branch or tag.
Fork Event: triggered when a user forks a repository.
Gollum Event: triggered when a Wiki page is created or updated.
Issue Comment Event: triggered when an issue comment is created, edited, or deleted.
Issue Event: triggered when an issue is assigned, unassigned, labeled, unlabeled, opened, edited, milestoned, demilestoned, closed, or reopened.
Member Event: Triggered when a user is added or removed as a collaborator to a repository, or has their permissions changed.
Pull Request Event: Triggered when a pull request is assigned, unassigned, labeled, unlabeled, opened, edited, closed, reopened, or synchronized. Also triggered when a pull request review is requested, or when a review request is removed.
Pull Request Review Comment Event: triggered when a comment on a pull request's unified diff is created, edited, or deleted.
Push Event: triggered on a push (commit) to a repository branch. Branch pushes and repository tag pushes also trigger push events.
Release Event: triggered when a release is published.
Watch Event: is related to starring a repository, not watching.