Learn About The PurpleTrader Metric System
At PurpleTrader, we believe one of the key components of community tokens is its strong social and utility components. Our research shows that, although traders want to explore this ecosystem, it requires navigating a complex web of crypto-native applications and misleading information. There is a lack of trustworthy sources and data, and a lack of organized metrics to help assess the real value of these tokens.
Our goal to alleviate this issue is to implement a scoring system that considers each social token’s trading activity, social signals, and reputation & utilities. These metrics, like a rating system, help assess the value of social tokens and can assist traders in their decision to buy and sell tokens. We use these prompts of analysis because we want to provide traders with more information they can use for their personal trading strategies. Especially in crypto, not all traders trade the same, which is what we took into account when creating our scoring system.
This article will dive deeper into the three key metrics that we use on our platform: trading activity, social signals, and reputation & utilities. This information will help you understand how to navigate our platform and assist you with your trading decisions.
A key component of social tokens, such as community tokens, is that more than financial metrics are needed to capture their true value. What makes social tokens unique is that they can help value the social capital, reputation, trust, and intangible value that a creator, brand, individual, or community contains. As a result, the industry needs to look at community-specific metrics such as community growth, governance activity, and resource allocation.
One way to measure the community growth of a particular project is to look at social media accounts and the engagement of these accounts. At PurpleTrader, some of the social media accounts that we look at include Twitter, Discord, Medium, and YouTube.
Users must be conscious that some accounts acquire fake followers thoughts “bots” that can misrepresent the social signal value of a particular community token. That is why it’s important to analyze a combination of factors - not just one.
For governance and resource allocation, we look at Snapshot, a voting tool based on the IPFS decentralized storage system, used by many crypto projects such as DAOs to poll their user bases. It’s not just enough for a community to have a large following. A community can only be strong if its members are active participants in helping shape the community. Snapshot provides the necessary data to determine whether members are active in a particular community. For example, are members voting? Are they making proposals for the community?
We understand that the crypto market can be exciting to traders because, unlike traditional markets, crypto markets never close, and setting up an account is much more accessible to start trading than the stock market. However, risks are associated when trading community tokens, so we provide extensive metrics on the token's trading activity to assist traders when trading.
We take into consideration metrics that include a token’s price, volume, supply, volatility, and market capitalization to provide a useful rating on how well the token is performing.
For example, volatility measures how much an asset's price has increased or decreased over time. Usually, the more volatile a cryptocurrency is, the riskier it’s considered to be as a trade — and the more potential it has to offer either higher returns or higher losses over shorter periods than similarly less volatile cryptocurrencies.
These are just some metrics you can expect to see under trading activity when using our platform.
Reputation & Utilities
The point of the reputation and utilities metric is to provide traders with transparency and a clear profile about a particular token. Similar to the information you might find on a stock, we look at the information that includes project background, current stakeholders, and the project's leadership. Our goal is to measure the quality of the background information of the token. However, given the anonymous nature of crypto, we take it a step further to include data such as the number of wallets that hold the token and if the ledger is public for everyone to see. Additionally, we look to see if the token has been listed on other key exchanges as a sign that this token has been vetted before. Currently, we consider Coinbase, Binance, Kraken, and Gemini as tier-1 exchanges in the crypto space.
Additionally, social tokens are separated from other types of cryptocurrencies because many social tokens have a utility component - a reason to exist. This means that the token issuer can define its benefits and use cases for those who buy the token. These benefits and use cases can include exclusive content, community resources, access to events, experiences, rewards, and voting power. We like to think of social tokens as a membership pass, but on the blockchain. When looking at this metric, we consider the quality and number of utilities a token offers its users.
Let’s look at ApeCoin as an example. ApeCoin is considered a governance and utility token, meaning that ApeCoin holders can access exclusive features of the APE ecosystem, such as games, events, merchandise, and services. Additionally, holders of ApeCoin can vote and make proposals in the ApeCoinDAO.
Trading social tokens such as community and brand/fan tokens can be confusing, especially if you’re new to the space. There is a shortage of trustworthy sources and data and a lack of organized metrics to help assess the real value of these tokens. As a result, some traders overlook the potential benefits these types of tokens can provide and, or make bad trading decisions.
We believe that community tokens will unleash tremendous value to society over the next decade. 10 years from now, we envision a world with 1 billion people who will own a community token. However, we need to create the necessary infrastructure to allow traders to feel safe trading these types of tokens.
Our approach calls for a new way to assess the value of these tokens. By implementing a scoring system that considers each social token’s trading activity, social signals, utilities, and token formation, we believe that this can help strengthen the ecosystem. As a result, not only will traders be able to navigate safely, but communities will also foster due to the added liquidity being brought into the market.
At PurpleTrader, we make discovering and buying community tokens simple.
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