How to Evaluate a Crypto Business: Beyond the Hype, Into the Chain

Why did the investor walk away from the deal? - Because the startup’s Discounted Cash Flow was so discounted… it was practically free! ????

Crypto cycles bring innovation, speculation, and more than a few cautionary tales. The space is filled with businesses leveraging blockchain in ways that promise to disrupt traditional industries - whether through DeFi, gaming, NFT marketplaces, or tokenized infrastructure. But not all of them are built to last.

For every legitimate project solving real problems, there are dozens of hype-driven ventures with no sustainable model. And in a market where on-chain data doesn’t lie, the ability to evaluate a crypto business beyond the surface-level buzz is what separates a solid investment from an inevitable rug pull.

This isn't about evaluating Layer 1 or Layer 2 networks like Solana or Arbitrum. It’s about assessing the businesses built on top of them. Here’s how to cut through the noise.

1. Does It Solve a Problem Worth Solving?

A successful crypto business shouldn’t just exist for the sake of existing. The best projects solve real-world inefficiencies - whether that’s reducing transaction fees, improving security, eliminating intermediaries, or increasing accessibility.

? Good Example: A DeFi lending platform that eliminates banks, allowing users to borrow against crypto assets seamlessly.

?? Red Flag: A vague “Web3 social network” with no differentiation, no clear use case, and no demand.

If the blockchain element isn’t integral to the solution, it's mostly like Web 2.0 dressed in sheep's clothing :)

2. Market Opportunity: Is There Room to Scale?

It’s not enough to solve a problem - the market has to be big enough to support growth. Crypto niches vary in scale:

• DeFi: Over $100 billion in Total Value Locked (TVL) with room to capture traditional finance.
• Gaming: Play-to-earn models have drawn millions, though sustainability remains a challenge.
• Immutable Records: Blockchain use cases in healthcare, identity verification, and education are emerging, with demand for tamper-proof records growing.

Beyond the Total Addressable Market (TAM), look at the Total Obtainable Market (TOM)—how much of this business is realistically up for grabs? Is the market crowded with incumbents, or does this project have a genuine edge?

If the business doesn’t stand out, it’s a clone that won’t survive long-term.

3. Team: Do They Have the Chops?

Crypto moves fast, and execution matters. A strong founding team should have:

?? Technical credibility - smart contract experience, contributions to past blockchain projects.

?? Business acumen - understanding of go-to-market strategies and scalability.

?? Public presence - transparency on X (Twitter), interviews, and industry events.

Pro tip: Check on-chain wallet activity (if available). Are the founders holding long-term, or are they offloading tokens as soon as hype peaks?

?? Red Flag: Anonymous teams with no prior track record, dodging scrutiny.

4. Tech: Is the Engine Humming?

The underlying tech should be built for scale and security. Key factors:

• Blockchain choice - Solana for speed, low fees and ability to handle large volumes of users.
• Smart contract security - Audits from firms like Certik or Hacken help, but exploits can still happen.
• On-chain adoption - Wallet activity and transaction volume (via Dune Analytics, Solscan) show real usage.

?? Red Flag: Poor audits, sluggish performance, or unaudited code. That’s an exploit waiting to happen.

5. Funding & Equity: Who’s Betting Big?

Follow the money. A well-funded project has backing from serious investors, but who holds the majority stake?

?? Venture capital presence - Funding from Multicoin, a16z, or Paradigm adds credibility.

?? Equity/token split - On-chain tools like Solscan or BscScan reveal the distribution.

?? Red Flag: If insiders or whales control 50%+ of the tokens, it’s a centralized risk—potential pump-and-dump territory.

6. Tokenomics: Money Mechanics, Not the Whole Game

A good token model supports the business - it isn’t the business.

?? Utility - Staking, governance, transaction fees - what does the token actually do?

?? Supply mechanics - Is it capped, deflationary, or inflating like a meme coin?

?? Demand levers - Burn mechanisms, lockups, or ecosystem incentives?

I covered this in “Do You Know What Makes a Good Token?” (Nov 21, 2024) -go check that out for a deep dive.

?? Red Flag: No real use case, or a massive token unlock schedule that guarantees a supply dump.

7. Community: Are People Sticking Around?

Crypto thrives on community engagement. A buzzing X (Twitter), Discord, and Telegram are positive signals - but only if engagement is organic.

• Daily Active Users (DAU) - Tools like DappRadar show retention rates.
• On-chain wallet activity - Are users holding and transacting, or was there a hype-driven spike followed by a ghost town?

?? Red Flag: Fake engagement (bot-driven hype) or an abandoned Discord post-launch.

8. Revenue Model: Show Me the Money

A real business has a clear path to revenue, not just token speculation.

?? How it earns - Fees (trading, staking), subscriptions, licensing.

?? EBITDA - Earnings Before Interest, Taxes, Depreciation, and Amortization. Revenue minus core costs. If it’s positive, it’s running on its own steam.

?? Discounted Cash Flow (DCF) - Projecting future cash flows and discounting them (usually 20% in crypto, given volatility).

?? Red Flag: No clear revenue model. Just vibes and token sales.

9. Risks: What Could Kill It?

Crypto isn’t just about growth - it’s about avoiding disasters. In crypto - risk happens fast!

• Regulation - SEC crackdowns on DeFi, NFTs, or gaming models?
• Security - Has the project been hacked before?
• Liquidity - Can the token survive a bear market without constant VC injections?

?? Red Flag: No contingency plans, no treasury transparency, or clear security gaps.

10. Roadmap: Vision Meets Execution

Talk is cheap. Can they execute?

?? Milestones - Look at past roadmaps. Did they deliver on time?

?? On-chain testnets - Beta usage and feature rollouts show progress.

?? Red Flag: Endless delays, generic “to the moon” promises, or roadmap abandonment.

Spotlight: Jupiter’s Playbook

Let’s apply this to Jupiter, a Solana-based DEX aggregator:

?? Problem solved -DeFi trading made seamless.

?? Funding -Multicoin-backed, with a healthy token split.

?? Tech - Audited, with $1B+ in on-chain volume.

?? Revenue - Fee-driven, likely EBITDA-positive, with strong DCF potential.

?? Risks - Regulatory uncertainties, but multisig protection helps.

Not perfect, but a top-tier contender.

Final Thoughts: Chain Data is Your Cheat Code

Evaluating a crypto business isn’t about gut feelings. On-chain data strips away hype. EBITDA and DCF ground the financials, while community and tech show the heartbeat.

I’ve watched this space evolve - Solana’s rise, DeFi’s grind and the winners stand out if you know where to look.

This isn’t about meme coin madness (that’s another article). It’s about execution. Do the research, check the chain, and don’t get rugged.

Stay sharp people!

Jamie West