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The Introduction — Huobi SMARTChain Blockchain Asset Assessment Model

Background

The rapid development and broad application of blockchain technology generate great impact on the way people live and work. “Blockchain asset” refers to the digital asset based on blockchain technology and can transfer to others via the web without the participation of a third party.

Normally, blockchain asset means the particular utility in the particular scenario. Blockchain assets, as an important part of application related to the public blockchain, can increase the liquidity of assets, improve the matching efficiency of technology and capital, and create new business model. Blockchain asset is playing an essential role in the digital economy.

In recent years, various types of blockchain assets arise and the asset size grows fast. By October 2017, there are over 1,000 types of blockchain assets with the size of about $ 200 billion around the world. However, according to a report from Cambridge, there are also over 5 million users of blockchain asset wallet, which means the penetration rate is only 0.1%. From this, we can see that blockchain asset is in its infancy with broad prospects. Since the number of blockchain assets rises rapidly while the quality tends to be uneven, making a scientific and systematic analysis of potential value and risk is of significance. We are making every effort to explore the value and support the development of blockchain technology and assets.(Resource: www.coinmarketcap.com.)

Rationale

Blockchain asset has dual attributes of technical and economic. Its technical attribute shows that blockchain asset needs to be produced by specific code program and database, and different blockchains have a major difference in underlying technology. Meanwhile, every blockchain asset corresponds to specific economic stimulus model in the particular scenario and the value of blockchain asset lies in its utility. Moreover, blockchain asset has technical, operational, price and legal risks. These risks have the following features:

  • Blockchain technology is developing on its early stage, and risks exist in whether the technology roadmap is applicable and whether the new technology can replace the old one.
  • The balance inquiry, transaction, and safekeeping would require technical foundation and mis-operation can lead to risks.
  • Project Management may have risks since most of the corresponding projects are in the early stage.
  • Blockchain assets are featured as highly liquid and price volatility. So overheating can easily happen and produce risks.
  • Anonymous transactions may be involved in money laundering.
  • Many countries are lack of integrated monitoring system of transactions while risks lie in business process and investors protection.
Methodology

1、Structure

Based on the analysis of technical features and applied trend, Huobi Blockchain Application Institute (hereinafter referred to as “the Huobi”) classified all blockchain assets into 4 categories including Coin, Technology Platform, Asset and Token Based On The Real Asset, and launched Huobi SMARTChain Blockchain Asset Assessment Model (hereinafter referred to as “the Model”). Through the qualitative and quantitative methods, Huobi explored the potential value of blockchain asset, illustrated risks and contributed to set up the ecology of blockchain industry.The results of this Model only represent the opinions of Huobi Blockchain Application Institute. They are not investment advice and not leading investors to buy or sell the assets. Investors should evaluate assets according to their experience and balance. Please make prudent investment.

From 5 points of view, including Strategic Positioning, Project Management, Market Activity, Team Reliability and Technical Advance, the Model developed 37 secondary variables to analyze potential and another 14 secondary variables to analyze risks. Besides, the Model established different assessment models for different asset categories according to primary market and secondary market. Primary market is the entrance of circulation while the secondary market is the primary site of transactions. The Model is made up of 5 sub-models.(Assessment of Coin only contains secondary market project.)

2、Index

Take the application asset in the secondary market for example. The Model took Strategic Positioning as the priority and will evaluate the size of target market and customer scale. For example, payment is the basic process of financial service, its target market will be broader than other financial services while potential customers of social application will be more than those of financial service. The assessment of the risk of Strategic Positioning was mainly concerned with the number of existing competitors and whether target market was strongly monitored by government.

Secondly, Team Reliability was evaluated by whether core members had related experience in blockchain area and whether the team had support from private equity. The assessment of Team risk mainly considered the stability of the team and personal credit of core members. For example, if core members put forward many projects in the short term, team risks should be increased.

Thirdly, the assessment of Project Management mainly focused on the project development schedule, information disclosure and token distribution plan. The risk of Project Management was mainly about the compliance of project, the open source degree of project code and the quality and frequency of information disclosure.

Fourthly, the assessment of Technical Advance was primarily concerned with the reliability and maturity of technology, while the risk evaluation attached importance to the substitutability of the technical proposal, dependence on the breakthrough of key technology and security.

Last but not least, the assessment of Market Activity Level mainly focused on the liquidity and community activity of tokens while the risk evaluation was mainly about ownership concentration, liquidity risk and price risk. Those projects with a high concentration, prices that rose too fast in the short term or financing amount seriously larger than requirements, were thought to have higher risks.

3、Proportion

In the potential assessment of secondary market, Strategic Positioning, Team Reliability, Project Management, Technical Advance and Market Activity Level accounted for 30%, 25%, 20%, 15% and 15% while in the risk assessment, their proportions were 20%, 15%, 30%, 15% and 25%. Compared with application assets, the potential assessment of platform project focused more on technical factors, but coin project focused more on market factors. The weight of primary indexes from potential and risk is shown in Figure 4 and 5 below:

4、Results:

The results of Huobi SMARTChain Blockchain Asset Assessment consisted of 4 categories, including Clear Value, Close Attention, General Concern and No Concern. The meaning of all 4 types are stated in Table 1 below:

Table 1. Results And Meaning of Huobi SMARTChain Blockchain Asset Assesment:Model

ResultsMeaning
Clear ValueHigh potential, low risk
Close AttentionHigh potential, medium risk
General ConcernAverage potential,low or medium risk
No ConcernLow potential
Notes:Scores of Potential over 60 are high, 50-60 average, below 50 low.Scores of Risk over 35 are high,
25-35 medium, below 25 low.
Features
  • On the basis of comprehensive assessment including potential and risk.
  • Using both of qualitative and quantitative methods.
  • Developed according to different types of assets and their life cycle.

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