We’ve just touched on the idea of network effects and how it relates to the number of users on a protocol, but this idea applies to developers as well.
Please note that I am not talking here only about developers of the certain project, but if you are looking for protocols (which you should), then you should be looking at developers of all the apps using that protocol. This helps tremendously because it is just easy to separate the wheat from the chaff because if there are dozen of other apps building on top of the protocol, then that involves significantly more developers than the protocol will ever need to have.
Crypto developers play an enormously crucial role that can’t be understated for two main reasons.
First of all, they’re the people who build the applications, products, and services that sit on top of these protocols in order to bring in users, making the protocol more valuable.
Second they also play a crucial role in safeguarding and upgrading the protocol. They’re the ones who look for vulnerabilities and bugs in the code that black hat hackers and thieves could potentially exploit to get hold of potentially billions of dollars worth of coins. They are also safeguarding the future of project by scaling solutions. You always want developers looking for vulnerabilities in the code, and you always want developers continually upgrading these protocols.
In many ways, developers are responsible for determining the future of any project because a protocol without developers is not going to have the applications and services built on top of it to bring in new users. You’ll have a dead project in that sense, and if you don’t have developers, you’re probably going to have vulnerabilities that will be found and exploited over time, which will also kill the project. However, if you have an enormous number of developers who are continuously building things and innovating on top of platforms, that’s a really good way of ensuring the future success of any protocol out there.
Now I need to make something clear here. Bigger amount of developers does not equal better product! Moreover, in the early stages, big number of developers is not good! What’s needed is a dedicated and small team of engineers and product people focused on building the best product in the market and winning where others have failed.
Any protocol that wants to succeed absolutely has to have the ability to attract developers. This can be very tough because competent or skilled expert developers in the crypto space are rare. There are not many of them, and they are able to attract enormous salaries because they have such a huge amount of choice, given the demand for them. They are pretty much only going to want to work for projects that they are actually passionate about. So, these protocols have to have the ability to capture the imagination of these developers, as opposed to just paying them really good salaries.
Because of all these reasons, I think this is a really important metric to study and to monitor over the long term. This isn’t just something you want now, but something that you want forever, pretty much for the life of the protocol. I found two really great ways to study this.
First of all, it’s on a website called GitHub. GitHub is basically a place where people publicly share their code for all types of projects. This is exactly the case with pretty much most cryptocurrencies out there. If they don’t have a GitHub, they’ll have some kind of similar website where they share all their repositories of codes out there. If they don’t have it, it’s a red flag.
You can browse one of these websites like GitHub, and you’ll see the commits of this project. You’ll be able to see data like the number of people who are developing code, or the number of people who have done the work, and the number of people who are doing it.
So, on a monthly basis, you can see the sheer volume and amount of code that has been deposited over the past month, quarter, or year. You can see if this is typically growing over time, whether more developers are joining or less, and if it is increasing or tapering off.
You can have access to all of this, and this is a really great place to generally evaluate what’s going on.
Does this look like a project that is attracting more and more people, and the more people spending more time building on top of it? That would be a really bullish sign. Or is it the reverse, and the number is dropping with the hype? Say you’re in a bear market, and a lot of the hype is gone, and prices are down. But is the number of developers still active in spite of that, or is it going down in line with the prices? Are people dedicating much fewer or much smaller amounts of code as well? In which case, that would be a very bad signal, typically.
Github or any of these commits is one really great place to look, and there are also these really great reports you can get from a firm called Electric Capital. I don’t know if they’ll do this forever, maybe not, but right now, they issue these reports (I think it’s pretty much on a quarterly basis, but don’t quote me exactly).
They provide an idea based on the research they perform about the number of developers that every project has. They do a lot of the bigger projects anyway, so you can see the likes of Ethereum, Bitcoin, Litecoin, etc. Once again, they provide you with exactly the number of people who are working full-time or part-time on developing the code for these protocols. It’s a really useful, low-effort kind of thing for you to just go and read this once every or a couple of times every year.
Between these two things, between the Electric Capital reports of developer reports and these Github comments, you can see what’s going on with developers in relation to these protocols.