GM! Welcome to Milk Road PRO. The newsletter that collects ingredients and provides recipes, so you can get to cooking!
You’ve probably experienced it before…
That moment of sheer, unadulterated frustration (like an itch that you just can’t reach to scratch).
That moment when the information you’re taking in from YouTube, Crypto Twitter, and random online pundits reaches a tipping point — shifting from ‘helpful’ to ‘excessive,’ as all the inputs begin to conflict.
We’ve been there before. It sucks!
And it’s in these moments that the little voice in your head starts chirping at you.
(You know the one).
It’s that voice that prods you with thoughts like:
“This sh*t is too hard to figure out. You gave it a shot, now call it a day.”
We’ve designed the following guide to be a metaphorical ball gag that you can use to shut that voice up once and for all.
Cause here’s the thing — when you’re analyzing new tokens, you really only need to look at 7 key factors to figure out whether they’ll be winners or losers in the long term, with some degree of confidence.
It’s not perfect (nothing is) — but together, these factors act as a bullshit detector (of sorts), giving you a repeatable framework for analyzing unproven tokens.
Now, it’s worth noting: these factors alone won’t deliver you the clarity, confidence, and conviction you’re looking for when considering an investment — because not all of them are created equal.
So we’ve assigned percentage weights — or “give-a-f*ck” levels (if ya nasty) — to each factor, so you can understand their level importance when analyzing a new project.
This way you can explore your options with confidence, and stem the fire hose of information down to a stream of pure alpha.
Sounds good? Good 🫡 Let’s get into it!
Here are the 7 factors that make up the Milk Road playbook:
You've probably heard some of these terms like TAM or Moat – but without context, they’re close to useless! They leave you wondering why they matter, and where you should focus.
We ain’t about that! Today we’re breaking it all down for you, in exact detail, with a bunch of examples to really drive things home.
With so much to cover, we’d say it’s about time to get into it! Ready? Let’s go!
PRODUCT (22.5%)
We love being users of the products we invest in—there’s no better way to truly understand them than by using them yourself.
But be careful—slick UX or seamless integrations can sometimes make you fall in love too quickly.
The real question you should be asking is:
👉 Is this the best product out there?
It’s not always that simple though—sometimes the best tech or product doesn’t win right away.
However, we believe that, in the long run, the best product usually comes out on top.
So, it’s important to understand what truly makes a ‘great product’ – what are its strengths, and why does it stand out in the market?
Example 1:
Let’s say I want to borrow money against my crypto. Which project am I going to choose?
First, I’d look for:
- A project that’s been around for a while
- Proper security audits in place
- Proof that others are using it (measured by TVL)
After that, I’d narrow it down based on two key factors:
- The project accepts my collateral (e.g., $stETH)
- It offers me the best borrowing rate
This process might lead me to ask:
What are they doing differently that allows them to offer the lowest borrowing rate? By digging deeper, I’d finally get the answer to whether this project really offers a competitive edge.
By going through this exercise, I’m putting myself in the user’s shoes to better understand their needs and figure out if the product from my chosen project truly stands out as the best option.
✅ And you know who would come out on top? $SKY.
P.S: We know $SKY’s price has been dipping recently 😔, but everything else is on the rise.
With upcoming deployments of $USDS on L2s, Solana, and the Spark launch, plus other exciting developments, selling isn’t on our minds—quite the opposite, in fact!
Example 2:
I’m now considering which stablecoin to use. I’ve got my eye on $FRAX (the decentralized version of $USDC) and using the same process. For a stablecoin, here are the key factors to consider:
- Sufficient liquidity
- Ability to consistently hold its peg
- Strong safety measures
- Offers some juicy yield
- Is composable and integrated across DeFi platforms
❌ I quickly realize that $FRAX isn’t widely integrated into other DeFi protocols, and it mainly generates yield from U.S. Treasuries—yields that are expected to decline soon. While they’re slowly trying to gain exposure to Ethena’s yield, it doesn’t seem like a winning stablecoin to me.
Example 3:
In the blockchain world, the "product" is essentially the block space each network provides. But there are different ways to evaluate which block space offers the most value, depending on what you prioritize.
Here’s our take, though others might have a different perspective.
✅For Ethereum, its block space stands out because it has the largest user base, the most liquidity, the biggest developer community, and a sprawling ecosystem. Plus, its growing Layer 2 solutions add even more utility.
✅Solana’s block space is all about speed and cost. It’s the cheapest and fastest blockchain available, offering unparalleled throughput for high-performance applications.
✅Then, there’s TON—its block space has a unique advantage: access to Telegram’s 800 million active users. This gives it massive potential, leveraging one of the largest messaging platforms in the world.
So, when evaluating new emerging Layer 1 blockchains, think about what they can uniquely bring to the table and how they plan to compete with the established L1s and what sets them apart.
Example 4:
If you're a U.S. citizen using T-Mobile or AT&T, there's a new project using blockchain technology to offer an unbeatable mobile plan—unlimited service for just $20 a month.
✅Helium can offer such an affordable mobile plan mainly because blockchain technology cuts costs and significantly lowers capital expenses.
When it comes to mobile plans, price is one of the most important factors. As a result, they’ll be able to offer the lowest-priced plans with continuously expanding coverage.
TLDR: Understanding the product and knowing how to define the "best" product in a specific sector is crucial and offers valuable insights. It’s not always easy to pinpoint the product or the users' needs exactly, but aim to stay as objective and unbiased as possible!
Keep in mind that usage or revenue can sometimes be inflated by incentives or a lack of fees. So, it's important to ensure that not only is it the best product out there, but also that its pricing is competitive and people are actually willing to pay for it.
MOAT (15%)
The secret to any company's success – whether it's a tech giant or a century-old powerhouse – lies in its "moat." A moat is that special edge that protects a business from its competitors. It could be anything from network effects, to high switching costs, or economies of scale. Without a moat, companies can't keep the competition at bay or hold onto their value for long.
Now, let’s talk about crypto – where moats aren’t just important, they’re a requirement. In the fast-moving world of crypto apps, building a moat is essential for survival. Here's why:
1. Forkability: In crypto, apps can be copy/pasted (or "forked") in a heartbeat, which means it's way easier for competitors to jump in.
2. Composability: Since crypto apps are connected and work together, users can switch between them with almost zero effort. Loyalty? Not much of it here.
3. Token-Based Acquisition: Crypto projects can offer tokens to reel in users at a fraction of the cost, making customer acquisition incredibly cheap.
These unique crypto dynamics supercharge competition. The moment a crypto app flips on its "fee switch," a flood of lookalike apps are ready to swoop in—offering the same service for less, or even paying users to jump ship with token rewards.
Without a strong moat, most crypto apps are stuck in an endless race to the bottom, quickly becoming just another generic option in a crowded market. If you want to survive and thrive in crypto, you need more than just a cool idea—you need a fortress of a moat to fend off the fierce competition.
Warren Buffet’s simple test for defensibility is this: “If I had a billion dollars, could I build a competitor and steal market share?”
In crypto, tweak it slightly: “If I fork this app with $50 million in token subsidies, can I take and keep their users?”
If the answer is yes, competition will likely erode the app’s dominance. If not, then the app has a strong moat—a key to surviving the fast-paced crypto market.
Example 1:
If I fork Aave and offer $50 million in incentives, can I take some of their market share?
❌ Yes, in the short term (since switching costs for AMMs are low). We think that liquidity or TVL can be easily influenced or subsidized, so they shouldn't be seen as strong, long-term competitive advantages.
Example 2:
If I fork Lido and offer $50 million in incentives, can I take some of their market share?
✅ People love Lido's products because they integrate seamlessly with other DeFi apps. This creates powerful network effects, building a strong, defensible moat for Lido, making it harder for competitors to break in.
Example 3:
If I fork Sky (previously Maker) and offer $50 million in incentives, can I take some of their market share?
✅ Sky has made partnerships/agreements and built infrastructure to access US treasuries through Andromeda, lending yields via Spark, perps yields through Ethena, and more.
Plus the endgame strategy focuses on creating infrastructure that can’t be easily forked or subsidized, giving Maker a strong and defensible edge in the market.
Example 4:
If I fork Jupiter and offer $50 million in incentives, can I take some of their market share?
✅ Jupiter has established itself as the go-to platform for trading on Solana, giving them strong bargaining power by "owning" the end-user experience.
This advantage allows them to secure exclusive deals and potentially vertically integrate in the future.
TLDR: Overall, we should view moats as "un-forkable" and "un-subsidizable" qualities. These can include things like a strong brand, big community, exclusive off-chain agreements, robust backend infrastructure, network effects, and more.
P.S. - We’re hosting a PRO AMA next week — scroll to the bottom for more info. 👀
These factors will tell you where a project is at right now.
…but what about the future?
We’ll also show you exactly how we forecast a project's future potential growth (with examples to really drive things home)!
This is a must have framework for any serious investor.
Don’t miss it!
Uh, Oh… 😧 The rest of this report is exclusive to Milk Road PRO members!
WHAT’S LEFT INSIDE? 👀
A breakdown of the remaining factors:
- Total Addressable Market (how big can this thing get?)
- Tokenomics (am I someone else’s exit liquidity?)
- Team (are these the right people to build this project?)
- Community (do people actually care about this product?)
- Valuation (am I getting a good deal here?)
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