Development activity is a measure of research and effort put into a protocol that usually translates into better features and usability.
Given most cryptocurrencies are open source projects, anyone can view or submit proposals to the coin’s code base. Bugs are more likely to be found in abandoned software, so cryptocurrency protocols must be maintained to remain secure. The development activity also reflects the capability and commitment to the project on part of the developers.
Secondly, if the changes to the code base stagnate then it is unlikely the project will retain the interest of investors or become widely adopted, since other cryptocurrencies will offer greater utility. Research on the returns in the cryptocurrency market found that innovation is the driving force of positive returns on investment.
Developer activity is difficult to quantify even though all activity is open sourced on platforms like GitHub. More code doesn’t necessarily translate into a better cryptocurrency. Similarly, more developers doesn’t necessarily mean that one cryptocurrency is better than another.
To compare different assets with ease, Chris Burniske and Jack Tatar recommend using CryptoCompare’s ‘Code Repository Points’ in their book Crypto-assets: The Innovative Investor’s Guide to Bitcoin and Beyond.
A cryptocurrency is awarded one point for a star on GitHub, two points for a fork (a copy of the code that is used to experiment/create a new cryptocurrency), and three points for each subscriber.
Code Repository Points provide a proxy measure of the amount of the developer activity on a cryptocurrency’s code. The Code Repository Points can be standardised using:
- the lifetime of a cryptocurrency (to account for Bitcoin’s older age). Divide the Code Repository Points by the age of the cryptocurrency in number of days, or
- the network value (to analyse the dollar value of each repository point and see which developers are over or under-valued by the market). Divide the network value by the cumulative code repository points.