Asian Crypto Aggregator Grades Exchanges for Transparency
Cryptocurrency data aggregator CoinGecko has released Trust Score 2.0 as a ranking system aimed at improving transparency among crypto exchanges. In the first half of 2019, several high-profile cryptocurrency exchange closures and hacks have seen the unregulated space lose more than $270 million.
The Asian aggregator will use the new scoring system to provide additional data by introducing four new major measurements – exchanges’ API technical coverage, scale of operations, estimated cryptocurrency reserves, and regulatory compliance. The system built on Trust Score which was introduced in May 2019 to provide additional insights into the liquidity of 370+ exchanges CoinGecko currently tracks through orderbook and web traffic analysis.
“This is a new ranking methodology and we are working to improve the accuracy of the data for each exchange that we track,” says CoinGecko’s co-founder, Bobby Ong, when asked if the methodologies employed for the grading system could be challenged by exchanges or claimed to be flawed. “It is a better reflection of exchange transparency compared to just using reported trading volume as the sole metric of evaluating exchanges,” Ong adds.
Trust Score 2.0 is to go beyond liquidity measurements to provide critical and actionable data to its users to better evaluate cryptocurrency exchanges – having integrated over 300 new exchanges in the last 18 months – in a way that is less prone to manipulation. It will enable exchanges to be graded on a scale of 1 to 10, with 10 being the best exchange and 1 being the worst.
Exchanges are sorted from the highest to lowest normalized volume, their APIs graded based on several data including historical trade, order book to determine bid/ask spread and candlestick/OHLC (Open/High/Low/Close) and on-chain analysis conducted by looking at exchanges’ cryptocurrency reserves through their known addresses. According to its metrics, CoinGecko has identified the top five crypto exchanges. They are: Binance, Bitfinex, Bittrex, Poloniex and Coinbase Pro.
The idea is to give crypto traders who need to use different exchanges, for various reasons, the options to choose any of the platforms that suit their needs unlike previously when there was a lack of adequate relevant information that could have saved many victims of hacks/scams.
Chief among the H1 2019 crypto losses is the Binance hack in which hackers made away with Bitcoin worth $40 mln by gradually collecting a large number of users’ API keys, 2FA codes, and other info through phishing, viruses and other attacks.
While there is no fool-proof assurance that the new exchange ranking system is effective, its use could serve to stem fake exchange volumes and help to provide crypto investors with the means of avoiding exchanges that have poor actual liquidity.