Crypto Exchange Ranking Methods Still Contested as CMC Takes More Heat

Crypto Exchange Ranking Methods Still Contested as CMC Takes More Heat

Experts say CoinMarketCap’s update is not good enough after the latest method tweak causes further controversy among the community.

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For reasons of vanity as well as for those of industry health, it’s important to have a good method for ranking crypto exchanges and coins. But as the past few years have shown, no foolproof method has yet been developed. CoinMarketCap has enjoyed the de facto status of being the leading ranking platform, but according to some, a string of controversies has shaken faith in its ability to provide neutral results.

CMC’s first flirtation with scandal happened when Bitwise published a report suggesting 95% of the volume reported on the website was fake. The revelation rocked the sector, as many business leaders, investors and commentators alike saw the data as evidence of adoption and a growing number of use cases.

CMC has been in the spotlight almost continuously since April of this year when the data provider was purchased by Binance for an unspecified amount rumored to be in the hundreds of millions. Almost immediately after the takeover, CMC changed its ranking system, and its new owner shot to the top spot. The action drew fierce criticism from competing exchanges as well as from industry leaders.

CMC changes again

Binance and CMC both claim that they function as independent entities following the takeover. But in a now-infamous tweet, Binance CEO Changpeng Zhao appeared to imply that he had managerial control over CMC when weighing in on the Twitter debate about its ranking of exchanges by web traffic. With some questioning the extent to which the two companies are actually independent of each other, CMC has been continually fine-tuning its ranking methodology.

Perhaps alluding to shaken trust in its own services over the past few months, CMC’s interim CEO, Carylyne Chan, explained the platform’s new “confidence score.” Chan told Cointelegraph that the idea behind the new confidence indicator is to not rely on volume as the sole data source, rather using a range of factors to ascertain data accuracy from each exchange:

“With these new changes, CoinMarketCap currently reports the liquidity of all market pairs using our Liquidity Score, and estimates the number of traders on the exchange using our proprietary Web Traffic Factor. Taking these factors into account, together with time and sales, we constructed a machine learning model to estimate volumes of every single market pair that exchanges report.”

CMC then uses the estimated volumes to detect “outliers,” where its machine learning model can spot which exchanges are reporting exponential volumes relative to its predictions.

Under the new algorithm, the top exchange is awarded a score of 1,000 points. Other exchanges are then given scores against the performance of the top exchange.

While this may be a big change from the previous system that reportedly relied heavily on web traffic figures, there hasn’t been a major reshuffle at the top of the rankings: Binance is still in first place. Chan said that the company’s decision to implement the changes was not influenced by its new owner:

“No, this new update has been in the works all along. As we mention in our blog post on the updates to our ranking algorithm, we are adopting an iterative approach to changes, and the Web Traffic Factor ranking was just one of those steps.“

While the confidence factor could be viewed as an improvement, it has not been met with universal acclaim. One Twitter user going by the name of Cosmonaut criticized CMC for placing BitMEX, a popular derivatives exchange, in 175th place. Deribit and Bybit, two other well-known derivatives platforms, were ranked closely at 179 and 177, respectively, at the time of reporting.

Puzzlingly, BitMEX was found to have a near-perfect web traffic score of 960 but a liquidity score of zero. In fact, 175th place appears to be a cliff-edge for exchanges that find themself at the precarious end of CMC’s rankings, as after this all exchanges have liquidity scores of zero. A CMC representative offered an explanation that the ranking only takes spot exchanges into account, with the derivatives platforms soon to be included.

But this does not account for another of Cosmonaut’s hawkish observations. The Twitter user pointed out that several exchanges in the top 50, such as CoinDXC and Huobi Russia, also have liquidity scores of zero.

Related: Crypto Exchanges Speak Out as Binance Takes CoinMarketCap’s Top Spot

Messari issues its own ranking

Binance’s sudden rise to the top of CMC’s exchange listing caused other exchanges to say that it was a clear conflict of interest, with few accepting the changes as coincidence. For some, CMC was fast gaining pariah status. But on May 22, new research from crypto data and research platform Messari added a further 10 exchanges to its “real volume” metric, initially defined by the landmark Bitwise report, as part of a methodology update.

While the premise of the overhaul was to establish the rank of exchanges without including any wash trading — a process in which a trader buys and sells a security with the intention of providing misleading information to the market — the change also confirmed Binance as the leading exchange. The new methodology ranks trading volume using 10 third-party statistics:

“Exchange rankings, ratings, and liquidity estimates from CoinGecko, CoinMarketCap, CryptoCompare, CryptoWatch (Kraken), Nomics, and FTX’s volume monitor, plus onchain transaction data from Chainalysis and other on-chain data providers, and anecdotal data from top traders.”

CMC’s Chan told Cointelegraph that while the data aggregator does not rule out using third-party statistics in the future, it is not planning to do so in the immediate term. While the CMC CEO stopped short of saying that Messari’s ranking of Binance as the top exchange was a vindication of its much-criticized methodology, Chan told Cointelegraph that it stands firm on its algorithms:

“We stand behind our methodology and machine learning models in providing accurate data, and will continue to evaluate our data on our own principled evaluations, using statistical data and analysis. At the same time, we are looking to constantly iterate on the algorithms, to adapt to changes in expectations and market conditions.”

Rival rankers weigh in

One of the most detailed criticisms of CMC’s previous web traffic ranking system came from Huobi Group’s Ciara Sun. Among Sun’s grievances with what she deemed a “highly flawed” methodology was the fact that search engine optimization, location and language need to be taken into account in order to create a balanced measurement.

CryptoCompare CEO Charles Hayter also echoed Sun’s call for a comprehensive analysis of exchanges. Hayter told Cointelegraph that there is still room for improvement with CMC’s methodology and pointed to CryptoCompare’s own twice-yearly analysis. As pointed out on the company’s website: “The ranking components include: geography; legal/regulatory; investment; team/company; data provision; trade surveillance; market quality and a penalty factor for negative events.”

Bobby Ong, the co-founder and chief operating officer of CoinGecko, told Cointelegraph that while CMC’s previous ranking of Binance as the top exchange based on web traffic alone was likely inaccurate, Binance also tops CoinGecko’s ranks:

“Binance is ranked as the top exchange by several parties using various ranking methodology and this includes CoinGecko and Messari. Messari started their exchange rank initially using Bitwise ‘Real 10’ volume and recently updated it by adding more exchanges.”

Ong outlined his view to Cointelegraph that web traffic is a metric that is “easily manipulated and makes a lot of simplification,” making it not suitable for ranking exchanges, as it is easy to provide misleading information and is based on what he sees as three fixed assumptions:

“That is a) the percentage of users trading on the website vs mobile app is the same for all exchanges, b) the percentage of users trading on the website vs API is the same for all exchanges, and c) the estimate for global web traffic including web traffic from China behind the great firewall is similarly accurate. Web traffic should be used as a guiding factor, not the sole measure in ranking exchanges.”

Ong commended CMC for making the latest improvements to its ranking algorithm but said that it is almost a carbon copy of CoinGecko’s “Trust Score” ranking: “For those who are not aware of our Trust Score, we first rolled it out in May 2019 by looking at multiple factors for exchanges.”

Transparency

For some, the anonymity of cryptocurrency may make it seem like a cloak-and-dagger industry. But for many investors, cryptocurrency’s decentralization and open-source nature place a premium on community trust and transparency. While this is often hard to see on crypto Twitter, it appears to be even murkier when looking at how highly influential exchanges collate and publish their data.

CryptoCompare’s Hayter said that exchanges can be more open in setting industry standards for market surveillance as well as Know Your Customer and Anti-Money Laundering protocals to bring transparency regading management and internal procedures. Ong took a more cynical view, arguing that the industry has its fair share of cheaters and that “any metric that can be manipulated, will be manipulated,” adding:

“We tell all exchanges that the best way to grow their exchange is not by cheating their way but by doing the real work of building a superior product that users want to use. Because of all the cheating, we have to stay one step ahead of the cheaters. This is a cat-and-mouse game and we have to constantly improve our Trust Score algorithm as exchanges become more aware of our ranking factors and try to manipulate them.”

Is it time to unite? 

Many people enjoy the narrative that cryptocurrency is more inherently based on cooperation than mainstream financial sectors. A cursory glance through the headlines on any given day does not do much to bolster confidence in this idea, but is an alliance between exchanges or ranking platforms to solve the issue of varying or inaccurate data out of the realms of possibility?

While experts see the benefits of the idea, most are skeptical about the possibility of such an arrangement ever being made reality. Ong told Cointelegraph that one difficulty would be the variety of ways in which exchanges and ranking platforms currently gather data: “An alliance will be tough to achieve because various ranking platforms and exchanges place different factors as important.”

For Hayter, such an alliance could lead to monopolistic trust issues as well as cause clashes with incompatible regulations in different territories around the world. Nonetheless, Hayter added that this has happened in mainstream finance, citing the World Federation of Exchanges and the Federation of European Securities Exchanges in the European Union. Hayter added that the prohibitive costs and regulation involved could prove problematic for smaller players:

“The problem is the barriers to entry that this entails for new entrants — in traditional markets the capital requirements to set up an exchange are huge due to the bureaucratic, regulatory and procedural drag. A balance has to be taken to ensure a rent seeking monopoly doesn’t form in the long run at the expense of consumers.”


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Experts say CoinMarketCap’s update is not good enough after the latest method tweak causes further controversy among the community.

Bitcoin Slips in KPMG Rankings, But Cryptocurrency Innovation Has Strong Showing

Bitcoin Slips in KPMG Rankings, But Cryptocurrency Innovation Has Strong Showing

KPMG ranking of global fintech firms highlights an array of crypto and blockchain firms

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On Nov. 18, Big Four auditing firm KPMG released its 2019 Fintech100 ranking, which lists the top 100 fintech firms in the world. The list saw a drop in Bitcoin-related companies but reinforced innovation in the payments industry.

As was the case in 2018, AntFinancial — owned by Jack Ma of Alibaba — led the ranking. AntFinancial controls Alipay, one of China’s leading payment systems, and is valued at $83 billion.

Among the companies that offer innovation through blockchain and cryptocurrency, JD Finance was best placed in third place, surpassed by Grab, an Uber-like rideshare app that also functions as a payment system in Singapore.

Robinhood dropped from 8th place in 2018 to 14th in 2019. However, crypto innovation remains strong according to KPMG’s rankings, which featured blockchain-focused OneConnect (18th), Revolut (26th), Coinbase (34th), Liquid (38th) and Banketa (42th).

Commenting on the strength of Chinese companies on the list, Chris Wang, partner and head of fintech at KPMG China said:

„As fintech development continues to go strong in China, we are seeing some changes in China’s fintech landscape. Aligned with trends we observe globally, we see an increasing number of wealth, insurance and multi-sector companies in China on the list, which indicates that technologies and innovations have spread into more financial services sectors.“

The report also named Binance, MemaPay, Moin, Silot and Tokeny among emerging companies in the top 100.

KPMG further points out that Fintech100 companies raised over $18 billion in the last 12 months and more than $70 billion in their lifetimes. The report identifies these companies as changing the world with their respective innovations, serving over 2.5 billion customers globally.

Although fintech firms have emerged as a financial services option, KPMG points out that many companies on the Fintech100 list have benefited from open banking, allowing them to access customer banking to create more personalized experience and services. Early fintech innovators with single product propositions are now diversifying to fulfill customer needs, often through banking licenses and supported by favorable regulatory developments.


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KPMG ranking of global fintech firms highlights an array of crypto and blockchain firms

Crypto Ranking Website CoinGecko Launches Derivatives Section

Crypto Ranking Website CoinGecko Launches Derivatives Section

Crypto ranking website CoinGecko is launching its own cryptocurrency derivatives metrics

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CoinGecko announced that it is launching its own cryptocurrency derivatives section.

In a press release shared with Cointelegraph on Oct. 29, the data aggregator said that its new derivatives section will offer additional stats so users can track more than 100 derivatives products offered by over 20 derivatives exchanges.

CoinGecko’s offering is the first of its kind

According to CoinGecko, this offering is the first to provide “free, unimpeded access to vital aggregated crypto derivatives data”, such as price, interest, funding rates, trading volume and more. CEO of CoinGecko, TM Lee, said:

“This year, we have observed strong growth in the crypto derivatives market. […] We are excited about the potential growth of crypto derivatives and look forward to further democratizing data access as we continue to commit to the maturation of the digital asset space.”

The crypto derivatives markets have indeed seen rapid growth, reaching all-time-highs during the month of September. Derivatives giant BitMEX, for example, passed $9 billion in daily trading volume, as Bitcoin (BTC) took a moonshot of more than 40% in a single day.

Also, institutional BTC trading platform Bakkt experienced a massive jump, trading 1,183 Bitcoin futures contracts (around $11 million) on Oct. 25. Compared to just 331 contracts ($3.1 million) the day before, the increase in just 24 hours was close to 260%, dwarfing previous jumps, which themselves had resulted in all-time highs earlier in October.

CoinGecko joined Coinfirm network

In August, CoinGecko announced that it had joined the network of blockchain analytics and anti-money laundering company Coinfirm in an attempt to improve its exchange Trust Score algorithm, as well as provide users with a means of reporting scams and hacks. CoinGecko apparently intends to make use of the AMLT Token Network alongside Coinfirm’s Analytics and AML Platform in bolstering its ranking system.


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Crypto ranking website CoinGecko is launching its own cryptocurrency derivatives metrics

A Blockchain Ranking Machine to Select Promising Science-Focused Venture Projects

A Blockchain Ranking Machine to Select Promising Science-Focused Venture Projects

Decentralized Ranking Machine promises to fund complex science ventures #SPONSORED

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For every Da Vinci funded by the Borgias and Edison patronized by Ford, there are tens, if not hundreds of inventors and genius scientists, whose innovations have never been noticed. In many cases, it was the inability to attract investors that buried promising technologies.

A startup called ScientificCoin, based in California, aims to have a solution for this centuries-old problem.

Nerds to the rescue

The company has developed an algorithm for a bias-free, decentralized evaluation of projects so that investors can fund venture projects in science and other areas including initial coin offerings (ICOs) with more confidence. Vladimir Kozhevnikov, the Chief Financial Officer of ScientificCoin, said:

“We are leveraging blockchain technology to take out the human error factor and to make the rating process more fair and transparent. We want to help investors to pick the right projects and we have the ambition to help the world by bringing as many valuable innovations as possible to the market.”

In other words, the bunch behind this nerdy name, have come up with nothing less than a project ranking machine, coupled with an algorithm that can distinguish an informed and knowledgeable opinion from the rest.

The result is a crowdfunding platform with a promise to finally do everything right.

The business model is simple: for investors, there’s the promise of peace of mind and more insurance against scams. For recipients, if they are able to defend their projects against the steel-cold logic of the machine, there is the promise of funding to implement their ideas. For ScientificCoin tokenholders, five percent of of all funds raised using this platform is distributed between tokenholders of its respective coin, as a fee.

It is a coin, and it is scientific

ScientificCoin’s Chief Executive Officer Maxim Dvedenidov says its ranking algorithm is based on the same mathematical principles that venture funds, insurance companies, and stock exchanges use to evaluate investment candidates. Dvedenidov says to Cointelegraph:

“The ranking machine takes into account more than 70 major characteristics divided into five sections. The rating is determined in accordance with the correlational regression model based on statistical analysis of the projects over a nine-month period”.

When applying for a ranking, those seeking financing are to fill out a form with “precise questions and indicators” of their product. The program models the rating of the project by the correlation of its characteristics, and then a ranking in with allocation of a rating for each characteristic of a project.

Challenging the oligopoly

The ScientificCoin team sees the centralization of authority to evaluate new projects in hands of a few pundits as a root of all evils that plague the industry. These experts, while knowledgeable, are prone to corruption, bias and influence, ScientificCoin argues.

The company offers a decentralized alternative, a kind of “crowd evaluation” as a remedy. The company’s leader elaborated:

“The algorithm we have created will not allow [experts] to take the project appraisal frivolously. The influence of an expert’s vote on the rating of a particular project will depend on a lot of factors, including the expert’s evaluation history, their personal details, and the level of uniqueness of the project”.

According to him, any particular experts may not be aware of some faults of a reviewed project, but the hive mind will not miss a thing.

While promising, the idea behind ScientificCoin will almost certainly provoke another arms race. An algorithm that decides who gets a resource (funding in this case, or customers’ attention in case of search engines), inevitably sees itself a target of much criminal attention. We all saw an entire industry of fooling search engines emerge. Does the same fate expect project ranking algorithms like ScientificCoin?

ScientificCoin says it is prepared for such a scenario. A complex set of statistical algorithms detects and rejects “opinions” with vested interests, based on a plethora of factors nearly impossible to circumvent, ScientificCoin explains.

Disclaimer. Cointelegraph does not endorse any content or product on this page. While we aim at providing you all important information that we could obtain, readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor this article can be considered as an investment advice.


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Decentralized Ranking Machine promises to fund complex science ventures #SPONSORED