Cryptocurrency exchanges have been the well and true focus of the collective industry in 2019. With several reports spelling out how exchanges overwhelmingly fake volume data via wash trading and other antics, the industry is on high alert.
The premier report detailing the same was written by Bitwise Asset Management, which stated that around 95 percent of exchanges have fake volume. Now, a major cryptocurrency data aggregator in CryptoCompare has ranked exchanges based on a system of Due Diligence, Market Trade Quality, and Market Order Book Quality.
Taking a page out of the Bitwise report which listed only 10 exchanges which touted real volume, CryptoCompare did the same. However, with several exchanges repeating, while notable ones being absent. Bitfinex and Bittrex made way for Bithumb and Liquid in the latter’s report.
Seven key “components” with custom “weightings” were used as a metric, which included Geography [13.3 percent], Legal/Regulatory Assessment[13.3 percent], Investment[13.3 percent], Team/Company Quality [13.3 percent], Data Provision Quality[13.3 percent], Trade Surveillance[6.7 percent], and Market Quality[26.7 percent].
Each of the components has three or four sub-criteria which details the entire proceedings of the exchange, from VC funding, KYC/AML guidelines and the experience of the CEO, to liquidity and stability of the platform. Grades ranging from AA to F will also be awarded based on the points given to the score of the weighted components.
Coinbase, the poster child for the American cryptocurrency exchange industry, tops the list with one of six exchanges receiving an AA rating and a total score of 60.3. Other exchanges with a top grade are Poloneix, Bitstamp, bitFlyer, Liquid, and itBit.
Binance’s Poor Show
In the geography category, Bitstamp topped the list with a score of 9.16, while Liquid, the exchange that will host Telegram’s GRAM tokens received the lowest score of 6.12. This was the same as Binance, the most prominent cryptocurrency exchange on reputation alone.
Legal Assessment, which looks at MSB registration, insurance, and regulatory relationship saw bitFlyer score a perfect 10 while Binance bottomed out with 1.1. Several reports have criticized the CZ-led exchange for not doing much to comply with sovereign regulators and instead, opting for the route of self-regulation with private partnerships.
Binance’s poor show in the geography category, considering the exchange’s habit for country-hopping for regulatory ease, legal issues and preference for self-regulation, has seen the exchange take the eight spot, behind San Francisco-based Kraken. The top fiat to crypto exchange, South Korea’s Bithumb, closed off the list with a score of 53.1.
Several exchanges which make a regular appearance on CoinMarketCap’s exchange volume ladder of many top cryptocurrencies failed to make the list. Among them were the likes of CoinBene, Coinall, BitForex, IDEX, Coinsuper, LBank, and FCoin.
To combat rising cases of exchange spewing fake volume data, several aggregators are going about a different route. CoinGecko for example, recently launched “Trust Score,” which will rank exchanges not merely on volume, but on two key parameters, order book data and web traffic.
If the latter of the two key indicators i.e. web traffic is looked at, the list presented by CryptoCompare aligns perfectly. A recent study of daily website visits a day put Binance and Coinbase on top of the list with 1.37 million and 1.14 million visits a day, respectively. No other cryptocurrency trading platform receiving over 500K visits.
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Bitcoin is an enterprise; its users are comparable to traditional shareholders, claims Goldmoney Founder
Bitcoin was conceived in the backdrop of banks bailouts and the 2008 financial crisis. The recession and the loss of faith in banking, financial institutions gave Bitcoin a platform to rescue the ones affected, giving them hope for a better financial system without the hassle of corrupt institutions. With the rise of Bitcoin’s fame, both in the darknet and in the mainstream, questions about its regulations had to arise.
The question was put to rest when the SEC/CFTC ruled Bitcoin as a commodity and taxed it. However, Goldmoney’s Roy Sebag brought this discussion up again recently in his tweet thread, where he said that Bitcoin as an enterprise is working towards its good, comparing its users to traditional “shareholders” among other things, while concluding that Bitcoin is a security. He tweeted,
“Is Bitcoin a security? <10 years old so regulators haven’t even had enough time to truly learn how it works (think Napster or Kazaa in early days). Miners are clearly issuing coins and responsible for governance, an absence of formal relations among them is irrelevant….”
In successive tweets, Sebag attributed miners with the role of “stewarding” the so-called enterprise. In return, these miners get paid in “direct fees” or in “share appreciation.” In Bitcoin’s case, it is the mining reward, which is “BTC”. Similarly, buyers are compared to “shareholders” with a common interest in the enterprise, i.e. profit. Sebag added,
“Coins trade at exchanges. The common enterprise is designed for the price appreciation of coin.”
Bitcoin could face a shutdown by the government, just like it did with big players in file sharing, said Sebag, who added that Bitcoin could also be interpreted as a security under the “34 act of the SEC.” The Goldmoney Founder concluded that “this realization rests on the belief that neither Bitcoin nor any common enterprise is truly decentralized.”
However, his inputs weren’t very well-received by many in the crypto-community. Casa’s CTO Jameson Lopp refuted Roy Sebag’s ideas, tweeting,
“Roy will believe what he wants to believe, though if he’s not actually participating in Bitcoin then his beliefs are irrelevant to its consensus formation.”
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