CoinGecko ‘Trust Score 2.0 makes crypto exchanges more transparent
This past May, CoinGecko introduced Trust Score as a way to provide better transparency on cryptocurrency exchanges. As with any technology, there comes a point when improvements, enhancements and changes need to be included, and the market data aggregator firm is ready to make those alterations. It has announced […]
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This past May, CoinGecko introduced Trust Score as a way to provide better transparency on cryptocurrency exchanges. As with any technology, there comes a point when improvements, enhancements and changes need to be included, and the market data aggregator firm is ready to make those alterations. It has announced a new and improved Trust Score, aptly dubbed Trust Score 2.0.
CoinGecko says in a blog post, “In May 2019, we introduced Trust Score on CoinGecko to combat the alarming trend of exchanges reporting fake trading volume. Unlike in regulated financial markets where trading volume is a good representation of liquidity, in the cryptocurrency industry, trading volume is no longer a good indicator of liquidity. This is because many exchanges are known to fabricate their trading volume to gain visibility among users.”
To that end, Trust Score 2.0 focuses on liquidity metrics to give traders more information and more confidence. It provides more insight into the real liquidity of an exchange and takes a look at several factors to offer the results. In addition to liquidity, the platform looks at API technical coverage, an exchange’s scale of operations, crypto reserves and regulatory compliance.
CoinGecko adds, “We have upgraded Trust Score to version 2.0 to incorporate all the above categories as there is no way to easily synthesize all the above into something that can be easily understood at one glance. Exchanges are now graded on a scale of 1 to 10, with 10 being the best exchange and 1 being the worst exchange.”
For now, crypto reserves and regulatory compliance are not being used to calculate the results; however, these could be added at a later date, according to the blog post. As it stands now, the score is weighted with liquidity at 50%, scale of operations at 30% and technical coverage at 20%.
CoinGecko believes that trading volume is no longer a viable measure of an exchange’s operations. It explains, “In the unregulated space that is the crypto industry, trading volume is quickly becoming an obsolete method of evaluating exchanges. While much data is available with which to evaluate exchanges, it is often difficult to fit these data together into actionable pieces of information.”
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