Crypto data is a mess.
This was the standout message from Quynh Tran-Thanh, Chief Product Officer at CryptoCompare, during her talk at the company’s Digital Asset Summit yesterday (Jun 12) in London.
The presentation identified three primary challenges facing the industry when it comes to obtaining legitimate and trustworthy cryptoasset data: “data is a mess”, “data is big” and “data is fake.”
Elaborating on the first of these challenges, Tran-Thanh emphasized that a lack of standards in the industry has resulted in a situation where there are no uniform ticker names for cryptocurrencies across different exchanges. The challenge for data companies like CryptoCompare therefore, was to map all the different ticker names to the correct assets to produce accurate information on the vast array of cryptoassets trading globally.
While it’s become somewhat of a buzzword, it turns out that when it comes to crypto - the data really is “big.” The second serious challenge she identified, this involves how to accurately reflect a cryptoasset’s price when it trades at very different prices across hundreds of exchanges. Data companies therefore, need to aggregate a lot of data - pulling prices only from exchanges that are representative of the true market value of digital assets.
Finally, the fact that data is “free” - whereby anyone can become a data source - presents perhaps the biggest problem, Tran-Thanh explained. Trading competitions, trans-fee mining, and other questionable volume-boosting practices mean that raw data from exchanges can’t be trusted alone as a metric.
It is this aspect that has drawn particular attention in the crypto space in recent months after reports highlighted the phenomenon of “fake” or inflated volumes on a number of exchanges. What needs to be done, she explained, is to establish a framework for more accurate and representative metrics.
CryptoCompare Aiming to Bring Greater Clarity to Industry Data
It is this that has led CryptoCompare to establish a new Exchange Benchmarking Tool which uses better metrics which can’t as easily be gamed by bad actors.
Outlined during the presentation, the new framework makes use of seven - harder to fake - metrics to rank exchange’s legitimacy: Market quality, Geography, Trade surveillance, Data provision, Legal/regulatory, Investment and Team/company.
Weighting each category to form an overall score, the tool grades exchanges as AA, A, B, C, D, E, F - with San-Francisco based exchange Coinbase coming out on top.
Tran-Thanh concluded by explaining that this framework gives rise to a new notion “trusted volume” - that is the volume on exchanges that are ranked B and above - currently standing at 23 exchanges.
With data reliability and exchange transparency becoming an increasingly hot topic since the release of the Bitwise “fake volume” report in March, it is clear that demand in the industry is growing for these kinds of tools. With institutions reportedly waiting on the sidelines, many hope that such frameworks will help accelerate their entry en masse into crypto markets.