Major cryptocurrency data aggregator CoinGecko and crypto investment firm 21Shares have joined forces to launch a global standard for rating various crypto assets.
On February 8, CoinGecko and 21Shares released their Global Crypto Rating Benchmark Report, proposing a unified method for classifying crypto assets. This effort aims to help investors and regulators better understand the specifics of each asset class in crypto, including potential failures like the one the industry experienced in 2022.
“Since Bitcoin’s inception some 13 years ago, thousands of unique crypto assets and protocols have emerged, each with unique characteristics and different value propositions,” Carlos Gonzalez, research analyst at 21Shares parent company 21.co, told Cointelegraph.
“Unlike traditional financial assets, crypto assets can vary greatly in nature, both as it relates to the asset itself and the protocol behind it.”
At the time of writing, there are over 12,000 diverse crypto assets listed on the CoinGecko website, with each coin having its own unique characteristics and features. CoinGecko and 21Shares’ rating standard is based on three rating levels, distinguishing these thousands of assets by stack, market segments, industries, and rating.
The first level, called the “crypto stack,” divides crypto assets into categories such as cryptocurrencies, smart contract platforms, centralized applications, decentralized applications, interoperable blockchain and others. The methodology only refers to networks or protocols in the first two levels, not the underlying token.
Six examples of the “crypto stack” classification. Source: 21Shares and CoinGecko
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The second level, called “Market Mapping by Sectors and Industries,” divides cryptocurrencies by sectors such as infrastructure, decentralized and decentralized finance (DeFi), as well as groups such as payment platform, lending, developer tools, and more. As some protocols may fit across multiple industries, the methodology attempts to place the assets in the most relevant category in such cases.
The third level, “Crypto Asset Classification,” is the classification of crypto assets according to a related asset “superclass” based on a cryptocurrency rating system proposed by cryptocurrency analyst Chris Burniske in 2019. Burniske’s system follows Robert Greer’s 1997 paper, “What is a class of Assets “anyway?” Categorize crypto assets across their super-categories such as capital assets, depreciable or transferable assets, and store of value assets.
Some examples in the store of value asset class include Bitcoin
BTC
pointers down
$22,676
Monero
XMR
pointers down
$163
, zcash
ZEC
pointers down
$44
and Dogecoin
dog
pointers down
$0.09
. This type of crypto asset “cannot be consumed; it cannot generate income. However, it has value. It is a store of valuable assets,” reads the proposed classification standard.
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CoinGecko and 21Shares’ effort to introduce a global cryptocurrency rating standard is just one of many global efforts to rank cryptocurrencies. On February 3, the Treasury of Australia issued an advisory paper on “token mapping,” aiming to get its own rating for crypto assets. Previously, the Belgian Financial Services and Markets Authority was also seeking feedback on the classification of crypto assets as securities, investment vehicles or financial instruments in July 2022.
“While grading digital assets is quite common, many grading efforts are one-dimensional and confuse traditional investors by mixing crypto assets — investable tokens — directly with the protocols behind them,” Gonzalez said.
The CEO also expressed confidence that 21Shares’ collaboration with CoinGecko – a major independent crypto data website – will allow the newly proposed standard to attract both retail and institutional investors, as well as policy makers around the world.
