DATA: The Path to a Mature Crypto Industry

It is no secret that the crypto industry is still in its infancy. Lack of governmental regulation and industry rules has created a space for unfair players to use unethical and sometimes fraudulent techniques to gain an advantageous market position.

One of the areas of major concern is trading volume numbers that are reported by crypto exchanges. A numerous amount of respectful analytical agencies speak loudly about fake trading volume taking place at cryptocurrency exchanges and how this practice damages the industry.

Examples include Bitwise, The Tie, Blockchain transparency Institute, Crypto Integrity, and many other grounded researchers who have recently released reports disclosing these problems in detail.

It is not a difficult job to criticize and reveal manipulations in the crypto market but it is way more challenging to create the solutions. There are none simple solutions on how to make exchanges more accountable and transparent.

That’s why the start of Data accountability and transparency alliance (DATA) is such an important step for a new maturity era for the cryptocurrency industry, all thanks to Coin Market Cap’s initiative.

Development of DATA set for 3 main phases:

1. Trade and order book data
2. Enhanced data and metrics
3. Self-reported information

Trade and Order Book Data

Trade and order book data is key to an in-depth analysis of crypto exchanges. There are a few popular technics on how to increase daily trade volume on an exchange. The most common is trading inside the spread. We have analyzed it in detail here.

Trade and order book data will allow us to identify the spread trading and analyze the patterns of its occurrence. As per our research, 80% of trades at the biggest exchanges in terms of blockchain balance exchanges are outside the spread.

As for new exchanges with critically high volume numbers, the spread trading number sometimes is above 95%.

It is expected that untransparent exchanges would resist disclosing these data sockets. Everyone has to make their own decision on where to trade based on their own trust for that exchange.

Enhanced data and metrics

CMC has announced a shift and increase of types of data available for analysis of the exchanges’ operations:

1. Exchange hot/cold wallet addresses: Proof of Solvency/Reserves/Liabilities, or at least indicative numbers to enable users to determine the solvency of selected exchange
2. Live market-pair trading status (example “status” field): More granular trading data at the market-pair level for further analysis
3. Live wallet status (example “can_deposit” and “can_withdraw” fields): Summary status of all possible deposits and withdrawals across currencies
4. Historical trade data (example): All time-stamped historical trades for tracking, and in some cases, compliance

Starting from September 2018 CER team in cooperation with the Crystal Analytics platform from Bitfury and Etherscan collects all publicly know BTC and ETH wallets that are associated with crypto exchanges. The ranking is online and available at cer.live.

As of today, we have collected more than 16 million crypto wallets. The next stage for our ranking accuracy improvement is to implement tight cooperation with exchanges. We have introduced Proof of funds CERtificate that allows a simultaneous audit of submitted wallets by crypto exchanges.

We encourage crypto exchanges to become CERtified and prove communities on their transparency and accountability intentions.

The blockchain balance of the exchange allows traders to understand the real size of the crypto exchange, evaluate its insolvency risks and recalculate its trading activity. It utilizes the best characteristics of blockchain technology and is impossible to disclose more information than is readily available.

The CER team consistently pushes the message of blockchain balance to become a major ranking criterion for crypto exchanges.