Time to take a stand against incompetent and irresponsible crypto exchanges

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By Liquid Head of North America Nick Chong and Cointelligence Chief Strategy Officer Hosam Mazawi

The prospect of cryptocurrency and blockchain technology fueling the move to a trustless economy has a lot of people excited. This financial revolution has the potential to be the single most important technological event in our lifetimes. Crypto epitomizes inclusivity; anyone can and should be a part of it.

But we’re not there yet. The crypto space has a lot of growing up to do. This unruly child has for too long been left without guidance, oversight or mentorship.

For cryptocurrency to reach its true potential, we must first establish a level of trust within the ecosystem to provide all participants with a safe and secure means through which they can engage with digital assets.

We need crypto exchanges, whether they are centralized or decentralized. These entities are necessary for people to buy, sell and trade digital assets. To enter the market, you have to be able to get a piece of crypto from somewhere.

It’s impractical to go back to the days of trawling Internet forums to arrange a meeting in a coffee shop with a shady stranger who can sell you some Bitcoin for cash.

Those times are long gone. Crypto exchanges should be the gateway — a safe haven where anyone can come and take their first steps into this exciting world.

But what stops a crypto exchange from being nothing more than a glorified version of that shady stranger from the coffee shop? How do you know you can trust a crypto exchange with your money and data?

The quest for truth

Coinmarketcap tracks data from more than 250 crypto exchanges — and there are countless more that have come and gone over the years. With so much choice, newcomers to the space must walk a minefield just to make their fist Bitcoin buys.

Which exchange is best? It can, at times, feel like a question of: which exchange is the least worst?

  • Seemingly major crypto exchanges that do massive volume may, in fact, not be doing quite as much volume as they make out.
  • Popular, well-known crypto exchanges — from Cryptopia to Bitfinex — have been hacked.
  • Oftentimes, it’s difficult to tell who’s really behind these exchanges, with little information available about the teams.
  • Run into a problem with your account or a trade? Who can you turn to? Support can be at best slow and at worst non-existent on some crypto exchanges.

These are a lot of problems. So what’s the solution?

We could potentially call 2019 the Year of the Data Vigilante. Numerous independent research and analytical groups have started taking matters into their own hands where rules and regulations have so far struggled to have an impact.

These warriors of justice have begun to hold bad actors in the space to account, using data, algorithms and analysis to finally shine a light on the dark and murky world of crypto exchanges and give all participants in the space a chance to peek behind the curtain and see what’s really going on.

Bitwise, Crypto Integrity, SophonEX, Bear Market Valuations and Cointelligenceare just a few of these groups who are filling a void with reliable, useful, actionable insights. The methodologies and processes are by no means perfect –at least not yet. There’s no oversight or agreement on those who are conducting the research. Just as research groups are aiming to show which crypto exchanges are trustworthy, so they must also prove that they themselves, along with their research, can be trusted.

This is a solid start though. We won’t get to a point where strong systems are in place to help identify and prosecute bad actors unless we have a foundation off which to build on. Legitimate market players — with support and input from crypto exchanges themselves — must come together now to adopt best practices and work together with other research providers to create a framework that is both reliable and accessible.

For that accessibility, most crypto traders and enthusiasts aren’t going to want to sift through mountains of graphs, charts and analysis — they want something digestible that they can trust has come from thorough and diligent research.

Compare and contrast

Something as simple as a ranking system, like that employed by Cointelligence for its crypto exchange ratings chart, can provide a great deal of insight and benefit for consumers wondering where they should turn. Users should not have to bear the burden of a crypto exchanges’ incompetence.

Cointelligence breaks down the exchange ranking system into four key metrics: Performance, Team, Risk and Usability.

  • Usability assesses the accessibility of the exchange, the payment features offered, and the quality and speed of customer support.
  • Performance reflects how much a user can benefit from using an exchange, looking at fees, trading volume, available markets and fiat currency support.
  • Team is a ranking that demonstrates the experience and competence of the people behind the exchange.
  • Risk explores whether an exchange has experienced any hacks or other attacks and the robustness of security.

These four metrics, and the research that goes into arriving at the final scores, give each exchange a total rating, out of 10. Based on current standings, Cointelligence shows 10 exchanges with “good” ratings, 16 with “quite nice” and an alarming 57 ranked as “really bad”.

Only two exchanges score more than 8 out of 10: Gemini and Liquid. Both score well across the board, particularly under Team and Usability.

For Liquid, a Japan-regulated and Big 4-auditted crypto platform, having a credible team has always been one of the company’s strongest selling points — resulting in a 10 out of 10 in the Cointelligence ratings. Many among Liquid’s senior leadership come from lengthy careers in the banking sector, compelled by the powerful story of blockchain to make the leap into the unknown.

Liquid’s founders, Mike Kayamori and Mario Gomez Lozada, have years of experience at the likes of Softbank, Merrill Lynch and Credit Suisse under their belts, while others among the leadership team have come from major players like Goldman Sachs. These are people who have lived and breathed financial services their entire professional lives, with a deep understanding of how regulations work in global financial markets.

The caliber of talent that Liquid hires goes beyond banking, however, with now more than 350 staff from more than 20 countries on the roster, pushing the boundaries of what’s possible for a crypto exchange that recently established unicorn status and billion dollar valuation.

These people strive to make Liquid a highly usable, accessible platform — again reflected in the 8 out of 10 rating on usability. Liquid offers full fiat support, credit and debit card deposits, 24/7 customer service, trading of more than 100 digital assets and a growing list of trading features and services aimed at both regular investors and professional traders.

Now is a time of great change in the crypto space. Those exchanges that don’t currently make the grade should be compelled to clean up their acts, make the necessary changes and focus on the customer. If they can’t do that then they have no place continuing to operate and attempting to compete with legitimate actors.

There will be a day of reckoning ahead and in the ultimate shakeout of questionable crypto exchanges, we’ll find the trust needed to work together to get to the trustless economy.

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