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Article by Forbes: Luke Fitzpatrick
CoinMarketCap has over 125 million people relying on its data as a reference price and trusted source of information on cryptocurrencies. Recently, it underwent a major algorithm change that impacted the way that the top 200 coins are ranked. For no apparent reason, some cryptocurrencies took a massive dive.
Out of those that were affected by the change, DAPS Coin was by far the worst. Adel de Meyer, the CEO of DAPS Coinwoke up this weekend, discovering that DAPS Coin shifted out of position 176 to position 1,173 in a single day. No explanation had been provided by CoinMarketCap as to why DAPS Coin had dropped almost 1,000 in rankings.
Adel de Meyer, CEO of DAPS Coin
In shock, de Meyer recorded a video sharing her thoughts on Twitter which has already received close to 10, 000 viewers. I reached out to de Meyer as I wanted to find out more information. Here’s what she had to say.
Question: What happened to DAPS Coin?
Adel de Meyer: Not too long ago, CoinMarketCap also referred to as CMC made some changes to their algorithm. Suddenly, without any warning, DAPS dropped over 1,000 in its rankings. Nothing has changed for DAPS to have dropped that low.
Other projects have less market cap, project activity and volume than DAPS, but yet their rankings weren’t impacted. Because of this, I could not understand why CoinMarketCap (CMC) dropped our ranking by this much. This is why I conducted an investigation and shared my findings on Twitter—the response was very supportive.
Question: What do you think about the requirements for the top 200 coins on CoinMarketCap?
Adel de Meyer: In my opinion, the requirements are vague and open to interpretation. There is no definitive method by which one can state that if the requirements are fulfilled, you will be ranked appropriately. Their direct competitor CoinGecko has its methodology published publicly, so it gives projects a fair and equal chance to rank better for their project’s visibility and credibility.
CMC methodology states that one of the ranking factors are “significant liquidity/trading activity with normal bid-ask spreads across sufficient sources of market data.” This, in my opinion, motivates wash trading to comply with this requirement. So if one exchange listing falls low on liquidity, it is up to the project to employ market makers to ensure “normal” bid-ask spreads across the board.
In my opinion, this does more harm than good to innovation, startups and the overall growth of the cryptocurrency industry. For the top 200 rankings, they also use something called Indices. “The CoinMarketCap Indices are a suite of benchmark indices designed to be the most comprehensive in the market, measuring the performance of the top 200 cryptocurrencies by market capitalization traded in USD.”
The methodology principles state that “all eligible cryptocurrencies are ranked by their current market capitalization.” To me, this is confusing because the market cap is not what CMC ranks you with any more.
Question: Can you explain what safekeeping is?
Adel de Meyer: Safekeeping is synonymous for deposit or surety. Some of the bigger exchanges require a set amount of money (some up to 1 million dollars) that you guarantee for a year to use and trade with, in case your volume drops. Exchanges will do this to maintain volume and not damage their reputation. That’s because exchanges want to show “volume and activity” for each coin, and this is a “questionable practice.”
This is mainly, in my opinion, due to them wanting the high rankings on CMC to attract users and new listings, and they can demand huge listing fees when they are perceived as the biggest with “most volume.” Rumors have been making the rounds that some cryptocurrencies are paying exchanges like CoinMarketCap for higher listings. If this is indeed happening, then this is completely unethical.
Question: How does the CoinMarketCap decision impact the blockchain community?
Adel de Meyer: This is a fundamental issue for multiple reasons:
- CoinMarketCap requires that a coin must be listed on one or more of their partner exchanges, and these exchanges are centralized and regulated. These 2 things are in direct conflict with the tenets of crypto and the purpose for the existence of bitcoin.
- If it is proven that CoinMarketCap can manually adjust the ranking of a project, then they cannot categorically state that they are a neutral 3rd party.
- Centralization of a ranking authority is immediately problematic, not only does that go completely against the tenets of the industry, but this also means that there is the option for collusion, corruption, and coercion.
- A ranking authority with the size and reputation of CoinMarketCap has the capacity to essentially “hide” a project at will.
- There is a lack of transparency for the top 200 rankings. CoinMarketCap claims that they don’t publish this to avoid manipulation.
- Coinmarketcap created FUD (fear, uncertainty, doubt) in hard-working projects by decreasing their ranking by up to 1,000 rankings overnight without a plausible explanation. This leaves investors and traders confused, hence damaging the reputation of projects.
- The ICO Envion who was responsible for stealing 90 million dollars was ranked at 191 on CoinMarketCap until I tweeted about it this week. After which, their ranking suddenly dropped to 1,174. This type of flawed ranking is dangerous and poses a risk to new inexperienced investors in the cryptocurrency industry. This project should have been removed completely as per “CoinMarketCap Delisting Policy.”
Question: Are there any new interesting developments at DAPS?
Adel de Meyer: Our code is currently undergoing a security audit by Red4Sec who is well-known for work with other large projects like NEO. We also just returned from Canada’s largest blockchain event called Futurist, showcasing how DAPS Coin is competing in the privacy coin space. Lastly, we’re planning for the launch of our mainnet, which we are pretty excited about—this will launch at the end of September 2019.
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