Rising Through the Ranks
Our team at coinranking.com is fully in awe of blockchain technology and the ideology behind cryptocurrency. I wrote in my previous article about how the second layer of blockchain technology appealed to me and why this is more important to me than the financial side. However we cannot ignore the financial side, since cryptocurrencies are currencies and a medium of exchange in the first place. The primary goal of Coinranking is to rank the existing coins regarding the financial side. This leads to the million dollar or rather the one hundred bitcoin question: What are the possible ways to rank cryptocurrency?
The way of market cap
The most obvious choice of ranking for newcomers in crypto would be the price of a coin. When people talk about cryptocurrencies in the news or in private the first thing that is mentioned, is the price. However the price of a coin or a unit tells a very short story and is not very representative for the total value of a project. The most common method of ranking is ranking on market cap. The market cap is calculated by multiplying the unit price with the circulating supply. The story this method tells, is a bit longer than just the unit price. It tells how much a unit is valued and how many units the project has. The difference between unit price and market cap became very clear to me by comparing it to cars. A Ferrari is more expensive than a Toyota, but Toyota is the largest car company, because the general demand for a Toyota is higher. Price only tells us what people are willing to give for something and market cap tells us more about how many are willing to buy the product.
The way of credit rating
There are more ways to rank cryptocurrencies though. These methods are developed with the aim to tell a more complete story about the quality of a project and result in a rating with a grade or a letter, just like a school rating system. The most famous and common of these rating systems is credit rating. This rating gives an overview of investment risks with triple A as top rating, the other A ratings as excellent and good qualifications. B ratings as sufficient and mediocre ratings and C or D ratings as highly speculative or imminent risk qualifications. There are rating agencies, that try to implement this risk calculating factor in cryptocurrencies with slight differences, but based upon similar ideas. Those agencies argue that ranking on market cap doesn’t tell the whole story. It doesn’t show the activity, the usefulness or the risks of a currency. These agencies look and grade for example the security, technology and activity of a coin and come to an overall qualification. While some use grades or letters and others use percentages, the overall idea is the same.
The way of Coinranking
We have chosen to rank on market cap for the same reason teachers often prefer exams instead of essays. An essay tells a teacher more about the abilities of a student. An essay is also very hard to check and to grade, because there is always a subjective level, that is hard to ignore. It is also more difficult to compare different essays with each other. Exams tell less about the abilities of a student, but allows the teacher to compare students with each other in a fair way. An exam gives a less disputable result than an essay. Market cap gives in our opinion the most clean and objective overview of the projects and makes the different projects better comparable.
