CoinGecko and 21Shares are proposing a global crypto classification standard
Major cryptocurrency data aggregator CoinGecko and crypto investment company 21Shares have joined forces to launch a global standard for the classification of various cryptoassets.
On February 8, CoinGecko and 21Shares released the report The Global Crypto Classification Standard, which proposes a unified method for categorizing cryptoassets. The effort aims to help investors and regulators better understand the details of each crypto asset class, including potential failures like those seen by the industry in 2022.
“Since Bitcoin’s inception some 13 years ago, thousands of unique cryptoassets and protocols have emerged, each with unique characteristics and different value propositions,” Carlos Gonzalez, research analyst at 21Shares’ parent company 21.co, told Cointelegraph, adding:
“Unlike traditional financial assets, cryptoassets can vary dramatically in nature, both in terms of the asset itself and the protocol behind it.”
At the time of writing, there are more than 12,000 different cryptoassets listed on CoinGecko’s website, with each coin having its own unique characteristics and features. CoinGecko and 21Shares’ classification standard is based on three levels of categorization, separating these thousands of assets by stack, market sector, industry and taxonomy.
The first level, called the “cryptostack,” breaks down cryptoassets into classes such as cryptocurrencies, smart contract platforms, centralized applications, decentralized applications, interoperable blockchains, and others. The methodology only refers to networks or protocols at the first two levels, not the underlying token.
The second level, called “market mapping by sectors and industries,” further divides cryptocurrencies by segments such as infrastructure, metaverse, and decentralized finance (DeFi), as well as groups such as payment platform, lending, developer tools, and others. Since some protocols may fit into multiple industries, the method attempts to place the assets in the most relevant category in such cases.
The third level, “taxonomy of crypto assets”, classified cryptoassets according to related asset “superclass” based on the cryptocurrency taxonomy system proposed by cryptoanalyst Chris Burniske in 2019. Burniske’s system follows Robert Greer’s 1997 article, “What is an Asset Class” Anyway?” categorization of cryptoassets across their superclasses such as capital assets, consumable or transformable assets, and stores of value.
Some of the examples in the store of value category include Bitcoin (BTC), Monero (XMR), Zcash (ZEC), and Dogecoin (DOGE). This type of crypto-asset “cannot be consumed; nor can it generate income. Yet it has value; it is a store of value,” the proposed classification standard says.
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CoinGecko and 21Shares’ effort to bring a global crypto classification standard is one of many global efforts to categorize cryptocurrencies. On February 3, the Department of the Treasury in Australia released a consultation document on “token mapping”, with the aim of having its own taxonomy of cryptoassets. Earlier, Belgium’s Financial Services and Markets Authority also sought feedback on its classification of crypto-assets as securities, investment instruments or financial instruments in July 2022.
“Although the classification of digital assets is quite common, many classification measures are one-dimensional and confuse traditional investors by conflating cryptoassets – the investable tokens – directly with the protocols behind them,” Gonzalez said.
The director also expressed confidence that 21Share’s partnership with CoinGecko – a major independent crypto data website – will allow the newly proposed standard to appeal to both retail and institutional investors, as well as policy makers worldwide.
