What is the worst issue in the crypto industry? Is it trade volume manipulations, security issues, exit scams, or maybe fake community cases?
These and a number of other problems shatter the confidence of young crypto investors as well as that of capital owners in the traditional financial world. As a result, these practices negatively affect the attitudes of potential new crypto investors. What is the solution?
Certification! The best restaurants are awarded Michelin stars; professional accountants are given ASSA certificates to show their proficiency and the highest performing IT-companies take part in the ITSM competition in the hope of being named one of the best businesses. Certificates help people chose a sustainable and reliable business partner.
Thus, following the experience of leaders in various industries, CER is launching a global initiative — CERtification for exchanges on the basis of Solvency, Security, Liquidity, and Community – to take one more step toward the maturity of the market.
Remember how Bitfinex locked withdrawals last year? That was presumably a clear sign of a lack of operational money. In this case, the exchange either may have faked its trading volume or used the money of users on non-trade related activities. Thus, apart from security, liquidity, withdrawal & limits, and public opinion scores (dashboards already existing on CER), wallet balance is one of the best metrics used in ranking crypto exchanges. In case of a hack, an exchange could at least restore its reputation by returning the users’ stolen funds. All in all, every platform should take responsibility for any losses suffered by its users that the exchange could have prevented.
Taking into consideration the numerous hacks and exit scam cases, exchange security should be treated as an issue of paramount importance. Another crucial aspect is an absolute absence of transparency, safety and credibility in the world of crypto exchanges. Simply put, we never know if the exchange is trustworthy and secure or what the balance of an exchange wallet is, and whether the exchange keeps the clients’ funds in cold storage or not. It gives the exchanges a chance to do whatever they want with impunity and at the same time, it makes the community lose trust and confidence in the crypto industry as a whole.
That is why the CER team conducted a huge number of researches and found a solution that resolves these most critical issues, revolutionizing the crypto world. We are sure that by detecting all the exchanges’ wallets, we will be able to figure out the exchanges’ balance and determine the actual liquidity and volume indexes of the exchanges.
This is how the Solvency CERtificate was developed. It’s a part of our global initiative called Transparency Hackers. The workflow of verifying an exchange’s hot and cold wallets is objective, well-grounded and progresses as follows:
- Exchange applies for CERtification on CER website.
- Exchange reports its wallet addresses.
- The reported wallets go through the verification procedure performed by the CER partners and CER team (including “satoshi test” and manual review).
- If successful, the exchanges gets CERtification!
Obtaining a Solvency CERtificate will demonstrate your credibility and sustainability as an exchange and present you with a precious gift – community trust and confidence.
Don’t lose a unique opportunity to get Storage Certificate free of charge before February 20, 2019.
Cyber Security CERtificate
It’s no longer a secret that only a few crypto exchanges have Bug Bounty Programs. According to our recent research, only 44 crypto exchanges (20,28% of the total crypto exchanges verified by CMC) have either self-hosted programs or use exterior Bug Bounty platforms. Why is a Bug Bounty important? It’s a legal way for a community of white hat hackers to report a find and earn payment from their work, discouraging them from selling or exploiting their findings.
Moreover, an exchange should also take care of domain security, SSL and TLS certificate security, and application level security. Hackers can compromise an entire system by using the tiniest bug in the least expected area. For instance, phishing capitalizes on an exchange that doesn’t oblige its users to use 2FA, leaving a high chance that the user’s funds can be hijacked. That’s why the Cyber Security CERtificate is backed up by the hacking problem.
The CER Certificate is offered to check exchange security in order to increase trust and safety within the crypto market. We’ll check:
- Server Security
- User Security
- CI Security (existence of Bug Bounty Program)
- and perform Penetration Test
In addition to securing systems, Cyber Security CERtificate provides an exchange with community trust and loyalty.
Fake volumes make traders overvalue some currencies, as the higher the volume, the lower volatility (check our ZB.com research). Fake volumes delude users that they will trade faster and pay for less slippage (check our BitForex research). Fake volumes can potentially be an omen of future hacking attacks since black hats target the largest players (check our Bithumb research). However, the main point is that faking the trade volume on exchanges constitutes a fraud that directly indicates the immaturity of the crypto market. Is it normal for TOP crypto exchanges to be engaged in fraud?
The development of Liquidity CERtificate was necessitated by the chronic volume manipulation problem. The CERtificate will identify honest market players on which other crypto exchanges can count, while further helping an exchange in a number of other aspects:
- Attracting new traders to their platforms.
- Increasing the trust of their users.
- Helping to grow the community of users.
- Raising revenue.
- Developing integrity within the crypto industry.
The workflow of Liquidity CERtificate issuing can be described in the following steps:
- Audit arrangements (agreement and obtaining the historical trade and order book data).
- Overview of the potentially manipulative patterns/inconsistencies detection.
- Liquidity Audit (calculation of price-volume correlation, volume inside the spread and volume made by instantly filled orders).
- Report and CERtifying.
Last but not least is the Community CERtificate, which we were advised to create following the BitForex Case. We had proved they were guilty of trade volume manipulations when we detailed that the exchange didn’t have a large enough community to have performed all the trading activities that they claimed. Feel free to check our researches on BigOne, ZB.com or any other exchanges which turned up in our investigations.
It is worth noting that historically (in contrast to stock exchanges) the community is one of the most crucial indicators of exchange credibility and liquidity in the crypto world. Thus, the inspection of this aspect (including the quantity and quality) becomes a critical element in building a full picture of exchange reliability and soundness.
CER will perform marketing analysis to test an exchange’s true community size by analyzing:
- Site visits, unique visitors, etc.
- All the sources of website traffic by using analytical tools.
- Telegram groups, Reddit and other forums to determine the REAL size and nature of the community.
- The trade volume per unique visitor, etc. and comparing those figures with peer exchanges.
Why do we need CERtificates?
Why are we doing it? Because we believe in the crypto industry and see it playing a big part in the future of economics and finance. It is our main objective to help the crypto industry become developed and mature.
We are a team of highly qualified specialists who have already repeatedly exposed exchanges in volume manipulations, wash trade, bot trading, money laundering, and other financial malpractice. Our skilled professionals have a huge breadth of experience in the following directions: Economic and mathematical modeling in risk assessment; Artificial Intelligence and machine learning algorithmization; Cybersecurity; Neuro-linguistic programming and HFT (High-Frequency Trading).
No one knows better than we do what the industry lacks and what it needs in order to develop. These certificates will be a clear sign that an exchange not only cares about its income and revenue but also about its users and the future of the platform. Each certificate proves that the exchange belongs to the global transparency movement and also reflects its commitment to remain transparent to its users and that this platform can be trusted.
The biggest market players have already joined us and we will be announcing our first partners very soon. Stay tuned!