A major cryptocurrency data aggregator known as CoinGecko and a cryptocurrency investment firm known as 21Shares have teamed up to develop a universal standard for categorizing different types of crypto assets.

The Global Crypto Classification Standard study was published on February 8 by CoinGecko and 21Shares. Describes a standardized technique that can be used to classify cryptocurrency assets. The purpose of this paper is to help investors and regulators better understand the specifics of each asset class in the cryptocurrency business, including the possibility of failures like those experienced by the sector in 2022.

“Unlike conventional financial assets, the nature of crypto assets can have a wide range of variations, both in terms of the asset itself and the protocol behind it.”

At the time this article was written, the CoinGecko website listed over 12,000 different cryptocurrencies, and each coin has its own set of traits and characteristics that distinguish it from the others. The classification method used by CoinGecko and 21Shares is based on three main layers of categorization, which differentiate these hundreds of assets based on stack, market sectors, industries, and taxonomy.

The first tier, known as the “crypto stack,” organizes crypto assets into categories such as centralized applications, decentralized applications, interoperable blockchains and smart contract platforms, among others. The technique does not reference the underlying token at any point in the first two levels; rather, it exclusively analyzes networks and protocols.

The second level is called “market map by sectors and industries” and further divides cryptocurrencies into categories like infrastructure, metaverse, and decentralized finance (DeFi), plus groups like payment platform, lending, and developer tools. , among other categories. The technique makes an effort to classify assets according to the category that is most relevant to their use in situations where certain standards may apply to more than one industry.

Based on the cryptocurrency taxonomy approach suggested by cryptanalyst Chris Burniske in 2019, the third level was called “crypto-asset taxonomy.” Within this tier, crypto assets were categorized according to the “superclasses” of related assets. The methodology developed by Burniske is based on a study written by Robert Greer in 1997 titled “What is an asset class anyway?” Placing crypto assets into their respective superclasses, such as capital assets, assets that can be consumed or transformed, and assets that can be stored as value.

Dogecoin (DOGE), Bitcoin (BTC), Monero (XMR), and Zcash (ZEC) are some of the examples that can be found in the store of value (DOGE) asset category. This particular type of crypto asset “cannot be consumed” and also does not provide any type of income. “However, it has value; it is a store of value asset,” is how the proposed categorization standard puts it.

CoinGecko and 21Shares’ attempt to create a global cryptocurrency categorization standard is just one of many efforts underway around the world to categorize cryptocurrencies. The Australian Treasury Department issued a consultation paper on “token mapping” on Feb. 3, with the goal of developing its own taxonomy of crypto assets. Prior to this, the Belgian Financial Services and Markets Authority also requested feedback on its categorization of crypto assets as securities, investment instruments, or financial instruments in July 2022. This was done to make an informed decision.

According to González, “while the categorization of digital assets is quite common, many attempts at classification are one-dimensional and mislead mainstream investors by combining crypto assets, investable tokens, directly with the protocols that support them.”

The executive also expressed optimism that the newly suggested standard could appeal to retail and institutional investors, as well as governments around the world, as a result of 21Shares’ work with CoinGecko, a leading independent cryptocurrency statistics website.