BD Ratings is short for Bezant & Denier Ratings. These are not surnames but names of precious metal coins circulating in the Byzantine Empire and in Medieval France. The name is also a nudge to the Byzantine generals problem that Satoshi solved so elegantly with Proof of Work.
- BD Ratings is a competent and free alternative to other pay-to-read cryptocurrency ratings agencies on the market.
- We base our ratings fully on a self-constructed and novel fundamental analysis model designed specifically for cryptocurrencies. Technical analysis is never used when compiling ratings.
- We ignore the buzzwords, marketing tricks and shallow performance metrics, to instead map the real value of blockchain protocols.
- Being fully engulfed in the ecosystem since 2015, we are seasoned and highly skeptical of most cryptocurrency projects as they fail to account for the importance of decentralization - a prerequisite for being hard money.
- We realize the opportunity costs in the space, and in contrast to other ratings agencies we are extremely selective with positive altcoin ratings as they, despite Bitcoin currently being worth much more, mostly have way worse risk/return ratios.
- Finally, BD Ratings provides all ratings services in an unbiased manner. Cryptocurrencies are rated in the order that they appear as a function of Bitcoin block nonces. This process was adopted for fairness and mitigation of corruption. Read more on this in the Ethics section.
BD Ratings is utilizing a self-constructed fundamental analysis model, specifically designed to map value in decentralized, public blockchains. Parameters used to identify value:
- Ecology: A measure of on-chain usage, utility and 'protocolness'. Measuring a cryptocurrency's ecology means looking at the general size of its communities and how actively these individuals, companies or projects are meaningfully utilizing the blockchain by transacting and storing value. Number of on-chain transactions per day and with what average fee is one of many measurements.
- Technology: A measure of the robustness of the open code base, the soundness of different incentives, the quality and quantity of core developers and how active technical development is. One measurement, for example, can be the number of years that the code has been publicly battle tested.
- Decentralization: A measure of the minimization of attack surfaces. Examples of such single point of failures are, among other things, few developers, PoS token concentration, powerful miners, bloated blockchain size, legal entities and influential 'leaders'.
- Valuation: A measure of, given the above ratings as well as a general assessment, how undervalued or overvalued a cryptocurrency is. Most often, such comparisons are done to Bitcoin and to very similar cryptocurrencies, to properly account for opportunity costs.
The above four sub-ratings (between 1 - 10) are aggregated into a master rating (between 1 - 10). 1 would signify severely overvalued compared to Bitcoin, or even a scam. 10 would amount to severely undervalued compared to Bitcoin. 5 is neutral.
There are a couple of factors that influence the BD Coefficient used to measure the predictive success of all ratings published on this webpage.
Here is the formula:
Simply put, the goal is to have as large positive value as possible
for coefficient BD. BD is positive if the coin rating was high and the return since has been positive, or if the coin rating was low and the return since has been negative. This dynamic is amplified with how high or low rating was set, where any step deviating from 5 resulting in further added weight. For example, with all else being equal, an initial rating of 5 that currently yields BD = 0.10 would have yielded BD = 0.12 had the initial rating been set to 6 instead, and BD = 0.14 had it been set to 7. Finally, a time-based weight was added to the formula to reflect the long-term nature of the ratings. 5 years after publishing, the time weight would finally add up to 1, meaning the value of BD would truly reflect the long term percentage return of a buy-and-hold position taken with an initial rating of 5 (neutral, hold). This time factor consequently punishes short term 'noise' volatility from the coefficient we use to measure predictive success.
Additionally, BD Ratings publish continuous updates on what we call 'hit rate'. The hit rate is simply the number of successful predictions divided with the total number of prediction. To further explore this simple hit rate concept, we added the two parameters 'hit rate BTC' and 'hit rate USD'. These two are representing the maximalist versions of investing; for each rating decision, always chose to just keep your money in BTC or USD. In other words, the two parameters can be directly compared to the regular BD Ratings 'hit rate' parameter.