Under the bonnet of TrustScore
Here at CoinSchedule, we take pride in being one of the only (perhaps the only) provider of trusted information about token sales (e.g. ICOs) in a way that cannot be manipulated or corrupted. I am talking about the CoinSchedule TrustScore, our proprietary algorithm that has been rating token sales since 2017. If you haven’t yet, please take a moment to watch this video that explains how it works.
The next step for us, which has been part of our roadmap and whitepaper for some time, is to release TrustScore (and indeed all our algorithms) as open source software, so everyone can see for themselves how it works and how it is mathematically rating token sales in an unbiased and fair way. We will be releasing all our rating algorithms as open source software in Github by Q3 2019. This is part of our journey tobecoming the Open Source Moody’s of Blockchain and it is a strong commitment that we have with the wider crypto/blockchain community.
As part of this push towards transparency, today I would like to offer a more detailed view on how TrustScore works, and show you how it’s impossible for an employee or partner to manipulate or corrupt it.
Let me explain: TrustScore is an algorithm that runs every hour and rates all token sales on the CoinSchedule portal (and will soon start to rate other types of Blockchain projects as well). It is not a subjective rating done by a person, it’s an AI-powered algorithm that takes dozens of data points as inputs and returns a rating that goes from A to E (most trustworthy to least). It’s mathematically driven, automated and executed by our systems every hour without any human intervention. This makes it scalable and critically, completely independent and transparent, as it’s not affected by the different personalities or moods or motivations of different human raters.
So that’s how it works from a high level – but since we are here let me explain some of the details of the parameters that go into TrustScore:
1. Team members KYC (Know-Your-Customer)
~35% weight of total score
Every project listed in CoinSchedule and eligible for a TrustScore, have the option for KYC to be undertaken on as many team members as they can. This is done with our partner company Onfido, a leader in KYC services used by many financial and Blockchain services out there.
So every project needs to enter the e-mail address of every team member they have listed as part of their project and these team members will get an e-mail from Onfido and need to verify their ID online. We then get a full report from Onfido, which we process and assign scores to each individual based on a number of criteria such as the verification score provided by Onfido and the jurisdiction where this team member is located.
The more team members that are KYC’d, the higher the score received by the project. The reason this is very important is that we have seen projects where several team members listed are actually fake. So if a project has, say 90% of their team members verified, this sends a very strong signal that it’s a legitimate project compared to a project that only has two members listed and none verified – you can see how important this is.
2. Company verification and interview
~25% weight of total score
The next thing we look at is documentation for the company issuing tokens. Companies upload their incorporation document (and any supporting documentation) on their CoinSchedule Dashboard so that it can be verified by us. We also use the country of incorporation as a factor of trust at this stage, since some jurisdictions are better at enforcing the law than others.
In addition to this, we also learned early on that it was very valuable to actually meet the people behind the project, figure out who the UBOs (Ultimate Beneficiary Owners) of the project really were, understand how the company is structured and make sure it matches the documentation that was uploaded. This is actually the only “semi-manual” part of the entire TrustScore system, but the output of this process – which by the way is done by a qualified lawyer that has been part of the CoinSchedule team since 2017 – is either LOW, MEDIUM or HIGH risk. That’s it. Over the last several months, this has proven to be a quite important step for TrustScore as we have uncovered structures where UBOs would actually be located in sanctioned countries, and so we assign a HIGH risk to the project and the TrustScore is therefore drastically reduced.
3. Quality of the CoinSchedule profile
~30% weight of total score
A legitimate project, looking to raise funds via crowdfunding, should be willing to advertise their project in the most extensive and transparent way. This is why, we look carefully at the data offered by these token sale projects to CoinSchedule.
This is one of the most complex parts of the algorithm. We look at things such as (just to give a few examples):
- Has the project provided a valid website, whitepaper, user profiles and social media links?
- Has the project uploaded pictures of team members and are they actually people as opposed to pictures of objects, or text, for example (using AI to determine this).
- Do the LinkedIn profiles provided for every team member check out?
- Has the whitepaper been plagiarised?
This is just a sample of the things we look at. The goal here is to determine how much effort this project has put into making their listing look great, and the accuracy/trustworthiness of the information that has been provided.
4. Subscription Agreement with CoinSchedule
~10% weight of total score
In these 3 years rating ICOs and token sales in general, we have learned that scammers always avoid signing formal agreements. This is something we learned from experience, and it is likely because these can be used in court and create a paper trail that could come back and haunt them in the future.
So we offer projects the opportunity to sign a formal subscription agreement with us. It cost nothing (no payment is needed), and this is an agreement where projects simply subscribe to the CoinSchedule Terms and Conditions. The agreement has been worded by Pinsent Masons, one of the most reputable law firms in the UK and it simply serves to create a more formal relationship between CoinSchedule and the token sale/ICO in question.
One important thing to note is that TrustScore is completely separate from any advertisement packages that projects can purchase (i.e. there is not way that a project can “pay” for a better TrustScore, even though we get asked quite often).
In fact, we do use TrustScore to protect ourselves and our users and partners: certain packages cannot be purchased unless the project has a minimum TrustScore.
So now that you know how it works, let me also tell you that we wanted to ensure TrustScore is a top notch algorithm that can help the Blockchain industry flourish. As such, when we started working on it, we called a couple of good friends who are also Data Scientists from the University of Oxford to help is calibrate the weights of all the different parameters used by the algorithm. They did a fantastic job using statistical and AI tools and this has been a key part of the success of TrustScore.
Going forward, we will keep improving TrustScore – the more information we have about all the different projects, the more accurate the algorithm becomes – and we are starting to apply TrustScore to other areas of Blockchain, stay tuned as we are launching ratings for new areas very soon. Together, we can create a safer, fairer, transparent and scalable blockchain industry!