As covered by Core Media, independent rating agency Weiss Ratings gave Bitcoin a mere “C+”. The 47-year-old rating company is not known for easily handing out A ratings. It gave Ethereum and EOS a B rating, the highest all covered cryptocurrencies received. Weiss Ratings is notably the first-ever cryptocurrency rating service.
The company was strongly criticized for not giving Bitcoin an “A” rating, so much so it felt the need to justify its decision. Through a 14-page report, the company explains that although bitcoin has the strongest brand and the early-mover advantage, it is falling behind.
In the report, Weiss Ratings founder Martin Weiss explains that the ratings are designed for institutional investors who are new to cryptocurrencies but are willing to risk their money. As such, although most cryptocurrency investors disregard volatility, it still needed to be a factor.
Since Weiss employs ratings down to F, a C+ marks bitcoin as a “fair” investment. Addressing both investors and developers, Weiss revealed that its model combines a number of sub-models. These include risk and reward, taken from its stock and ETF ratings, and fundamentals and technology.
Per the company’s model, despite bitcoin’s price surge in late 2017, it’s still falling behind other cryptocurrencies. This is hinting at bitcoin’s dominance index, that dropped to 34.9% at press time, from over 80% in early 2017.
Regarding the cryptocurrency’s fundamentals, Weiss wrote:
“Bitcoin does well in terms of network security, usage, developer participation, and user popularity. However, it underperforms in two areas: (1) network capacity, as evidenced by a meager four transactions per second and fees of about US $10 each, plus (2) centralization, with five large mining pools controlling nearly three-quarters of the hashrate.”
Weiss further added that bitcoin “does well with regards to the security of its blockchain,” but notes the cryptocurrency loses points when it comes to scalability and sustainability. The report adds that bitcoin cannot “easily upgrade or adapt.” As such, Weiss says, it is stuck to technology that’s falling behind.
Weiss Ratings’ mobile phone metaphor
To properly illustrate its point, Weiss Ratings adds an analogy in its report. Per the company, a great metaphor to illustrate how bitcoin is falling behind is that of the first mobile phones. These had a battery life that lasted 30 minutes and took 10 hours to charge. They weighed over one kilogram and were state of the art in 1973.
Nowadays people use smartphones to do pretty much everything. Tasks people use their smartphones for include browsing the internet, pay bills, and even trade cryptocurrencies.
Further down the report, Weiss notes that bitcoin is holding its own. The cryptocurrency is processing between 250,000 and 300,000 transactions a day. However, this means the cryptocurrency’s fees and transaction times both increased.
Nevertheless, the agency adds a positive note, implying it believes the cryptocurrency will continue to be a key part of the ecosystem.
“Could Bitcoin ultimately wind up in the scrapheap of forgotten technologies? Or will it continue to play a pivotal role as other cryptocurrencies evolve and grow around it? We favor the latter.”