Digital Asset Taxonomy System (DATS) Top 2022 Takeaways

Highlights from updates to the industry’s most comprehensive classification system

DATS Continues Bringing Clarity To A Complex Industry 

Before jumping into 2022 highlights, let’s examine what the Digital Asset Taxonomy System (DATS) is and why it is important.  

Digital assets are complex and difficult to navigate because they are:

• A nascent asset class with components that intersect finance, cybersecurity, technology, and many other fields
• Often open-sourced, which means anyone can create one 
• Trading 24/7 in the ‘always on’ cryptoverse
• Rapidly proliferating with new tokens being launched daily

These issues make it challenging to gain access to a broad view of the industry. To solve this problem the Digital Asset Taxonomy System (DATS) follows a robust taxonomy framework to create a system much like the ones used in traditional finance. DATS is uniquely crafted for the complexities of crypto and with the quality that institutional clients require.  The framework allows institutional investors to filter data, see sector trends, and determine how those trends impact a portfolio’s performance. 

2022 DATS Highlights

DATS is reviewed and updated quarterly to maintain its accuracy and increase its breadth of coverage. Today, DATS tracks over 10,000 digital assets and classifies over 1,300 assets, making it the most comprehensive classification system in the industry. In 2022, DATS continued to evolve with the industry and captured several trends, including:

#1) Expanding Rights For Token Holders

The number of digital assets that give governance rights to their holders has been continuously increasing. As the right to propose, vote on, and implement changes related to protocols and tokens became more common and standardized, there was an increased need to assess digital assets based on the problem that they’re trying to solve. For instance, a Web3 gaming project will now be assessed based on its goal of building a video game, even if the underlying token has governance rights.

The result: 

DATS now includes a governance flag, enabling users to easily identify which digital assets have governance functionality, while separately classifying individual assets based on their use case.

#2) Better For The Environment

DATS’ “Environmentally Focused” theme initially tracked digital assets that operate on blockchains with consensus mechanisms that consume significantly less energy. 

The majority of these consensus mechanisms are based on proof-of-stake (PoS). After Ethereum moved to PoS, DATS shifted the “Environmentally Focused” theme to also track digital assets that are native to the underlying blockchains with energy-efficient consensus mechanisms, as well as projects that are working on climate-related issues. This includes green blockchain initiatives, tokenized carbon credits, and more.

This adjustment was necessary to keep up to date with the development and maturity of the digital asset industry. 

The result:

DATS now classifies 177 digital assets under its “Environmentally Focused” theme.

#3) “Privacy-Preserving” Sector Leads Performance

One of DATS’ primary use cases is as a framework for institutional investors to compare performance across different digital asset sectors. Excluding the “Stable and Asset Backed” sector, “Privacy-Preserving” led the performance of DATS sectors in Q4 2022, whereas “Protocol Interoperability ” was the most significant laggard.

The result:

DATS sectors can be used to compare performance across different areas of the digital asset landscape. 

#4) “General Purpose” and “Smart Contract Platforms” Sectors Dominate Relative Volume 

When excluding stablecoins, a comparison of relative trading volume across DATS sectors showed that the “General Purpose” and “Smart Contract Platforms” sectors combined to dominate Q4 2022, accounting for about 75% of average relative volume on DAR Vetted Exchanges and Watchlist Exchanges. Notable assets in the  “General Purpose” sector include: Bitcoin (BTC), Bitcoin Cash (BCH), Bitcoin Gold (BTG), Bitcoin SV (BSV), Cronos (CRO), Dogecoin (DOGE), eCash (XEC), Litecoin (LTC), Shiba Inu (SHIB), and XRP (XRP). The “Smart Contract Platforms” sector includes Algorand (ALGO), Avalanche (AVAX), Cardano (ADA), Ethereum (ETH), NEAR Protocol (NEAR), Polkadot (DOT), Polygon (MATIC), Solana (SOL), Terra (LUNA), and TRON (TRX).

The result: 

DATS classifications can be used to identify unique patterns and trends, including those related to volume and other market data.

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