Token score

Our Token scoring process involves several key steps to calculate a comprehensive score for each issued token.

XRPScan Token Score is available in token response as score field. Here's a breakdown of our proprietary scoring process:

1. Configuration parameters

• Weights: Each metric (trustlines, holding wallets, total supply, price, market capitalization) is assigned a weight. These weights determine how much influence each factor has on the final score. For instance, holdingWallets has the highest weight (0.4), indicating it's considered the most significant factor in our algorithm.

• Centralization Threshold: This is a crucial parameter (1000 wallets in our case). If a token's holdingWallets count falls below this threshold, it starts incurring a penalty.

• Max Centralization Penalty: This defines the maximum percentage of the potential score that can be deducted due to centralization (e.g., 0.3 or 30%).

• High Market Cap Threshold: This parameter is essential for penalizing outliers (Market capitalization more than 1,000,000,000,000 or 1 Trillion XRP). Tokens with a market capitalization exceeding this value will incur an additional penalty.

• High Market Cap Penalty Percentage: The percentage of the baseScore that will be deducted if the highMarketCapThreshold is exceeded (e.g., 0.4 or 40%).

• Epsilon: A tiny value (1e-9) used to prevent errors when taking the logarithm of zero or very small numbers.

2. Log scaling

• Token metrics like trustlines, holdingWallets, totalSupply, price, and marketCap can vary by many orders of magnitude. To prevent larger values from disproportionately dominating the score, the algorithm applies a log10 (base-10 logarithm) transformation to each of these metrics. This compresses the range of values, making the scoring more balanced.

• For example, a jump from 100 to 1,000 holding wallets will have a similar impact on the log-scaled score as a jump from 1,000,000 to 10,000,000, rather than the raw difference.

3. Min-Max normalization

• After log scaling, the algorithm finds the minimum and maximum log-scaled values for each metric across all the tokens in the input list.

• Each log-scaled value is then normalized to a range between 0 and 1 using the min-max normalization formula: (value - min) / (max - min). This ensures that all metrics contribute to the score on a comparable scale, regardless of their original magnitude. If all values for a metric are the same, it normalizes to 0.5 to provide a neutral impact.

4. Base score calculation

• The normalized log-scaled values for each token are multiplied by their respective weights.

• These weighted normalized values are then summed up to calculate a baseScore. This baseScore represents the token's performance across the key metrics before any centralization or market cap adjustments.

5. Centralization penalty

• This addresses the risk associated with too few token holders.

• If a token's holdingWallets count is below the centralizationThreshold, a penalty is calculated.

• The penalty increases as the number of holding wallets decreases further below the threshold. The formula: maxCentralizationPenalty * (1 - (token.holdingWallets / centralizationThreshold)) ensures that a token with very few holders gets a penalty closer to the maxCentralizationPenalty.

6. High MarketCap penalty

• This penalty is applied to tokens that exceed a certain market capitalization threshold.

• If a token's marketCap is greater than highMarketCapThreshold (e.g., 1 Trillion), a significant penalty is applied.

• The penalty is calculated as a percentage (highMarketCapPenaltyPercentage, e.g., 40%) of the baseScore. This aims to heavily penalize extremely large, potentially over-valued, or dominant tokens, depending on our adjustable ranking strategy.

7. Final score and ranking

• The finalScore is calculated by subtracting both the centralizationPenalty and the highMarketCapPenalty from the baseScore. We ensure that the score does not drop below zero.

XRPScan token scoring algorithm rewards tokens with higher numbers of holding wallets, larger total supplies, higher prices, and greater market capitalizations, while simultaneously penalizing those that exhibit signs of centralization (i.e., too few unique holders) or those that have reached an extremely high market capitalization, as defined by the configurable thresholds.