Cryptocurrency prices are generally down over the past year but developers have been working 24-7 on improving the underlying technology and adoption is growing accordingly, Weiss Ratings founder Martin Weiss said.

“There’s a disconnect between what’s happening in the marketplace and what’s happening in the real world,” he told Bank Innovation.

On-blockchain transaction volume is up three times from where it was in 2018, Weiss said, and strides have been made in network capacity and network security. But many barriers remain before there will be anything resembling widespread adoption of cryptocurrency, or blockchain, by banks.

Weiss said banks risk losing too much opportunity by holding their cards too close to their vest, referencing JPMorgan Chase‘s JPM Coin, a digital coin representing one U.S. dollar, and limited to the instant transfer of payments between institutional accounts.

“Many corporations didn’t want to be a part of the early internet,” he said. “They wanted their own intranets, and some of them focused all the efforts on that and missed out. They realized too late that they had to participate in order to be a part of it.”

Weiss Crypto Ratings, a division of Weiss Ratings, today released a report that assigns grades to cryptos based on tech/adoption, for long-term investors, and risk/reward, which is based more on short-term factors. Focusing on the former, the grades were as follows:

• Ripple’s XRP, Grade A, “best positioned to compete with SWIFT, the global network for interbank money transfers”
• EOS, Grade A, “currently the leading cryptocurrency challenging Ethereum to become the backbone of the new internet”
• Bitcoin, Grade A, “upgraded with the roll-out of its Lightning Network, is the best positioned to become a popular store of value for savers and investors”
• Ethereum, Grade A-, “the most widely used smart-contract platform, but currently faces difficulties with scaling”
• Cardano, Grade B+, “aims to provide the most advanced smart contract capabilities, monetary policy and governance”

But Weiss also cautioned that investors should not ignore the risk of loss, which he said remains far higher in crypto markets than other asset classes. After factoring in risk/reward, only four cryptos – EOS, Ripple, Bitcoin, and Binance – received an overall rating of B-, and no coins received an A. It’s also worth noting most of the 120-plus cryptos Weiss covers did not perform nearly as strong.

Weiss has been in the financial ratings business since 1971 and said he added cryptocurrencies in 2017 after he saw a lot of misinformation and hype, and a lack of robust research that was preventing investors from making informed decisions. He said crypto is a different animal because there’s no balance sheet to read, and often no company or central authority to hold accountable.

Weiss said XRP is “very far along” in terms of transactions, while Ripple’s dealmaking with banks could eventually help it mount a considerable challenge to SWIFT and other networks. He said another crypto, Stellar, has teamed up with IBM for a world wire payment network and is starting to sign up some banks, but that Stellar’s more decentralized approach could be a hindrance to widespread institutional adoption.

“Large banks need accountability and they don’t trust yet this public thing where there’s no one to go to,” Weiss said. “They just don’t have the confidence in that yet.”

He said Ripple, for this reason, will probably maintain a competitive edge for now over other decentralized cryptos like Stellar.

Then there are newer cryptos, like Cardano and Holochain, that don’t even use blockchain. Weiss said blockchain consumes a lot of electricity and can get particularly cumbersome as more transactions are made. Hedera Hashgraph is also thinking outside the box, he said, building a more efficient, faster ledger that is still shared and follows the same foundational principles.

Weiss said the bottom line is cryptos and their underlying distributed ledger technologies are still in the experimental phase.

“This is not going to change the world overnight,” he said. “Some will fail, some will succeed.”

Weiss said the big missing piece for institutional adoption is liquidity.

“Other things flow from there,” he said. “Less volatility, more stability. And we’re already starting to see that happen.”

Weiss also predicted there will ultimately be fewer cryptos as the industry matures.

“Some dominant players today may become the BlackBerries of tomorrow,” he said. “Bitcoin will not become the single, dominant player because its use case is too narrow.”