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GameKnot player ratings are calculated using the classic Elo formula with fixed K = 20. Team ratings are also based on Elo rating system.
You can read more about Elo rating system or its modified versions used by FIDE and USCF below:
ELO rating system
FIDE rating system
USCF rating system
GameKnot switched to using Elo rating system in October 2003.