“We have an opportunity to reform the financial system, to turn it into the public utility that it’s supposed to be—a level playing field that everyone can indiscriminately use in their bid to get ahead. Let that be the standard for the coming age of cryptocurrency.”
― Paul Vigna, Challenging the Global Economic Order
Cryptocurrency startups have raised millions of dollars in the last couple of years. Very few industries have shown such phenomenal growth in such a short time period.
Success of ICO projects can be attributed to best practices implemented by new fin-tech companies. Cryptocurrency ventures are defined by their use of cutting edge technology to bring vast improvement in processes.
This includes creation of publicly accessible networks that benefit the exchange of information.
The most critical practice for success is cryptocurrency transparency. Offering information to investors, platform users and regulators builds trust. It makes a project more reliable and increases acceptance many times over.
Here we will discuss ways in which crypto platforms can be more transparent. We will also cover pitfalls that need to be avoided.
Cryptocurrency Transparency In The Digital Domain
There are at least three areas where crypto can be more open and transparent.
First, each crypto team should be open about the assets of the business. Most crypto projects start out small with few assets to show.
The team members often take on multiple responsibilities. The potential for growth at this stage is huge.
In order for investors to take interest, the holdings of the business must be clearly identified and communicated.
A crypto use case usually holds the following assets during its existence.
- Fiat Reserves
- Equipment and Machinery
- Real Estate and Property
- Automated Smart Contracts
We all have seen examples of crypto that simply does not account for these assets when determining the value of the project. This is also prevalent during ICOs and future coin launches.
Crypto developer teams should willingly publish asset reports on a routine basis, similar to financials reported by main stream companies. The crypto team should also invite auditors to review their accounts for consistency.
This would be a step in the right direction by providing two benefits for coins. It would make the investment more attractive to larger investors while improving regulatory compliance.
The second area where cryptocurrencies can improve is cost reporting. Crypto teams spend a lot of resources in developing a fast, global infrastructure to ensure platform accessible globally.
Major expenditures include the following.
- Setting up network nodes
- Developing the code to run the blockchain
- Legal fees and regulatory expenses
- Marketing and PR costs
- Technical development and improvement costs
Most cryptos fail to publish any report regarding their expenses. Without a detailed report about assets and expenses, it is difficult for investors to determine the true value of any coin.
We need cryptocurrency transparency.
For new crypto tokens, it is imperative that expenses are clearly spelled out in the whitepaper. This simplifies the process where investors assess the profitability or economic viability of a project.
Hiding or failing to report expected costs shows either inexperience or deception. Both set a bad precedent for the entire market going forward.
Recording transactions is the third area where cryptocurrency transparency is important. Serious investors prefer to see that the majority of coins are not concentrated and not held by a small group of people.
When a developer, and team, holds the majority of its own coin, the price is ripe for manipulation. What that means is that a few can artificially raise the price through controlled trading.
This is often called a “pump and dump” scam.
There are very few crypto coins that take the well being of investors seriously. Crypto developers see investors as wallets of quick cash who will simply look for opportunities with artificially inflated ROIs.
Rarely do you find crypto assets, expenses and capital reported in a transparent fashion. Cryptocurrency transparency is basically non-existent.
In The End:
We believe that this must change for crypto markets to be seen as serious and reliable business models. You simply cannot have a business, crypto or otherwise, which fails to share basic information about its income, expenses and assets.
If we don’t want the markets to collapse under their own weight, we must have more open, transparent and reliable information for everyone.
We must have cryptocurrency transparency.