The crypto industry needs a lot more transparency because it will make it easier for users to deal with problems.
In the past few months, the post-FTX problem and the long-term drop in cryptocurrency prices have hurt people’s trust in the crypto sector. These things make it hard for people to use digital currencies and investment securities in the long run. But the original idea behind blockchain technology is still there. The crypto sector needs radical transparency and decentralized finance (DeFi) to lower barriers to financial intermediation for the masses by using technology that solves the problems that users of current centralized financial institutions face.
It is very important for user funds to be clear. One of the most important promises of blockchain technology, which keeps a record of all transactions that can be checked and is valid, is the ability to make information public. Blockchain is meant to be an open system where anyone can connect to the network and, as a result, see all of the information on the network. Blockchain makes sure that information is clear by storing it so that it can’t be changed without using the right coding and control mechanisms to record the changes. Because the technology can use data encryption to show third-party companies that data doesn’t change, it could make payouts more clear and processes more responsible.
Here are some ways that crypto companies could keep their business open.
Proof of Reserves (PoR): The main lesson from the FTX crisis is that unified crypto platforms and businesses need to be open and honest. To rebuild trust in the community, centralized trading platforms and exchanges must be more open about their proof-of-reserves. Cryptocurrency exchanges should say if their proof-of-reserves has been accepted by the rest of the cryptocurrency world or not. After that, investors can look at the platform’s deposits before deciding where to put their money.
Regulation: It’s important to remember that even if reasonable, flexible, and factual laws are passed, they might not stop dishonest strategies in the sector. As more claims about what was going on at FTX and its businesses came out, it became more and more likely that some of the actions were, at best, questionably legal. Regulation will only stop bad people from doing bad things. Since regulations must take into account important differences, the cryptocurrency industry cannot be regulated in the same way as traditional financial companies.
Real-time Reporting: Right now, it’s hard to understand what crypto companies say, which makes it hard for investors to know what’s really going on with their investments and with the organizations’ finances. Organizations in the crypto industry should take advantage of the fact that blockchain transactions are public and can be found by their descriptions. Consumers should wonder why these revelations aren’t made in the first place if there isn’t enough reporting on them. This is especially true in a sector that brags about being able to shake up the traditional financial system.