In the midst of a bear market, the last story the crypto industry wanted to see hit the headlines was the debacle at FTX. It’s a story centered on the biggest negative perception many in the public still have of the crypto industry: that transactions regularly happen out of public view for the benefit of a handful of bad actors and at the expense of customers.
Whether it’s fair or not, this negative reputation of crypto is something honest crypto leaders and companies will have to overcome, and the best way to do that is by ensuring current customers know what’s going on with the assets they’ve invested and that potential investors clearly understand the potential the industry offers. Below, 15 members of Cointelegraph Innovation Circle discuss ways crypto companies can provide improved transparency for their customers.
Use public ledgers and proof of reserves
Cryptocurrency-based companies, as well as Web2 and traditional businesses looking at moving their models to blockchain, should use public ledgers and proof of reserves coupled with regular internal and external financial audits that are made public. – Steven Talbot, BHero
Encourage the use of noncustodial wallets
Crypto companies can provide improved transparency for their customers by promoting and encouraging the use of decentralized solutions such as noncustodial wallets. By using noncustodial wallets, customers are able to control their own private keys and have full ownership and control over their funds, reducing the risk of theft or fraud by third parties. – Erki Koldits, OÜ PopSpot
Avoid technical language in messaging
With so many mainstream ways for the public to become involved in crypto, we’re no longer just talking to the tech-savvy. Therefore, to improve transparency, crypto companies need to move beyond very technical language in their messaging so that mainstream audiences can clearly understand every word. Any and all content should use simple language that even my mother could understand. – Ayelet Noff, SlicedBrand
Shine a light on any ‘secrets’
Shine a light on everything; leave no stone unturned. Crypto customers right now are taking the risk of wading into murky regulatory waters with shady actors all around. We should reward this bravery by providing them with a safe harbor with no secrets, regular audits and full transparency. Early crypto users deserve at least that much. – Jae Yang, Tacen
Expose select data on the chain
Use blockchain technology directly to prove operational data. The fact that data can be selectively exposed on the chain is a unique benefit of the technology, which should be used for this purpose. – Joe Roets, Dragonchain
Provide regular updates on projects
Crypto business models are reshaping front- and back-end business operations worldwide. To enhance transparency for customers, crypto companies can aim to educate them about the technology and provide regular updates and reports on projects. Any blockchain-driven innovation has the potential to deliver tremendous business value; increasing transparency will only help in its increased adoption. – Vinita Rathi, Systango
Put rulesets in the data availability layer
At Syscoin Labs, we are doing compliant decentralized finance based on a public, permissionless ledger. Instead of putting rulesets into the smart contract (not scalable), you can put them in the data availability layer. This improves transparency since they get time-stamped to the chain, and at the same time, it ensures compliant EVM operations. – Jagdeep Sidhu, Syscoin Foundation
Schedule independent audits and publish the results
Above all else, crypto companies must adopt a culture of openness and accountability. The best way to do this is probably through regular, independent audits from respected firms. All findings, good and ugly, should be published, and all fixes should be announced. In this way, DeFi companies can show radical transparency unlike any in the financial industry. – Budd White, Tacen
Be more upfront about development roadmaps and milestones
While it’s not “transparent’’ in a technological sense, companies can be more upfront with their users about their development roadmaps and milestone timelines. Not only will this keep customers more informed, but being honest about challenges and timeline changes will also instill trust in the community and reduce frustration. – Anthony Georgiades, Pastel Network
Educate on the difference between decentralized and centralized transactions
Cryptocurrency companies need to educate the public on the difference between handling decentralized and centralized transactions. People are still unsure about the legitimacy of crypto, so the work and output of credible companies are more important than ever before, as is staying compliant with Bank Secrecy Act rules and regulations. It is essential to convey that crypto is a safe and secure option. – Chris Groshong, CoinStructive, Inc.
Publish audited financial reports
One way crypto companies can provide improved transparency for their customers is by regularly publishing audited financial reports and conducting regular third-party audits of their financial accounts and systems. This can help customers to have confidence in the financial health and integrity of the company and also give them visibility into how their funds are being handled. – Wolfgang Rückerl, ENT Technologies AG
Commit the hash of published financials to a blockchain
Blockchain is based on data permanence. Publishing financials and then committing the hash of those documents to a blockchain shows that you stand by the statements you made. This increases your liability, which naturally projects integrity. – Arie Trouw, XYO
Release regular, detailed financial updates
One way crypto companies can provide improved transparency for their customers is by providing regular financial updates and reports on their activities, such as a breakdown of how funds are being used, how many tokens are currently in circulation and the number of transactions that have taken place. – Theo Sastre-Garau, NFTevening
Hold customer funds in 1:1 custody
Much of the crypto ecosystem’s current woes are predicated on investments made by a few bad actors, often exclusively with customer funds. This accelerated their insolvency and caused incalculable harm. However, by holding customer funds in 1:1 custody and only putting company value on the line, crypto companies can introduce a stopgap to prevent future runs and the evaporation of user assets. – Oleksandr Lutskevych, CEX.IO
Partially back stablecoins with tokenized real assets
Stablecoin’s stability is a function of public perception and trust. The algorithmic model backed with a pure basket of digital assets is starting to lose trust because of what happened to Terra Luna. Perhaps part of that basket should include tokenized real assets such as real estate and precious metals, with the rest still being digital. – Zain Jaffer, Zain Ventures
This article was published through Cointelegraph Innovation Circle, a vetted organization of senior executives and experts in the blockchain technology industry who are building the future through the power of connections, collaboration and thought leadership. Opinions expressed do not necessarily reflect those of Cointelegraph.