Posted 2 years ago | by Ben Armstrong
New Research Demonstrates Transparency Matters for Crypto Projects
New research published on Duke University School of Law’s FinReg Blog points to project transparency as a driver of crypto prices once they trade on the secondary market. The research was undertaken by Nicholas J. Krapels and Dan Liebau, who authored the blog post.
There are no regulations to govern information disclosure for utility tokens, but it looks like the market rewards projects that share as much information as possible with stronger token prices.
The two authors of the blog post from the FinReg Blog gave seven recommendations to help guide utility token projects when they are designing information sharing protocols. These ideas should come as no surprise, and will likely help projects that want to attract more attention.
Crypto Projects Need to Share Information
In the course of their research, the authors found 83% of people who participate in utility token offerings don't think that the issuers provide enough information, according to a poll they conducted of 76 “industry experts.”
The authors' central thesis is,
“If cryptocurrency and utility token issuers want to list their tokens on public markets, they should provide basic levels of transparency. Such disclosures increase stakeholder confidence, enable more sound decision making and, most importantly, attracts new market participants.”
To accomplish this, they suggest the utility token projects disclose:
1. Token Issuer Information
2. Initial Cash Position
3. Current Cash Position
4. Token Treasury
5. Contract Information
6. Project Progress
7. Open Source Components
In the established financial markets, most of the above information would have to be disclosed if a company wanted to have its shares traded publicly, although there are some big differences between a utility token, which doesn't confer the ownership of a company, and a stock, which does.
The authors state that, “The wholesale importation of traditional public market practices is neither advised nor warranted. Instead, we observe the utility token and cryptocurrency markets with fresh eyes and a view to support issuers, their intermediaries and buyers alike.”
New Markets are Growing Up Quickly
As the blog points out, there is a real demand for more transparency in the utility token space. If the authors are correct, utility token projects that offer more information to potential investors will be rewarded with higher amounts of interest and more stable values.
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