By Drew Bell, Chief Developer at Ethercoin
With over 1,300 cryptocurrencies currently on the market, it seems that a new digital currency is launching almost daily with its own purpose, USP and objective. However, for an industry that is seemingly growing, the marketplace is not without its critics.
Back in January, Facebook announced that it was banning cryptocurrency advertising from the platform altogether; citing that “there are many companies who are advertising binary options, ICOs and cryptocurrencies that are not currently operating in good faith.”
Was this a justified move from a company trying to protect its users? Or simply Facebook demonstrating its lack of understanding of an emerging and disruptive technology and therefore highlighting the need for more mainstream education? If anything, it does highlight the need for the crypto market to work harder to ensure a greater level of transparency to instill trust from its audiences.
Increasingly utilised by various mainstream industries and markets over previous years, blockchain technology has trust and security at its heart. Yet, for a technology that enhances transparency across multiple sectors, cryptocurrencies, which are built around the very same technology, continue to instill a lack of trust and transparency.
It can be hard for investors to trust cryptocurrencies due their decentralised nature, meaning no government body, bank or authority has control over it.
Of course, this is not entirely unjustified as it doesn’t take much effort to locate stories about less than legitimate ICOs or fraudulent cryptocurrencies. However, it means that those within the industry need to work harder to not only demonstrate that their projects are legitimate but also to educate the wider audience to be able to identify viable investment opportunities on their own.
As more cryptocurrencies appear in the market everyday, there is further demand for transparency and verification. For companies who are looking to launch a brand new cryptocurrency, they will be expected more than ever to demonstrate reliability for potential investors, in order to advise them to buy into the ‘crypto’ space.
To ensure transparency before an ICO launch, business must create a technical white paper detailing all information and project plans, profiles for all leaders and developers involved in the making of the ICO and a timeline of events so investors can keep track of the project’s developments.
Due to cryptocurrency’s seemingly volatile nature, and in a bid to instill some trust back into the industry, the Digital Currency Index was launched in July 2017. Aiming to be the first widely accepted market index for tracking the cryptocurrency industry, the index tracks the marketplace based on a variety of qualitative and quantitative prerequisites; including the cryptocurrency team, development, expected return and the degree of volatility.
The Digital Currency Index has presented crypto investors with a range of insights and analysis into the market which were previously unavailable. The index is freely available to mainstream audiences and works as a tool that is able to track the value of certain currencies and enables potential investors to see which digital currencies are the most viable.
Whilst the launch of the index is a step in the right direction for the market to promote transparency, is it enough to instill trust in an industry that is so heavily plagued with cautionary tales?
In order to promote a greater level of transparency within the cryptocurrency market, it is up to the currencies themselves to prove their potential to investors. Previously, social media was a tool that many utilised to engage directly with their audiences and update them on their project’s development. However, with Facebook, shortly followed by Twitter and Google, seemingly turning their backs on cryptocurrencies and ICOs, it remains unclear how these platform will play a role going forward.
By providing a strategic white paper, profiles on the team behind the cryptocurrency and promoting a high level of communication, currencies can start to build a strong foundation of trust and transparency in the market and continue to dominate in this new era of technology.
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