Take Off the Blinders: Crypto Exchange Reports VS Reality
The recent article contributed to Bitnewstoday.com by Vance CARVER, concerning the idea of crypto exchanges’ transparency, made it obvious that the problem still exists. Previously, Vance has also summarized the questions, which are to be asked about the security of crypto exchanges. These issues, among with such news like Goldman Sachs postponing their decision on crypto trading, clearly show us how unstable the crypto market is and how easily it can be depreciated yet. Moreover, the lack of transparency and security breach issues can trigger the regulators as it was in Japan this year. The investigations which started right after the Coincheck case, has shown the weaknesses of crypto exchange business, but it was a signal that things are to be done. The topics of security and transparency are still timely up to this day, as we have received several comments from the representatives of the crypto business.
Some “don’ts” crypto exchanges should consider
Don’t hide the failures. Don’t cheat with the volumes. Don’t lie to your community. All of these might seem disastrous to the reputation, but still such issues occur from time to time, disrupting the industry as a whole.
“Crypto exchanges need to be more open and public, both with reporting and when there is an issue. Too many times when a hack or issue occurs they are reluctant to come out publicly and report it. It creates a sense of distrust amongst the users.” — Kyle ASMAN knows what he’s talking about. Being an investment consultant and VC investor in the cryptosphere is a great responsibility and one can’t rely on the financial institute which is not transparent enough.
The questions previously asked by my colleague Vance and the opinion of Kyle are strongly supported by the words of Vikram RAMAKRISHNAN, a former hedge fund manager and the co-founder a crypto market intelligence dashboard for investors and traders: “The area of transparency that's lacking at exchanges is how they manage and store customer assets. Do they even have all the assets they say they do? What happens if their wallets are hacked? Exchanges also miss out on generating even more revenue by not addressing these concerns. For example, quantitative trading shops typically don't leave more than a few percents in assets at an exchange because of these risks, and as a result, don't trade as much as they would like to at a given time. Exchanges could generate more fees if they were more transparent with the questions above.”
So this is all about gaining more trust of the community, isn’t it?
Well, yes. Because if you don’t become transparent all by yourself, the community will find a way to do that for you. Mr. Ramakrishnan spoke in his interview to Bitnewstoday.com about the work on adding a layer of transparency to the market: “We monitor sources like, what coins are being added to and removed from exchanges, what coin teams' admins are speaking about in their chat rooms, GitHub commits which are examples of what code has recently been incorporated into a coin's codebase, press releases that coin teams are putting out, second layer solution activity, and a whole bunch of other sources.”
The blockchain industry is keen on self-regulating: it has been created following these principles. Knowing that, crypto exchanges should understand one clear message: if you avoid implementing transparency in your business, the community will do it. And the outcome might be not so positive if you’re not properly prepared.
“Exchanges have a really tough time being consistent with how they deliver data to their users through their APIs. The problem with this is that it doesn't engender confidence in users. Their APIs can often go down, change their data format, have fake data in production, etc. As a result, it's hard to trust the data you see on an exchange.They need to manage their data schema and formats better, provide clear documentation to their users, and give explanations why prices/volumes look the way they do. This is going to take time, but it's something they'll have to do for customers to be confident in their systems,” — Mr. Ramakrishnan is strict in his views on security and transparency policy and the future to come: “One of the reasons there's excitement and interest around decentralized exchanges is that they don't generate the same kinds of concerns that centralized ones do. The exchanges who can be more transparent early on will be the winners.”
Exchanges claim to take the white path in gaining the trust of the community
Ray YOUSSEF, CEO of Paxful is keen on hearing the vox populi: “I personally do customer support as much as I can. As a CEO, I should know what the users need firsthand. Every comment and reaction that we get is considered as creative and supplementary feedback to make the platform better. This process led us to become a community of bitcoin enthusiasts built by bitcoin geeks for bitcoin geeks. That kind of transparency is valuable and needed, especially now that we have several million users."
Herbert SIM, CMO of the Cryptology Exchange is no less community and regulation friendly in his statements about transparency policy: “We put our community first and believe in providing a trustworthy and a secure platform by advocating transparency in all our processes and services. We have initiatives in place such as a multi-level structure KYC system with advanced ID verification services that swiftly verifies, identities and mitigate risks all together. We build trust in the industry and with our community, and I believe that more than ever, working with regulations is the way to encourage transparency in services. Cryptocurrency exchanges can and should work hand-to-hand with regulations to encourage and build transparency in the industry.”
Three steps to the ultimate transparency
Timofey FORTUNATOV, head of PR-department of Tugush Blockchain Capital, collected the ideas into three pieces of advice, which are the basis of the new crypto exchange project.
Firstly, one of the main factors that will contribute to the transparency is an active and genuine presence on the social platforms. Try to be open about the current stages of your products’ development and keep your users updated on any changes. Thus, people will feel that you value their time and attitude towards your product.
Secondly, use GitHub or any other platform that is similar to that. It will show your users that you are confident technology-wise in your product and its capabilities. Do not think that published code can be beneficial only for people who have blockchain programming experience, it also will raise the level of trust among those people who are lacking any developer’s experience at all. The fact that a company uploaded some files to public repositories signifies that it really has a product in the development and not just talks about it.
Thirdly, the presence of “legal” section may seem needed just for the record. However, this particular section is significant for building straightforward relationships between crypto exchange and its users. It explains how those relationships are formed and supported, thus giving users at least some kind of regulation.
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