Why the Crypto Sector Needs Radical Transparency in the Post-FTX World?

The crypto sector needs radical transparency as it lessens the problems that users face in this current scenario

Trust in the crypto sector has dwindled in recent months as a result of the post-FTX issue and the prolonged decline in cryptocurrency prices.  These elements work against the long-term use of digital currencies and investment securities. However, the original vision of blockchain technology continues to remain. The crypto sector needs radical transparency and decentralized finance (DeFi) to lower barriers to financial intermediation for the masses by utilizing technology that eliminates the problems that users of current centralized financial institutions face.

Transparency of user funds is critical. One of the most significant promises of blockchain technology, which provides a fully auditable and valid record of transactions, is the ability to enable information transparency. Blockchain is intended to be a transparency mechanism in which anyone can connect to the network and, as a consequence, perceive all of the network's information. Blockchain ensures transparency by stashing information in such a way that it cannot be changed without capturing the changes made using the necessary encoding and control mechanisms. Due to the technology's ability to prove to third-party companies in a data encryption way – that data is unchanging; it has the potential to make payouts clearer and processes more responsible.

Here are certain ways through which crypto companies could maintain transparency.

Proof of Reserves (PoR)- The main takeaway from the FTX crisis is the importance of transparency for unified crypto platforms and businesses. Promoting transparency among centralized trading platforms and exchanges about their proof-of-reserves is essential for restoring community trust. Cryptocurrency exchanges should reveal whether or not their proof-of-reserves has been recognized by the cryptocurrency world. After that, cryptocurrency investors can check the platform's deposits before making any investment decisions.

Regulation- It is essential to consider that although reasonable, adaptable, and factual legislation is enacted, it may not prevent deceitful strategies in the sector. As more assertions about what exactly was heading on at FTX and its commercial enterprises emerged, the growing skepticism that some of the acts were, at the finest, debatably legal. Regulation will only prevent bad actors from behaving badly. Since important distinctions must be made in any regulations that are implemented, the cryptocurrency industry cannot be regulated in a similar way as traditional financial firms.

Real-time Reporting- The current understanding of disclosures made by crypto companies leaves much to be desired, causing investors to misinterpret the true state of their investments and the financial condition of organizations. Organizations in the crypto industry should ideally capitalize on the fact that blockchain-based transactions are transparent and discoverable by description. A lack of adequate reporting should cause consumers to wonder why these revelations are really not made in the first place, especially in a sector that brags about its capability to disrupt the traditional financial system.