Lack of transparency in the crypto market raises concerns among investors

The cryptocurrency industry has gone through more than a decade and is at a critical turning point. Although some crypto companies have started seeking IPOs, the issue of transparency in the token market still severely restricts the industry's development. Tokens are seen as an important direction for future capital formation, but if the chronic problem of lack of transparency cannot be resolved, the industry will struggle to make significant progress.

Many liquidity token investors are concerned that the current market is evolving into a "lemon market." This concept originates from economic theories in the 1970s, referring to the phenomenon where high-quality goods are driven out of the market by inferior goods due to information asymmetry. In the token space, due to the lack of standardized information disclosure mechanisms, investors find it difficult to accurately assess project quality. This leads to high-quality projects being reluctant to issue tokens, while speculative projects proliferate, potentially resulting in a decline in overall market quality.

Compared to equity investors, token investors face many additional risks:

1. Insufficient legal protection: The rights of token holders are far inferior to those of shareholders.
2. Multi-token issue: The project team may issue new tokens for new business lines, harming the interests of early investors.
3. Unclear profit distribution: Token holders cannot determine whether the project profits flow to tokens or equity.
4. Lack of transparency in founder behavior: Founders may abandon the project after selling a large number of tokens during a bull market.
5. Foundation Abuse: Some teams may cash out indirectly through the foundation.

These structural issues have led to a risk premium for tokens that is far higher than that of stocks, estimated to be as high as 20%, while stocks only have a premium of 5%. According to capital market pricing logic, this high-risk premium could result in token valuations being discounted by as much as 80%.

The industry is rife with chaos. Some projects suddenly announce "abandoning tokens" after achieving considerable returns, leaving cash flow to a few core members; some well-known projects, despite having substantial front-end monetization, do not distribute any profits to token holders; and some projects pay high "consulting fees" to their core teams through foundations, effectively accelerating token cashing out. Additionally, the stringent listing requirements of certain centralized exchanges and the improper behavior of some market makers have also exacerbated the market's lack of transparency.

In response to these issues, some industry insiders proposed the concept of a "token transparency framework." This is an open, standardized self-disclosure template designed to help projects clearly communicate their structural information to the crypto market. The framework requires projects to answer about 20 questions covering business descriptions, supply timelines, and agreements with exchanges, among other content, and to provide relevant supporting materials. The scoring mechanism assigns different weights based on the importance of the questions, ultimately generating a simple and understandable rating.

Industry insiders generally believe that projects adopting this framework and receiving reasonable ratings are likely to gain a premium for their tokens in the long term due to increased transparency. While this change may not be immediately apparent, it is expected to attract more attention from liquidity token funds, driving institutional capital into the token market. Conversely, projects that treat tokens as arbitrage tools, lack real products, or abuse market structures may be marginalized by the market due to a lack of transparency.

Increasing market transparency not only benefits the protection of investors' rights but will also promote the long-term healthy development of the industry. With the promotion and application of such frameworks, the crypto market is expected to gradually establish a more comprehensive information disclosure mechanism, creating a favorable development environment for truly valuable projects.