The Urgent Need for Greater Transparency in the Crypto Space and What Can Be Done to Address the Issue in 2023
By
Jack Tan, Co-Founder of WOO Network
Crypto holders want to make sure that the information that they get is always updated and covers both assets and liabilities. Various solutions have been put forward after the FTX collapse, but many solutions including proof of reserves fall short of establishing consumer trust. In a proactive response to calls for greater transparency among digital assets exchanges, we launched a real-time reporting of its assets and liabilities – the first in this industry. WOO Network’s transparency dashboard, WOO X, includes live data reporting that updates every 15 mins, proof of assets and where they are held, information on liabilities, and additional information related to transparency.
We looked at the top 50 exchanges on CoinMarketCap and checked their websites and Twitter accounts for their statements about proof of reserves, looking for what traders use as a gauge of transparency. The analysis also included WOO X’s dashboard in this informal survey. Out of the 51 exchanges surveyed, only 18 including Binance, OKX, and WOO X have proof of reserves statements that can be found either on their websites or Twitter posts. A few of those 18 exchanges have a dedicated page that talks about their proof of reserves while some posted the information directly on their Twitter pages. Only 5 exchanges are providing live data. For example, WOO X updates its proof of reserves page every 15 minutes. Others such as Kraken, Korbit, and Phemex also update their page regularly at different times of the day. Out of 18 exchanges that have shown their proof of reserves, seven have also displayed their liabilities, including WOO X.
To compare, proof of reserves is the equivalent of a bank showing how much capital they have, but not showing how much they owe to clients and to others. Audited records are an important part of the push for greater transparency but have limitations in isolation. We believe that the value of the auditors is greater when they can also verify methodologies and identify whether inputs are accurate. As of today, many auditors still lack the knowledge to evaluate cryptocurrency exchanges fully. WOO X is much more than a simple exchange with its ability to aggregate liquidity from top trading venues and provide this liquidity at lower fees, through well-vetted and diversified holdings on other liquidity venues.
We arrived at this solution by coming up with a wishlist for what we want to see from other exchanges. So, we are holding ourselves to the same standard and being the first to act with this type of radical transparency and live data. Our transparency dashboard is just one of the steps towards our goal of making CeFi more transparent than traditional banks and financial institutions. The practice of using market-makers and other venues to enhance liquidity is widely used but has never been particularly transparent until now. From job postings for internal market-makers by CEXes to the contract fine print enabling the rehypothecation of client assets on Wall Street, this is a trend of opacity that originated in traditional finance and has crossed over into crypto. Going forward, users need to know how much risk is taken with their assets and which venues are being used, an area in which we are now leading the way.
