Research suggests that transparency is the key to Utility Token-based projects

Research suggests that transparency is the key to Utility Token-based projects

Researchers suggest that issuers of utility tokens should provide basic levels of transparency to the public before their inclusion in exchanges. They say that by doing so they can increase stakeholder confidence and attract new market participants. This is the key to the adoption of cryptomonies, according to Duke University Law School’s FinReg blog on June 25.

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Disclosure of certain information is key to cryptographic performance
In the blog post, authors Nicholas J. Krapels and Dan Liebau noted that most crypt industry experts do not believe that issuers of useful tokens disclose enough information to their stakeholders. This could be the main reason why these crypts do not work well in the secondary market.

Krapels and Liebau outlined seven easy-to-follow recommendations for information disclosure that they believe are relevant to utility token issuers, buyers, brokers and regulators alike.

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The recommendations apply to both financial and non-financial matters. The financial details include information on the issuer, initial and current cash positions, as well as token treasury information. Non-financial information includes contact information, project progress updates, documentation and open source software repositories.

Correlation of price and information
The authors relied on a comprehensive trial, recently published in the SSRN academic research. The piece includes brief case studies on Tezos, Hedera, Algorand, and Immediate Bitcoin that highlight exemplary behavior in the area of information disclosure. The study suggested that best practices of minimal disclosure positively affect these prices of cryptomoney and utility tokens.

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Nicholas J.Krapels, Associate Professor of Strategy and Entrepreneurship at SKEMA Business School, China, and Dan Liebau, Founding Director of Lightbulb Capital and Affiliate Faculty Member of Singapore University of Management, told Cointelegraph that:

„Some would still say that „insider trading“ is the only way to make a profit in cryptomarkets. Others want to boost the industry and be treated fairly. If you’re looking for a way to promote the widespread adoption of blockchain ecosystems, this is the kind of advocacy we need.

As Cointelegraph reported earlier, Oxford law researchers argued that asymmetric information can lure investors into „pump and dump“ schemes.

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