Token Transparency Framework: Promoting Trustworthy Development in the Crypto Market

The crypto market is at a critical turning point. While some crypto companies are seeking IPOs, the transparency issues in the token market are hindering the industry's development. Tokens are seen as the direction for future capital formation, but without resolving the transparency issues, progress will be difficult.

Currently, the Token market is facing serious information asymmetry, making it difficult for investors to assess project quality. This has led high-quality projects to be reluctant to issue coins, while speculative projects are rampant, resulting in a decline in overall market quality. Token investors are confronted with various risks, such as inadequate legal protection, multi-token issues, parasitic equity problems, and improper founder behavior. These issues have resulted in a Token risk premium of up to 20%, significantly higher than the 5% for stocks, causing Token valuations to be discounted by about 80%.

In response to these issues, the Blockworks team has launched a Token Transparency Framework aimed at guiding projects to disclose key information through open-source standard tools. This framework is similar to the crypto native version of the S1 form, requiring projects to fill out about 20 questions related to business descriptions, token supply plans, exchange agreements, and more, while providing relevant evidence. The scoring mechanism assigns different weights based on the importance of the questions, ultimately generating an easily understandable rating.

The framework prioritizes encouraging links to on-chain data, while relying on projects to self-declare parts that cannot be verified. The risk of publicly lying is much higher than not stating a position; in the long run, the reputation mechanism will drive projects to disclose honestly. It is expected that projects participating and receiving reasonable ratings may have their tokens appreciate due to increased transparency. This will attract more liquidity token funds' attention and drive institutional capital to enter.

In the short term, projects with solid fundamentals that are overlooked by the market will be the main beneficiaries. By applying this framework and making the results public, these projects can clearly demonstrate their true fundamentals to investors, enhancing market awareness. Meanwhile, those projects that view Tokens as arbitrage tools and lack real products will lose market favor due to a lack of transparency.

Overall, the Token transparency framework aims to drive the crypto market toward a more open, trustworthy, and sustainable development path, with the potential to improve the structural issues present in the current market.