Certain Venture Capitalists that are involved in Blockchain projects, have started speaking out about the importance of more transparency related to the progress in the Blockchain space, as Crypto firms go live.
Melem Dimorors, who leads strategy for CoinShares, a company that seems to be a mix between a Crypto Hedge Fund and a Crypto brokerage, was quoted as saying, “A lot of projects that raise money, they’re not really reporting what they are spending it on.” If you look beyond the top ten Crypto projects and the press that they’re generating, then it isn’t that hard to get behind this idea.
Why are hundreds of other projects falling far behind the likes of Ethereum, Litecoin, NEO, and others? Why isn’t every project releasing something like a quarterly budget?
It is valid to suppose that the answers to these questions might not be ones that we would like to hear. If you invest based on any traditional strategy, then you should walk away from a project which you determine has too much risk for you, related to these areas and more.
Even though Dimorors, as well as others, haven’t pulled any punches with regards to criticizing the risk management techniques of Crypto firms, ICOS are still making a killing on the global market, amounting to $6.3 billion in this year’s first quarter.
At this juncture, it’s easy to wonder: why? If projects really aren’t doing their due diligence with regards to telling us how our investments are being used, then why do we continue to invest in them? Part of the reason is because, until very recently, the Crypto space had been growing at a rate that no one’s really experienced before.
Consequently, it’s quite natural that a consistent flow of new capital continues to enter the industry, not just because of its innovation, but also because of what insiders call “FOMO,” or the fear of missing out.
In the interest of beginning to solve the issues inherent in the Gold Rush to the Blockchain, Jalak Jobanputra, another VC executive, suggests that the industry should be clearly governed, starting with making clear what she calls “the ownership” as well as “the rights to utility the tokens represent.” Inside of this list, Jobanputra hones in on the question of a Crypto project’s value proposition. “I want to see them start shipping products,” she reportedly said to clarify her earlier statement. By this, she was alluding to crypto projects that raise millions in ICOs that include no proven products.
Jobanputra’s not wrong to suggest that we only invest in ICOs which have a working product. If they don’t yet have one, then it’s reasonable to wonder: what exactly am I investing in?
To make matters possibly worse, on top of ICO’ing with no proven utility, Crypto projects have often even gone so far as to go live with nothing but a slightly altered, albeit clear copy of a popular Cryptocurrency. If you want a real-time example or two of this, look no further than Bitcoin Private and Bitcoin Diamond.
As Coin Desk said in their original report on the subject, even though Jobanputra’s call for working products before ICOs might be a bit farfetched, something still needs to be done. In an attempt to put forth a solution, Jobanputra proposed that Crypto teams be required to submit some sort of progress report, perhaps monthly, to all of their investors.
If this was done, then everyone would be clear on what money was being spent when and for what purpose as well as what progress was being made on what part of the product, during what time period.
To this, Jobanputra added the idea of reporting on how the Crypto project in question, is being used in real-world businesses. In the very least, then, one could see the team’s ideas develop, on the subject of real-world use cases.
As of now, few Crypto teams are doing this, but the ones that do include: Cardano, certain subsidiaries of ConsenSys like the Brooklyn Project and Cellarius, as well as Messari, which is being run by Ryan Selkis, the former CEO of Coin Desk.
If the majority of the industry were to follow suit, then perhaps the amount of fear and doubt that outsiders and newcomers bring to it would be greatly diminished.
By: BGN Editorial Staff