Why Investable Tokens Need Real Disclosures | Roundup

The podcast "Bell Curve," hosted by Miles and Dave, emphasizes the necessity for real disclosures in the token market, highlighting the Token Transparency Framework (TTF) developed by Blockworks, L1D, and Fei. Approximately 40 protocols have voluntarily disclosed information under this framework, with Turtle Club recently experiencing a 20% increase in token value following their disclosure. The hosts note a growing demand for transparency, as investors seek proof of market fit and revenue, which enhances trust in token projects.

The discussion underscores the impact of transparency on project success and investor confidence. Founders are categorized into two groups: those committed to product viability and transparency, and those lacking accountability. The TTF encourages high standards among founders and promotes responsible engagement with investors. Institutional investors are increasingly drawn to tokens with clear price movements based on fundamentals, yet less than 1% of tokens disclose their market-making agreements, raising concerns about transparency in this area.

The hosts discuss a rating system for tokens, where some receive low scores, questioning the implications of centralized exchanges listing poorly rated assets. They express concern that if many projects achieve similar high ratings, the value of those ratings may diminish. Common issues in crypto projects, such as limited buybacks without disclosing inflation rates, are highlighted. Misunderstandings about ownership structures can confuse token holders, emphasizing the need for improved disclosures.

Looking ahead, the anticipation of regulatory clarity regarding token classification as commodities or securities is discussed. Regulatory bodies like the SEC and CFTC are open to crypto technology, emphasizing compliance and the importance of trust and revenue generation for assets to be deemed investable. Trust remains a critical component in the investment landscape for crypto assets.

The conversation emphasizes the importance of optimism in business growth while highlighting the critical role of trust in tokens and protocols. Trust is closely tied to transparency in disclosures and the governance structures of decentralized autonomous organizations (DAOs). Concerns arise regarding the complexity of these governance structures, which can lead to transparency issues and organizational challenges. Some projects attempt to mitigate these complexities through buybacks and token burns.

Disclosure requirements are deemed essential for clarifying the structure and ownership of protocols, as a lack of transparency can erode trust and negatively impact token prices. The market should ideally determine token values based on disclosed structures, although the term "should" is critiqued as misleading since the market reflects existing realities. The conversation also contrasts the value propositions of tokens and equity, with some participants remaining optimistic about tokens.

Current trends indicate a shift towards raising equity rather than focusing on tokens, which have developed a negative stigma. This new framework encourages founders to reassess the value of tokens, emphasizing that the best tokens will be transparent and accountable regarding their revenue sources. Transparency is crucial for attracting institutional investors, who often struggle with limited information about token allocations and revenue sources.

The conversation highlights the importance of timing in token launches, advocating for achieving product-market fit (PMF) before introducing a liquid token. Founders need to provide investors with essential data, including project descriptions, team information, token supply details, and market structure agreements, to facilitate informed investment decisions. Investors require both basic data and advanced analytical tools to assess token projects effectively.

The conversation underscores the necessity for transparency in the crypto industry, which is criticized for its lack of performance compared to traditional finance. The potential of combining AI with blockchain technology to enhance information access and transparency is discussed. The speakers agree that the market will resolve ideological debates, evolving away from past missteps. They advocate for adapting existing frameworks to crypto rather than reinventing them.

The maturity of crypto technology and large language models (LLMs) is seen as a catalyst for innovation. The speakers reflect on the challenges of building a comprehensive data platform for crypto, emphasizing the need for better disclosure practices and a unified effort among projects to enhance standards and transparency. The conversation highlights the critical need for transparency in the crypto market, emphasizing that this transparency is essential for building trust among investors.

There is curiosity about the growing interest in crypto beyond the US and Europe, with a particular focus on how US exchanges, as the largest capital market, play a pivotal role in shaping global strategies. The current state of decentralized finance (DeFi) is marked by a crisis of confidence, which presents both challenges and opportunities. The conversation concludes with a light-hearted note on the importance of applying transparency standards not just in finance but also in personal events.