18 Months of Transparency - Unqualified Opinions

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The Messari Disclosures Registry, 18 Months In

We’re excited to announce seven new participants in Messari’s disclosures registry initiative:

Cosmos (ATOM), ZCash (ZEC), QTUM (QTUM), Crypto.com (MCO), Fantom (FTM), Airswap (AST), and Veil (VEIL).

With these additions, as well as a number of others we'll complete and announce around Consensus in May, the registry now has 30+ participating projects from around the globe, including 20% of the top 30 assets, and about 10% of what we feel is the current target market (asset creators whose projects have a $20 million+ market cap or did a $10 million+ ICO).

The registry is the backbone of our business, and (we hope) the beginning of a standardized reference data backbone for the entire crypto asset class.

Here’s how I described the initiative in October of 2017

If we don’t do a better job of self-regulating and creating some foundational social contracts in cryptoasset sales and trading, there will be no adults in this industry that deserve a seat at the table when the new laws and regulations are written…Sunlight is absolutely the best disinfectant. If we want the cryptoasset party to last without serious legal setbacks in the years to come, radical transparency from token projects will be the very best form of regulation. Let people make informed decisions for themselves based on high-quality, free, public information.

Since then, we’ve tackled a number of challenges: 

1) Could we design basic standardized token disclosures? (Example)

2) Could we incentivize long-term engagement and alignment in such an initiative, so we aren’t a central point of failure, and the global community governs this public utility? (TCR design)

3) Could we distribute this data outside of Messari? (Free API, Partnerships - Q2 announcements)

4) Could we get exchanges and liquidity providers rallied around the initiative, so their users could reference a single source of reference data on listed assets? (In progress)

5) Could we help regulators think of common sense methods for reining in the excesses of 2017, without squashing innovative new approaches to capital raising. (Looooong term; these guys move slow.)

We’ve tackled #1-3a, and are spending the majority of our efforts in Q2 on 3b (data distribution partnerships) and 4 (exchange partnerships).

We’ve spoken with about 100 projects regarding the Messari registry.

That’s a 30% win rate (not bad), 40% are warm/considering, 30% are skeptical/negative on the initiative. Acting in full transparency ourselves, we wanted to highlight some of the resistance and challenges we face on an daily basis with these conversations, and how we think about objections to the registry. 

In order, based on the frequency we hear the pushback.

We’re already very transparent, why do we need you?

A number of projects have responded with this line, with varying degrees of truthfulness. Many are, in fact, very transparent by default. Some even have their own transparency sites which share key metrics, full token economics breakdowns, and team vesting schedules. These are good!

But for other teams, this particular objection is a bit fuzzier. 

They’ll point to their medium posts or tweets (which are deletable), white papers (which often differ from the originals), community forums (so. much. unstructured. data.), or token sale documents (outdated).

Not all teams who object on the “we’re-already-transparent-go-away” grounds are suspect, but there’s a strong correlation to this feedback and the degree to which our team’s bullshit detectors start picking up signals. This critique was expected in the early days of the registry when there were fewer participating projects and the distribution of registry data was more limited. Now it raises eyebrows.

Teams participate in the hopes we will do the aggregation, standardization, and distribution work to fix crypto’s reference data problem. 

Rather than hoping your stakeholders will come to your website, why not work with a team that’s actively pushing *correct* basic data to all interested platforms…for free!   

The fee is high, and our budget is stretched. Why are we paying you?

The first objection also makes more sense if you’re talking about teams with smaller budgets. The registry initiative costs $10k / year. Not too high, but high enough.

  1. We use it as a spam / fraud prevention feature. It’s easy for teams to pay $10k for an ad campaign. It’s harder to pay, submit to our review process, and keep up to date with material disclosures. If data gets stale or teams make misstatements, they get booted. This ensures that our data set doesn’t fall prey to “garbage in, garbage out" and applies social pressure to stay on the registry. 

  2. The fees will make the project sustainable. A good rule of thumb for software businesses in NYC or SF is that expenses will be ~$150k+ per employee. For a ten person team like ours, that’s ~$2 million in annual expenses. If all we offered was the registry, the break-even point for this initiative would be ~200 projects. We’re not getting rich off this. We’re bootstrapping a public utility as part of our longer-term strategy.

  3. It’s important to demonstrate that a vibrant fee market exists for this type of global service. Of course, the goal is still to decentralize the governance of the registry and treat it as a public utility. Phase 1 included proving out that a fee market would exist that would give any TCR / work token holder the ability to earn fees in exchange for work. We’ve done that. (You could argue better than all but a handful of cryptoasset projects.)

We didn’t really hear price objections prior to the November market correction. But we've heard it more frequently since then.

We note that the cost of this program to our target market is (at most) a single basis point of treasury proceeds or current market cap. Often it is much less.

Regardless, we think the downstream communications and compliance cost savings will prove to be many multiples of the fee. We’ll also be rolling out additional benefits/services for registry participants in the months ahead. Stay tuned. :)

We want to do this, but will this make us look like a security offerer?

This one’s always a bit of a head scratcher for us. The discounted pre-sale was ok. The ICO was ok. The listing on exchanges was ok. The insider vesting schedules are ok. The ongoing treasury sales are ok. But help your communities with basic disclosures, and that’s gonna set off the SEC?

Come on, now.

This seems very focused on the investment case vs. the use case?

Call it what you will, but most token holders today are buying tokens for one reason and one reason only: to make money. Whether that’s by participating in an ecosystem as a compensated worker (staking, market making, oracle services), or passive speculating, token holders want to know that their investments aren’t going to get diluted unfairly; that they are getting treated fairly vs. insiders; and that they will be rewarded for the time and energy they spend working with a given project. 

Before the industry can really evolve, asset creators need to be honest about who their stakeholder bases really are, and offer some type of reliable disclosures that help stakeholders understand the attractiveness of the asset for a desired behavior. (e.g. Livepeer is a terrible token for speculators because unstaked tokens get diluted down mercilessly. And that’s their goal.)

Can we participate if x project joins, but only if y project doesn’t join?

We don’t vouch for projects for better or for worse. Our disclosures registry requirements are consistent and transparent. We’re not playing favorites, and suspect that it would be difficult for a “shady” project to make it very far through our application process without outing themselves for pretty egregious and unethical behavior.

When it comes to judgment calls about project quality, we need apples to apples reference data before we can start benchmarking assets against each other. We’d rather stay impartial, and let the data speak for itself. 

Luckily, this hasn’t been a common critique. Leading projects like ZCash, Maker, and Cosmos are all on the registry, and that has attracted other large and small asset creators. None of the projects listed have created much of a problem for us, either, because their disclosures are thorough and it’s tough to argue with cold, hard data.

We’re private, should we wait until this token begins trading? 

It probably doesn’t make sense for us to list assets that plan to stay private until 2021+, but we do recommend that teams engage with us at lease three months prior to their anticipated token distributions so that key stakeholders have an opportunity to review the ins and outs of the token and its creators.

Drop us a line at registry@messari.io if you’re interested in participating! 


So there it is. 

If you hear one of these objections from a project you think should be on the registry, please forward this note to them because we’re close to hitting this initiative’s inflection point. 

We look forward to working with all major projects on basic disclosures, and letting the market use that data to assess quality and future potential.


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