EMURGO, as the official and commercial venture arm of Cardano — the first third generation blockchain to evolve out of a research-driven approach — manages the Yoroi repositories, the private Seiza blockchain explorer repository, the Cardano Reddit sub, and a number of educational, marketing, and outreach efforts; part of our job is to give readers informative insight into the Cardano project.
To say that information asymmetry is extreme in the traditional equity, OTC, and commodity markets is quite an understatement; it is nearly absolute. Large institutions have billions of dollars, teams of genius quants, access to dark pools, machine learning algorithms that can analyze retail order flow (pioneered by Bernie Madoff), and decisions in-between decisions, as well as high frequency trading systems with near perfect track records. Criminal behavior has become institutionally normalized across a variety of gradients, and in many contexts, in the traditional world of finance.
Information asymmetry exists in the cryptocurrency space as well and the opportunity for collusion is ripe; however, calls for regulation should be met with a skeptical, yet balanced, eye — primarily with the OTC market in mind, as a general historical reference gauge, as it represents a space where rampant corruption has been allowed to exist for a very long time under the auspices of the SEC. While transparency is an issue that merits its own lengthy article, it will suffice to say here that many crypto projects have raised funds with no working products and many founders, and developers, have abandoned projects prematurely. So speculators, and investors, need to do significant due diligence.
As the space matures, a number of tools, products, and services have arisen to help investors identify worthy projects. Luckily, the open source push that started in the late 1990’s allows users to have a greater level of transparency in terms of understanding product development. However, before we look at GitHub specifically, let’s take a brief cursory examination of the broader context of noteworthy tools that attempt to satisfy the due diligence needs of users.
For example the Network Value to Transactions (NVT) ratio, popularized by Coinmetrics, “measures the dollar value of cryptoasset transaction activity relative to network value. This is a simple way to compare how the market prices one unit of on-chain transactions across different networks.” In other words, the NVT ratio is essentially calculated from the daily market cap divided by the 28 day moving average of on-chain transaction volume in USD; exchange volume is not present in the formula. New indicators need to be understood carefully, as Dmitry Kalichkin says in this interesting article, which explains that the NVT would benefit more from using a 90 day moving average instead of a 28 day moving average.
However, the problem with this metric is that it fails to capture large OTC, and dark pool, volume from trades that happen off-chain. In short, investors need to have a clear understanding of the evaluative tools they use to measure the significance of projects.