Transparency in the Digital Economy
How Covalent is Making a Difference
Transparency can be an ambiguous term when it comes to economics. Broadly, it refers to the extent to which data is available for participants in the market to make informed decisions. Markets and institutions are seen as transparent when agents publicize information regarding their financial position, practices, and the overall state of affairs. The basis for economic transparency is that it favours growth by reducing corruption and information asymmetry, which are economically inefficient.
Traditionally, institutions such as central banks, the World Economic Forum (WEF), the Organisation for Economic Co-operation and Development (OECD) and others, support transparency by publishing reports and other informative material. This enables businesses and consumers to make informed decisions about their investments and activities by evaluating things like risk and opportunity cost.
In recent decades, technology has been branded as a solution to various information problems, due to its ability to store and provide data that is easily accessible. However, technological solutions still require compliance and maintenance, which can be especially challenging given the rate of digital transformation. This is exemplified in the digital economy, where cryptocurrency and other blockchain-based assets undergo volatile changes on a day-to-day basis, and the financial industry tries to keep up.
So what is the state of transparency in the digital economy? This question is hard to answer because the variables are hard to define and quantify. We know that institutions take time to develop, but we also know that we are seeing technology advance at an unprecedented rate. The digital economy is also foundationally different than other markets due to the “irrationality” of its consumers. People aren’t investing purely based on yield rates, but rather on meme popularity and other social influences.
The enigmatic nature of cryptocurrency, blockchain, and the Defi movement, makes it hard for participants to make informed decisions in this marketplace. Perhaps the reliance on social media can be explained by the lack of transparency when it comes to blockchain, crypto, and token data.
This is where Covalent comes in. Covalent’s mission is to “provide transparency and visibility to assets across all blockchain networks” — CovalentHQ. With over 25 billion transactions indexed, Covalent is the leading provider of blockchain data in the digital economy. This data is provided in the form of the Covalent API. Using Covalent, anybody can make an account and obtain a free API key, which will allow them to decode event logs, retrieve token holders from smart contracts, get current and historical token values, and much more. Covalent users can pull data to make better-informed investment decisions in the DeFi realm. Additionally, developers can build dApps on Covalent, which promotes the growth of the decentralized ecosystem.
What are the implications of this? Blockchain data has always technically been available, however, until recently it has been costly and difficult to access. Barriers to access, whatever they may be, work against transparency. Covalent APIs and no-code capabilities make blockchain data analytics possible for those who previously didn't have the resources. With accessible blockchain data, people can find information that helps them make decisions on more than just hype.
The functionality of Covalent’s unified API supports a variety of use-cases but its value extends beyond the data. By contributing to provide transparency, Covalent is part of the movement to demystify and destigmatize the digital marketplace.
Ultimately, the world is digitizing in a way that is still hard to predict and understand. What we know is that many of our current institutions are unable to keep up with technological advancement, which is causing new institutions to form. With the market for digital assets is rapidly expanding, there is a massive opportunity for people to take part in a more decentralized financial system. However, there is still an abundance of misinformation surrounding the DeFi community, which can insight fear and uncertainty into those considering investment.
Covalent equips participants in the digital economy with informational tools, in order to ensure that these markets stay transparent and accessible. This not only provides value to consumers in the digital realm but also businesses. If we recall the economic principles laid out above, information asymmetry creates inefficiencies that can inhibit growth. With all eyes on blockchain crypto, and everything DeFi, transparency is a critical factor in the liftoff of these markets, and Covalent is standing at the helm. One Unified API. One Billion Possibilities.
To learn more, head to the Covalent Website, get involved with our events, or take a look at the Alchemist Ambassador Program!!!
