There is a famous quote by Peter Drucker that says, “If you can’t measure it, you can’t manage it”. This is one of the most frequently cited quotes as Drucker was called the father of management. While the quote is fictitious, nevertheless it made its place in the pagoda of mostly all business books because it showcases the critical aspect of reliable metrics in having sound business decisions. In the digital currency space, there is one thing that is still missing and that is the track of the official decentralized daily reference rate.
An official daily reference exchange rate is important in enabling the accountant to allocate a particular value for exchange among two or more currencies on any specific day even though there have been fluctuations of those currencies beyond that specified time. The decentralized daily reference rate is a shared benchmark for all the entities, auditors, investors, and regulators.
It is never by chance that even after 10 years of the first Bitcoin mining we still do not have any metric in the crypto ecosystem. In the fiat economy, the central banks are responsible for setting a reference exchange rate that is based on the concentration procedure on a regular daily basis. But cryptocurrency does not follow the rules and notions of any fiat economy or its central banks. They reject the concept of centralized transactions as they are decentralized organizations.
Now you may wonder that any decentralized organization does not require a decentralized daily reference rate. That could have been the case a few years back, but now it is not the same. The crypto market is expanding at a huge rate. According to studies, this market has reached over 100 million digital currency owners all over the world which is approximately the size of Egypt’s population.
It was known that the current crypto rally will hike up the interest in crypto assets, specifically with equally predictable hype. But it is also known that when we wave the “blockchain tourism” the crypto industry gets wider. But this time a different behavior was seen from the players in the market compared to the previous crypto frenzy of 2017. This time, more and, more big investors are investing in crypto thus making this market more big, complex, and of course more mature.
Decentralized Daily Reference Exchange Rate
The concept of crypto “wild west” is over. This implies that the value of the asset can no longer be increased for interpretation. There is a need for an official reference rate and without that, it will be impossible for accountants to hold the value of each crypto in the balance sheets. This leaves the room for fraud and also slows down the process of crypto being recognized in the mainstream financial market. According to PWC’s (PricewaterhouseCoopers) Global Blockchain Survey of 2018, the audit and compliance concerns were among the six most worrying concerns in the crypto world.
From the perspective of accounts, the current infrastructure is surely a nightmare. There are a handful of players who have gained the top positions as the cryptocurrency prices are decided by the authorities. There are no proper guidelines for the same.
The present census calls for a “hold” of crypto in your balance sheet as a barrier against inflation. But there has to be some way for the future where the motor industry starts to experiment with cryptocurrencies for their goods and services and signing contracts with crypto values. This is the future we should be working for and for that reason, there should be a decentralized daily reference rate.