Gate.io مدونة What Is the Transparency of Cryptocurrency

What Is the Transparency of Cryptocurrency

20 February 17:09

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![](https://gimg2.gateimg.com/image/article/16768836371.18.jpeg)

## [TL; DR]
🔹 After the cryptocurrency exchange and token crash, the topic of cryptocurrency's lack of transparency triggered people's deep thinking and appeal again.

🔹 The transparency of cryptocurrency makes it impossible for traditional financial infrastructure to monitor how the stored value of cryptocurrency is used.

🔹 Transparency is essential in cryptocurrency transactions because it eliminates the space for suspicion or deception.

## Introduction
As more and more retail investors and institutions begin to be interested in emerging [digital asset investment](https://www.gate.io/blog_detail/1785/The-Digital-Asset-Market-has-Plunged.-What-is-the-Status-Quo-of-Cryptocurrency-Exchanges- "digital asset investment") methods in order to hedge against inflation and the current unstable economic situation, the market has seen cryptocurrency replace gold as a new potential investment. Combined with a variety of factors, cryptocurrency has become more and more popular.

However, the biggest advantage of cryptocurrency or, more accurately, blockchain technology is that it creates a completely transparent trading system, that is, it provides blockchain transparency. However, due to the [bankruptcy of the cryptocurrency exchange FTX](https://www.gate.io/blog_detail/1876/after-ftx-investors-are-choosing-an-exchange-with-a-long-track-record-of-best-practices-in-liquidity-and-risk-management "bankruptcy of the cryptocurrency exchange FTX") in 2022 and a series of crypto crashes, the industry has called for improving the transparency of the blockchain.

## What Is the Transparency of Cryptocurrency?
The transparency of cryptocurrency refers to the node network that records and shares the details of each transaction. It allows everyone to view the transaction history or ledger, thus providing users with completely transparent information.

Transparency is essential in cryptocurrency transactions because it eliminates the space for suspicion or deception. Different from the traditional financial operation mode, the nature of a [highly transparent system](https://www.gate.io/blog_detail/1434/Letter-from-the-CEO---Transparency-in-the-age-of-Blockchain "highly transparent system") means that every transaction will be immediately verified and authorized by each network member. Therefore, it can better change the operation mode of enterprises or institutions and improve the security and visibility of cryptocurrency transactions. This is why the current traditional financial infrastructure cannot monitor how the stored value of cryptocurrency is used.

![](https://gimg2.gateimg.com/image/article/16768838209451676883757_.pic_hd.jpg)
Source: techug.com

## Transparency Is a Major Principle of Blockchain Technology
The term blockchain is usually used interchangeably with DLT or "[distributed ledger technology](https://www.gate.io/blog_detail/1334/Fed-Survey-says-over-56--of-bank-officials-consider-distributed-ledger-technology---crypto--not-a-priority "distributed ledger technology")", which is the underlying system that makes blockchain possible. Transparency is the underlying logic and one of the biggest features of blockchain technology. All nodes (as participants) can access the shared history of transactions or accounts in the blockchain.

The transparency of blockchain technology is conducive to daily life in many aspects. Its scope of application is not limited to finance or remittance transfer, but also includes file storage, property ownership, asset transactions, and even the verification of the manufacturing process of drugs, as well as rarely known birth certificates and medical records. The possibility of its use is actually limited to the scope of human intelligence. No one can change the data unless the participants reach an agreement.

The advantages of blockchain and transparency technology are the key to the rapid growth of cryptocurrency, and also the driving force for its future development. Improve efficiency through transparent records from a single source, improve data integrity, enhance customer experience through faster processing, help reduce losses, and provide the possibility of higher capital availability and lower operating costs.

## How Do Blockchain Technologies Ensure Transparency
However, after more than one thunderous event about cryptocurrency exchanges and tokens broke out in 2022, the topic of cryptocurrency's lack of transparency triggered people's deep thinking and appeal again. How to ensure the transparency of blockchain technology is mainly through the following points.

### Full Traceability
Transparency, one of the best features of blockchain, also means that it is fully traceable and easier to maintain. The method is a decentralized database and records the input and output of each transaction on the chain so that changes in the number of assets and transaction activities can be easily tracked.

### Fully Auditable and Accurate Transaction Book
The feature means that all transactions on the website cannot be deleted, which means that no one can attempt to manipulate, modify or delete any data stored after network verification. If someone tries to change a transaction on the network, all other blocks in the system must be changed.

Blockchain transparency also makes it impossible to manipulate transactions. Although cryptocurrency crashes have occurred, their illegal transaction information can be found on the chain.

### Highest Security and Guarantee
The most advanced data security is another remarkable feature of blockchain technology that enjoys a global reputation. Blockchain uses extremely secure blocks to protect data. Each block copy is stored in chronological order and linked to documents of all previous blocks.

Although all transactions can be tracked, stored, and viewed on the network, the information provided by the blockchain is anonymous, and its security is one of the main reasons why it is so popular.

### Decentralized Network
Blockchain technology is relatively new and unregulated because it is a decentralized peer-to-peer network creation, which means that no individual or group can affect or manipulate the network in any way. Ordinary users or "miners" from all over the world are responsible for verifying every transaction.

There is no central institution or server, so blockchain technology is relatively more secure than other storage options.

![](https://gimg2.gateimg.com/image/article/16768839129461676883777_.pic.jpg)
Source: transitnet.io

## How Cryptocurrency Companies Provide Proof of Reserves
Although blockchain, the underlying technology of cryptocurrency, claims to be one of the most open and transparent technologies, its transactions are still concentrated in a centralized exchange and conducted in the form of an internal database. The trading system architecture is roughly similar to that of traditional financial securities trading. Therefore, it is more necessary for cryptocurrency companies to provide [Proof of Reserves](https://www.gate.io/blog_detail/1817/as-industry-calls-for-more-transparency-gate.io-highlights-its-3-year-proof-of-reserves-journey "Proof of Reserves") to ensure users of the security of their funds.

Proof of Reserves is a method to verify whether the platform has enough assets to ensure that its users can deposit and withdraw money. If users want to withdraw their assets, the platform should verify that they can withdraw them.

However, in the centralized trading platform, the assets of each user are recorded through the account book in the database. How to safely prove that the platform keeps the assets of all users intact is a problem for the platform to prove itself.

## Gate.io Cryptocurrency Exchange
As one of the oldest trading platforms with the longest history and the largest trading volume in the world, Gate.io has been operating steadily for nine years. Knowing the importance of blockchain asset security, Gate.io has always been the protector of user asset security.

In order for users to verify that 100% of their assets are indeed stored in Gate, Gate.io proposed the scheme of [using Merkle tree](https://www.gate.io/blog_detail/1795/What-is-a-Merkle-Tree- "using Merkle tree") + a third-party audit, and hired an independent virtual currency accounting audit company Armanino LLP, a well-known American audit company, to help with the audit.

Armanino LLP is a leading auditing company in the United States and a global leader in digital asset solutions. Gate.io, as the world's first trading platform that promises to provide 100% margin, has already started to work closely with Armanino LLP audit company in 2020 to provide Gate.io users with professional and reliable asset verification services in the form of open source, openness, transparency, blockchain signature and, Merkle tree.

For more details on reserves, please refer to:[What Is the Significance of Introducing Third-party Audits to the Exchange? Understand What Proof of Margin Is](https://www.gate.io/blog_detail/1731 "What Is the Significance of Introducing Third-party Audits to the Exchange? Understand What Proof of Margin Is")

## FAQs
### How Is Cryptocurrency Transparent?
Through the underlying technical logic of the blockchain, all transactions on the chain can be viewed anonymously and cannot be deleted or changed. The user's wallet address is transparent and the wallet owner is not transparent.

### Why Is Transparency Important in Cryptocurrencies?
It means that no one can attempt to manipulate, modify or delete any data stored after network authentication, which ensures the security of users' personal assets.

### Is a Cryptocurrency Transaction Transparent?
Cryptocurrency transactions are based on blockchain technology and also have transparency.

### What Does Transparency in Blockchain Mean?
It means that some transaction details on the chain can be viewed by everyone, including receipt, payment, and amount. However, due to privacy, the participant's personal information is anonymous.

### What Is the Principle Behind Cryptocurrency?
Cryptocurrency refers to digital currency that is based on cryptography principles, uses blockchain technology, and uses a distributed consensus mechanism to ensure decentralized emerging tokens. Compared with the banking and financial system relying on a centralized regulatory system, cryptocurrency can not rely on the benchmark currency and third-party intermediaries, but only determines the ownership of the currency through cryptography, and directly completes peer-to-peer transactions.

<div class="blog-details-info">
<div>Author:**Rena W.**, Gate.io Researcher
<div>Translator:Joy Z.
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.

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TL；DR

Introduction

What Is the Transparency of Cryptocurrency?

Transparency Is a Major Principle of Blockchain Technology

How Do Blockchain Technologies Ensure Transparency

How Cryptocurrency Companies Provide Proof of Reserves

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