“If you can’t measure it, you can’t control it” is perhaps the most quoted quote from Peter Drucker, also known as the father of management thinking. Although this quote is apocryphal, it has found its way into the body of business books by emphasizing the importance of reliable accounts for making informed business decisions. In the crypto space, we still miss one of the most important calculations: the official daily reference rate.

The reference rate is critical for accountants to be able to assign a specific exchange value between two or more currencies on any date, even though these currencies may have fluctuated over a period of time. The base rate is a general guide for companies, investors, auditors and regulators.

It is no coincidence that more than 10 years after the first Bitcoin (BTC) was mined, we still lack these important accounts in the ecosystem. In a monetary economy, central banks are responsible for setting the reference rate based on a normal daily negotiation procedure. But in cryptocurrencies we do not have the concept of a central bank – we flatly reject the concept of centralized money management. However, the result is a fragmented landscape of unofficial quotes with various exchanges and aggregators at different rates, which can lead to confusion and in some cases fraud.

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You may ask: Why is it important? Perhaps a decentralized economy does not need an official daily reference rate. This may have been true a few years ago, but not now. Cryptocurrency markets are growing relentlessly in terms of size, market capitalization, and distribution. Research shows that we have reached more than 100 million cryptocurrency holders worldwide, which is roughly the population of Egypt. Nearly 43 million active crypto merchants and up to 500,000 unique users send or receive cryptocurrencies daily.

We knew that the recent surge in cryptocurrencies would lead to a new wave of interest in crypto assets, especially with the equally predictable hype. But we also know that the industry is getting wider with every wave of blockchain tourism. This time around, the market and players behaved differently than they did during the previous crypto craze in 2017. More and more institutional investors are joining the market, making the market more sophisticated, complex and definitely more mature.

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Those of us who have spent a great deal of time in the crypto room also know that behind the ups and downs of the markets lies a legion of brilliant people creating amazing blockchain and cryptocurrency projects. At this point in the decentralized ecosystem, there are many companies operating in a wide range of disciplines in different jurisdictions. However, this means that you need to consider the cost of these transactions. You have to plan budgets, value assets, pay taxes, and handle multiple currencies – crypto and fiat currencies – at different times and even on different days of the week to take into account time zones.

decentralized exchange rate
The “Wild West” crypto has expired, which means that the values ​​of the assets can no longer be explained. We need an official reference rate, without which accountants will not be able to accurately assess the cryptocurrency held on balances. This leaves the door open to fraud and slows the progress of cryptocurrency as an important resource in the business books. Audit and compliance issues were among the six biggest obstacles to blockchain adoption, according to a global survey conducted by PricewaterhouseCoopers (PwC) in 2018.

The benchmark will benefit the major players in decentralized finance. For accountants, this will be a common standard method for valuing crypto assets, providing better protection against fraud. For investors, this will provide a true apple-to-apples comparison when looking at investment opportunities. This will give auditors a tool to independently verify that the company is properly valuing its assets and is not committing fraud.

From an accounting perspective, the current system is a nightmare. A handful of players served as authorities for this effort. There is no correct set of rules and details about the source of the information and at what time. This results in large price discrepancies between the various unofficial sources of exchange rates.

For those of us who are dedicated to creating decentralized accounting protocols, it is only natural to look for decentralized solutions. Now that Chainlink’s decentralized pricing channel is the de facto standard, it’s time to continue innovating and developing an official reference.

Source: CoinTelegraph