Source: Tiger Research
Compiled by: Plain Language Blockchain
Brief Overview (TL;DR)
Blockchain transparency enables the community to uncover misconduct and redistribute power, but it also brings new vulnerabilities. Today, transparency is both an asset and a liability for Web3 projects, creating pathways for strategic attacks and crowd-driven volatility.
While transparency amplifies systemic risks—including internal exposure and protocol exploitation—it would contradict the fundamental principles of open verification and decentralized trust in Web3 to abandon it.
The long-term success of Web3 will not be achieved through hiding activities, but by building robust systems that operate and thrive under continuous public scrutiny.
1. New risks of transparency: from monitoring to attacks
Blockchain transparency has become a core value of the Web3 industry. Unlike centralized databases where a single entity controls data access, blockchain operates on a transparent and immutable ledger that all participants can verify in real time. Transparency has now become a foundational element of Web3.
With this transparency, Web3 users can now monitor projects they care about in real time. They can track the wallet activities of founders, investors, and large holders, identifying suspicious token movements within minutes. In the Web2 environment, internal activities were often hidden behind private banking accounts, inaccessible to the public. In contrast, the radical transparency of Web3 immediately exposes all transactions. Compared to traditional finance, where such disclosures may take months, the real-time visibility of blockchain represents a transformative shift.
However, this shift introduces a structural paradox. Transparency was originally intended to enhance accountability and user oversight, but it is increasingly being weaponized to attack projects and large holders, even in the absence of evidence showing their behavior is unethical.
This report explores both the positive and negative effects of blockchain transparency and raises a critical question: Should Web3 pursue absolute transparency at all costs?
2. The double-edged effect of transparency
2.1 Positive effects: Exposing internal behaviors and restoring market fairness
Source: Tiger Research
In 2024 and 2025, a series of internal monitoring actions revealed that team wallets, influencers, and early supporters in some projects seemingly participated in token sales. These internal activities were immediately exposed through blockchain transparency, triggering a strong backlash from the community.
For example, Bubblemaps flagged suspicious concentration phenomena of the $HAWK token. Source: Bubblemaps
For the HAWK Memecoin, it was discovered that over 96% of the token supply was concentrated in the project's team and its affiliates. Following this revelation, the market reacted violently: the token's market cap plummeted from a peak of $500 million to below $60 million, triggering regulatory scrutiny and undermining its credibility.
Blockchain transparency enables the community to act as real-time enforcers. Whether led by influencers or anonymous founders, project teams often face manipulation accusations if they fail to engage transparently, even if their actions are technically compliant with legal requirements.
Although transaction data is publicly visible to all participants, interpreting its significance remains a complex task. Accurately understanding the intent and context behind each transaction requires expertise, making it difficult for the average user to fully interpret the information. However, as on-chain analysis tools advance, this gap is gradually closing. Users are increasingly able to extract actionable insights from complex transaction flows and apply them to their decision-making processes.
2.2 Negative effects: Transparency backfires on the platform itself
Today, advanced on-chain analysis tools allow participants easier access to and interpretation of blockchain data. However, this increased visibility also brings new risks. As on-chain monitoring capabilities expand, transparency itself may be weaponized. Projects with weak governance structures or highly concentrated token distributions face higher risks of manipulation and coordinated exploitation.
The frantic squeeze resulted in losses for Hyperliquidity Providers (HLP). Source: Lookonchain
On March 26, 2025, Hyperliquid faced a new type of protocol-level risk, which was facilitated by the transparency it advocated. According to Arkham's analysis, the events unfolded as follows:
Attackers analyzed Hyperliquid's publicly available liquidation thresholds and HLP treasury size to calculate precise liquidation points.
Using three wallets, attackers opened a $4.1 million short position and two long positions ($2.15 million and $1.9 million), artificially inflating the price of JELLY.
As the price of JELLY rose, the first short position was liquidated, transmitting losses to the HLP treasury.
External traders joined long positions due to rumors of an OKX listing and expected short squeezes, exacerbating price volatility.
Hyperliquid sought to mitigate systemic risks by forcibly delisting JELLY and closing all open positions at $0.0095.
The architecture of Hyperliquid openly displays treasury exposures, margin levels, liquidation thresholds, and open positions, inadvertently enabling attackers to exert precise pressure. In this case, transparency not only failed to prevent manipulation but also facilitated real-time coordinated financial attacks.
Hyperliquid's official statement regarding the manual delisting of JELLY. Source: @HyperliquidX
Ironically, the transparency touted by Hyperliquid led to financial losses and raised broader concerns about its governance and resilience. To prevent further systemic damage, the team was ultimately forced to delist JELLY—an essential action that contradicted the principles of decentralization.
Other projects may face similar risks. Even with a well-designed technology, transparent protocols remain vulnerable to unexpected attacks. Without accompanying defensive mechanisms and a clear response framework, transparency, while intended to build credibility, may become a source of systemic instability. In this case, transparency is not just an advantage but also a strategic vulnerability.
2.3 Neutral effect: Transparency becomes a collective strategy tool
The outcomes of transparency cannot be simply categorized as positive or negative. In some cases, transparency, as a tool, blurs the line between promoting market integrity and achieving individual self-interest.
The public call to hunt down Hyperliquid's large holders garnered high-profile attention. Source: @Cbb0fe
This emerging trend is clearly reflected in Hyperliquid, where some investors began targeting large traders based solely on visible positions. A notable case involved a trader named CBB, who publicly called for coordinated liquidation of a large holder, claiming to have mobilized eight-figure funds. Importantly, the targeted trader had not violated any protocols or engaged in misconduct; the sheer scale of their position made them an inevitable target.
Moreover, this behavior reflects a psychological pattern in Web3 akin to a modern iteration of 'David vs. Goliath'. In traditional narratives, David is portrayed as the righteous underdog, while Goliath, despite being a powerful soldier in the same arena, is seen as the adversary due to his strength. Similarly, in the Web3 environment, large holders often become symbolic targets, regardless of their intentions or actions. Visibility amplifies perception, and perception rather than fact increasingly shapes collective behavior.
Innocent investors may suffer reputational damage or financial losses simply due to visibility. The fear of being publicly targeted may deter large-scale capital from entering the ecosystem, ultimately limiting growth opportunities for new projects. At the same time, organized crowd behavior may consolidate power within influential groups, ironically creating new forms of centralization within systems originally designed to be decentralized.
3. New Reality: Should projects be more transparent?
Transparency in Web3 is a double-edged sword. On the positive side, it empowers the community to expose internal misconduct and redistribute market power through collective action. On the negative side, it exposes projects to unexpected attacks, including strategic market manipulation. While transparency aims to build trust, it can also become a catalyst for systemic instability.
Despite these risks, abandoning transparency is neither feasible nor desirable for most Web3 projects. Transparency is at the core of the Web3 spirit: it enables open verification, reduces information asymmetry, and shifts trust from centralized intermediaries to decentralized systems. Without transparency, the core principles that distinguish Web3 from traditional finance and technology structures will be eroded.
Instead of abandoning transparency, projects must develop strategies to coexist with it. This includes embedding resilience in protocol design, establishing clear crisis management frameworks, and actively managing perceptions and communications with the community.
For example, some projects are establishing DAO-based emergency procedures to ensure interventions are managed by a transparent and community-approved framework. Other projects regularly conduct bug bounty programs to identify weaknesses before they are exploited.
Transparency in Web3 cannot be reduced; it is a structural inevitability. Projects must recognize that transparency will continue to amplify both opportunities and risks. Successful projects are not those that hide better but those that build systems robust enough to withstand scrutiny.
