Decentralization Evaluation Framework: A Comprehensive Guide to Critically Assessing Open Metaverse Projects
Unlock the potential of open metaverse projects with this comprehensive decentralization evaluation framework. Critically assess key project areas such as decentralization, vision, technical capabilities, tokenomics, and more to identify projects that align with the principles of openness and decentralization.
Not all metaverse projects are created equal. While a project does not require decentralization to be part of the metaverse, there are many potential benefits an open metaverse project can provide.
This article provides a framework for critically assessing metaverse projects and their level of decentralization, so we can make more informed decisions about what projects we align ourselves with and why. An opportunity currently exists to transform the way we integrate our physical lives into our digital ones for the better, and we don’t want to miss it.
Decentralized projects have the potential to revolutionize the way we interact in the digital ecosystem. Decentralized applications (dApps) and Decentralized Autonomous Organizations (DAOs) enabled by blockchain technology, allow for a more open and transparent system that can provide clear benefits over centralized projects.
For example, in a decentralized and open metaverse project:
- Users can connect to metaverse projects anonymously without submitting personal details.
- Users can transact peer-to-peer without needing to trust a central authority.
- Power can be distributed among users rather than concentrated in the hands of a few.
Further, decentralized projects can enable true ownership and control of digital assets, enable a more inclusive and diverse community while also increasing data security, privacy, and communication. This opens up greater potential for equitable and fair systems that allow for increased innovation and creativity.
Public blockchains introduce improved levels of decentralization due to their inherent qualities of permissionless access, trustless transactions, censorship resistance, and programmable value. These features increase security, allow peer-to-peer transactions without intermediaries, protect against censorship, and enable creative asset transactions through programmable smart contracts which are transparent and auditable.
These qualities form a backbone for global trust networks, enabling new ways of conducting business and organizations. Blockchain should therefore be considered critical for building metaverse projects if we want to see:
- Increased democracy and accountability: This is possible when individuals and communities can participate in decision-making, leading to a more democratic and transparent system.
- Improved resilience: Decentralized systems are less vulnerable to single point disruptions or failures. If a system is decentralized, it is more difficult for a single entity to shut it down, making them more resilient and adaptable.
- Enhanced innovation: Competition and innovation are encouraged in decentralized systems, allowing for greater experimentation and creativity.
- Reduced inequality: Decentralization can help distribute resources and opportunities more equitably, reducing concentration of wealth and power and leading to a more balanced society.
Supporting projects that are building on public blockchains and working towards decentralization and openness, even if they are not fully there yet, helps to promote these values and creates a stronger digital ecosystem. By evaluating a project's level of decentralization and supporting those that are working towards these goals, we can help to promote a more democratic, resilient, innovative and equitable metaverse.
If we fail to critically assess projects, blindly support those that claim to be decentralized but in fact are not, or if we fail to support the ones that are, we miss an incredible opportunity to restructure parts of our society that have led to increasing inequality and globally destructive outcomes.
The following framework provides a comprehensive approach for evaluating metaverse projects, covering key areas such as decentralization and openness, vision and goals, technical capabilities, community and governance, ecosystem, tokenomics, and security and compliance.
It's important to note that complete decentralization is a challenging goal to achieve. Many “decentralized” projects still rely on centralized servers and platforms. For example, over 60% of Ethereum nodes are running on Amazon Web Services (AWS), a centralized system. To put this into perspective, the most popular public blockchain for programmable smart contracts, which allows for greater decentralization, is currently almost 70% secured by nodes that run using centralized systems.
This strongly suggests that we still have a way to go before we can be confident that these systems are truly infrangible. However, there are solutions being built at a rapid pace and the more a project aligns with the principles of decentralization, the greater the potential benefits for its users and for the wider ecosystem.
There are a few projects that make full decentralization a number one priority. It is more likely that these projects fully understand the true value of greater decentralization and the potential for public goods; however, it does not automatically imply that if a project is not fully decentralized, it is not a “good” project or unworthy of support.
Some points in this framework are more critical than others, especially when a project is still in its early stages. This is because projects are often still waiting on fully decentralized technology stacks to mature. They may also require significant funding and time to build out the integrations necessary to be fully decentralized. I have also included some points not specifically relevant to decentralization; however, they can help determine the overall health of a project.
Ok, now that is out of the way, let's get started.
When evaluating the project's degree of decentralization and openness, it’s crucial to assess its use of blockchain technology and its adherence to open-source principles. Review the project developer documentation and whitepaper to evaluate the following:
- Is the project built on a public blockchain with a functional blockchain and transaction explorer? The lack of a public blockchain reduces the capacity to be a fully decentralized project. Open-source projects not built using blockchain can still be decentralized in many ways, but if the platform they are building on is centralized, there is still potential for a single point of failure.
- Does the project highlight decentralization as an essential aspect? If yes, but it's not built on blockchain, be cautious unless there's a clear plan for decentralization.
- Is the team's approach to decentralization well-articulated and transparent? Ensure the project's actions align with their claims of community involvement and decision-making. Lack of consultation can indicate centralization.
- Is the project's code open and accessible for an audit? An open and auditable code base enhances transparency and trust in a project, especially for a decentralized project. But it may not be a priority in the early stages. Evaluate if keeping the code closed aligns with the project's messaging.
- Is project/protocol data and APIs accessible to developers? Accessibility of project/protocol data and APIs for developers is crucial for fostering user-generated creativity and promoting network effects. Though it may not always be feasible in the early stages of development, having accessible data and APIs allows the project to contribute more to an open and interconnected metaverse.
Evaluate the project's overall vision and goals, including its proposed use cases and target audience, and how they align with the principles of decentralization and openness. Review the website and look for the project’s documentation or whitepaper.
- Is the information presented clearly and in an easy-to-understand manner? A difficult-to-understand whitepaper suggests poor communication of the vision and project. Whitepapers in new fields like blockchain may tackle complex concepts, but they should be clear and accessible, especially if aimed at retail users and monetization.
- What are the project's development roadmap and milestones? An overly ambitious project with unrealistic funding expectations and ideological thinking raises concerns. On the other hand, a roadmap that appears achievable with current resources and team size is a better sign.
- Is the information or roadmap up to date? A project's commitment to its roadmap can be evaluated by its adherence to it or changes made with transparency. For example, a sudden change in direction after raising funds without clear reasons or documentation may raise red flags. In contrast, transparent communication about necessary changes builds confidence.
- Has the project suspiciously arrived out of nowhere, trying to raise funds for something that has recently started trending? It is a warning sign if a newly launched website shows no development or team presence. Before supporting such a project, make sure to gather all necessary information. Watch out for early signs of price speculation, such as “Moon,” “rocket,” or “spaceship” language in community channels. If you experience FOMO, take a step back and avoid hasty decisions.
- Is the messaging consistent across all platforms and channels? Contradicting messaging can indicate a lack of credibility, causing red flags. Ensure the project aligns with its claimed values by thoroughly researching before making any decisions.
Review the team's documentation and personal profiles in their whitepaper, website, and LinkedIn.
- Can the team's experience be verified through GitHub commits or professional profiles like LinkedIn? Check for secondary verification to ensure their work history is accurate.
- Is the project partnered with reputable entities, and are these partnerships mentioned on the partner's website? Strong alliances with reputable projects may indicate that some due diligence has been completed, but exercising caution and verifying affiliations is essential.
- How much data is stored on-chain vs. off-chain on the project's infrastructure? Storing every bit of data on-chain is not always an option due to scalability issues. If a project claims to be built on a blockchain, it is essential to assess what is built on-chain. All smart contracts and token treasury addresses should be on-chain, publicly viewable, and auditable at a minimum.
- Is the in-house infrastructure of the project open source? The transparency of the off-chain components that interact with the blockchain is crucial to a project's level of decentralization. In addition, making the code open source allows the community to independently verify the security and functionality of these components, thereby increasing the overall trust in the project.
- Does the project have a scalability solution in case the project gains a large user base? Check if the project has a solution for potential scalability issues if it gains a large user base. Consider which elements need to be on-chain to ensure sufficient decentralization. Further, the team should have a plan to ensure that key elements remain on the blockchain while accommodating growth.
- Can the team realistically achieve the project goals outlined in their roadmap? First, assessing if the project's roadmap is realistic and if the team has the technical capability and experience to execute their plans is vital. It is also essential to check if the team has a solid track record of delivering on their commitments, as this can be a good indicator of their ability to execute the project as planned.
Review the project's website, social media channels, and community forums to understand the project's community engagement and decision-making process. Seek evidence of transparent and inclusive decision-making processes and the ability to adapt to the evolving needs of its community. This is especially relevant to DAOs.
- Does it use a governance model for community participation or treasury management? The governance model is how the community or contributors can influence the project's direction. It should be clear, automated, and based on code, not just used as a facade for centralized decision-making. A fair and effective governance model is essential for a truly decentralized project.
- Is there a strong and active community of contributors? A strong community of engaged, respectful contributors who focus on the project's fundamentals, values, and infrastructure instead of just the token value is a positive indicator of a healthy project.
- Is there a sense of clear direction and communication from leadership? It is vital for a project to have regular updates and clear communication with its community, even if direct discussion with leaders is not possible for established projects.
- Is there dissonance within the team or from within the community? It is critical to evaluate if there is conflict within the project team or community, as this may indicate poor communication and a lack of cooperation. This can arise when leaders do not effectively listen to or communicate with stakeholders. Identifying the source and extent of the disagreement is crucial, as some communities may have a few outspoken individuals who are never satisfied. At the same time, the overall sentiment may be positive.
- What type of governance model is used, and is there sufficient documentation to help users understand the process? Governance determines community or contributor influence in a project's direction. The lack of governance suggests a lack of decentralization. Different governance models exist, and full community participation may not be required for a project to be considered decentralized, depending on the organization's structure.
- Does the decision-making process align with the project's values and principles? The consensus mechanism determines how decisions are made. Different models can be appropriate for different outcomes. For example, key contributors may have more influence in the early stages. Still, if a project claims to be decentralized and a single person is calling the shots, it may not align with the values of decentralization.
Evaluate the project's partnerships and ecosystem, including its potential for interoperability and collaboration with other decentralized and open projects.
- Does the project value composability? Composability refers to combining and building upon dApps and smart contracts to create new, more complex applications without disrupting the underlying functionality. It enables the creation of complex systems from modular building blocks, allowing for more significant innovation and interoperability.
- Does the project have partnerships with other decentralized and reputable projects? Collaborations with well-known and trusted projects can indicate that the project is well-regarded and has support in the decentralized community.
- Is the project chain agnostic? Chain agnosticism refers to a project's ability to operate across different blockchain networks rather than being tied to just one specific network. This can increase the project's resilience, allowing it to take advantage of the strengths and resources of multiple networks rather than relying solely on one. However, developing numerous chains can be technically challenging, as each network uses different programming languages and tooling.
- Are there high barriers to entry for users to participate? First, check if a project has high barriers to participation, be it financial, technical, or otherwise. If a project has a high barrier to entry, its potential is substantially diminished.
- How does the project handle user-generated content creation and intellectual property? For example, centralized projects may own, sell, and distribute user data, while a decentralized project should not have these policies.
- Is there a process to protect creators' rights and ensure that content is properly licensed and attributed? Copyright protects creative works, giving creators exclusive rights to reproduce, distribute, display, perform, and alter them, including writing, art, computer code, software, etc. A decentralized project should have clear guidelines protecting creators' works. This does not contradict the values of decentralization, even if the works are licensed under a creative commons license.
Analyze the project's tokenomics, including its token distribution, governance, and economic incentives, and how they support the project. Review the project's contract addresses to look for any potential red flags, such as pre-mined tokens or a large percentage of tokens held by the development team.
- Does the project use its cryptocurrency for its ecosystem? Verify that if the project has its cryptocurrency, that makes sense for its ecosystem, and its access/utility aligns with the project's goals.
- What is the token distribution and allocation to the team? Look for a fair token distribution and allocation to the team, allowing for a decentralized ecosystem once most tokens are in circulation.
- Is there a vesting schedule and lock period for the team's token allocation? Check for a vesting schedule and lock period for the team's token allocation to ensure team incentives and to prevent the team from selling in a way that negatively impacts the project's long-term sustainability.
- Are staking contracts or treasury wallets secured by a multi-signature wallet? Ensure that multi-sig wallets secure staking contracts and treasury wallets for improved security.
- Are the tokenomics sustainable for their intended purpose? Evaluate if the tokenomics are sustainable for their intended purpose and if the token emission schedule aligns with the project's goals.
Evaluate the project's legal and compliance status, including its adherence to regulatory requirements and potential legal risks and how they align with the principles of decentralization and openness.
- What is the project's approach to security and privacy? Assess the project's stance on privacy and security. Does it prioritize protecting individuals' data and privacy over meeting legal minimum requirements, which may not always align with privacy rights?
- Have the smart contracts for the project been audited and results made public? Review if the project's smart contracts have undergone an audit by a reputable company and if the results were made public. An audit helps to identify any potential vulnerabilities in the code. Upgrades to the contract should also be audited.
- How did the project launch? The launch of a project can provide insight into its security and privacy. For example, suppose a project was launched as an initial exchange offering (IEO) on a reputable exchange. In that case, it is more likely that the project has undergone strong vetting by the exchange and has a higher level of security and privacy. However, IEOs are subject to regulatory requirements, and some projects may be stuck in a regulatory gray zone. Therefore, it is essential to research the project further and assess its potential risks vs. benefits.
- Is the team transparent with their Identities, with clear links to their past work history? Check if the team is transparent about their identities and has clear links to their past work history. A reputable and well-known team adds credibility to the project. An anonymous team may still have verifiable past development history. However, anonymous teams increase risk factors and require more due diligence.
- Does the project have future potential to influence the development of legal and regulatory frameworks for decentralized projects? Evaluate if the project has the potential to positively impact the development of legal and regulatory frameworks for decentralized projects. Projects aiming to help create legislation supporting decentralization can pave the way for the industry's future growth.
Decentralized metaverse projects can provide benefits such as improved security, resilience, privacy, innovation, and reduced inequality relative to their centralized counterparts. However, to ensure the values align with our own and that we can benefit from these projects, it's crucial to evaluate them using a framework that embodies the principles of openness, transparency, and community involvement.
By following the framework in this article, you can evaluate the level of decentralization of various projects in the metaverse. This can be a complex and time-consuming task; however, it is a worthy pursuit that will reward you with increased knowledge, confidence, and discernment to understand what makes decentralization so essential and how to identify projects that value it. It's important to note that evaluating a decentralized project is an ongoing process and will require regular monitoring and updates as a project and available technology evolves.
If you have any suggestions that should be included or want to chat about this article, join me in the Metaverse Outpost in the Flagship Discord channel. I will create a topic specifically for conversations related to this content. I look forward to meeting you there.
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