a16z: Deciphering the key elements of the decentralization of the Web3 protocol

Decentralization is key to realizing the potential of Web3 and addressing regulatory uncertainty. However, achieving decentralization is not an easy task.

原文标题：《Factors of decentralization of web3 protocols: Tools for planning greater decentralization》

Written by: Miles Jennings, StephenWink, Adam Zuckerman

** Compilation: Sissi**

Decentralization is a key innovation brought about by blockchain technology and one of the most important features of the web3 protocol. Therefore, for a more accurate assessment and comparison of the degree of decentralization of various web3 protocols, it is imperative that web3 participants, policy makers, and regulators work together to form a more unified and nuanced understanding of decentralization. Doing so will not only better adapt **web3's regulation and policy to the nature of decentralization, understand and consider how decentralization can reduce risks, but also ultimately motivate web3 builders to pursue decentralization in order to maximize web3 Committed public interest. **

To this end, we define three types of decentralization and propose relevant elements for each type, applicable to tokenized blockchain protocols (such as Bitcoin, Ethereum, Polygon, Solana, Optimism, Arbitrum, layer1 and layer2 blockchains such as zksync) and tokenized smart contract protocols deployed on blockchains (such as Uniswap, Aave, Compound, Curve, etc.). We also provide two tables, one for a tokenized blockchain protocol (Figure 1) and another for a tokenized smart contract protocol (Figure 2), that will help enumerate the constituents of a decentralized section to provide more specific and standardized definitions.

For a decentralized analysis of a blockchain protocol or smart contract protocol, the full range of circumstances related to that protocol must be considered. The elements we present here are intended to set an orientation for this analysis.

figure 1

figure 2

Why is decentralization needed?

Web3 ushers in a new era of the Internet - the era of "read, write, own". The technologies underpinning web3 enable "trustless computing," eliminating the need to rely on centralized entities to browse the Internet and databases. This has allowed us to independently develop more complex and advanced protocols that provide the functionality of the modern Internet while being truly owned by users. **For example, a decentralized social media protocol can support the construction of multiple applications, and through token ownership, ownership and control of the protocol can be distributed to a large number of developers and users.

Decentralization is a key feature of the web3 protocol that drives this paradigm shift. Decentralization will absolutely drive the creation of a democratized Internet and enable three important changes: promote competition, protect freedom, and reward stakeholders. **

First, decentralization makes web3 systems reliably neutral(1) (they cannot discriminate against any individual stakeholder or stakeholder group), which is critical to incentivize developers to build applications in the ecosystem . At the same time, they are also composable (2) (like Lego bricks, software components can be mixed and matched). Therefore, web3 systems are more like public infrastructure, than proprietary technology platforms. Unlike the closed software of web2, the web3 protocol provides a distributed Internet infrastructure on which anyone can build and create Internet businesses. Importantly, in web3 this can be done without requiring permission from the original protocol deployer or using a centralized control interface. For example, Twitter can be contrasted with a web3 protocol that provides the underlying data architecture of social media controlled by the public through token ownership. In such a system, anyone can build their own client or application on top of the protocol and gain access to their network of users.

This concept is relatively abstract. Consider the schematic diagram of the web3 ecosystem (Figure 3), which includes a decentralized blockchain, a decentralized smart contract protocol managed by the token holder DAO, and several Entities form proprietary clients operating as independent businesses. Every blockchain and smart contract protocol acts as a decentralized internet infrastructure on which businesses can build, compete and innovate.

image 3

Secondly, decentralization requires a broad distribution of control and participation in web 3 protocols, ensuring that the development and use of the network reflects the views of various stakeholders, not just creating these protocols company of. With properly structured protocols that promote decentralization, the concentration of power in the hands of one or a few companies can be limited. Decentralization should therefore limit the control that businesses or individuals have over thresholds and ensure that any changes to the protocol are consistent with the broad ecosystem of users who hold tokens and ultimately govern the network.

Third, decentralization allows for the design of systems that are more stakeholder-capitalist - systems designed to serve the interests of all participants more equitably, rather than serving only a specific subset of people. Token-incentivized stakeholder capitalism distributes ownership and control among a wider range of stakeholders, rather than placing equity holders above all other stakeholders, including customers and employees. As a result, the **web3 protocol and network becomes a diverse design space that more equitably serves the interests of all stakeholders. Such a decentralized protocol provides a more stable internet infrastructure on which a wider range of stakeholders can confidently build upon. **

Decentralized type

We can look at decentralization from three different but interrelated perspectives: technical, economic, and legal. All three angles are important, but often there are competing interests and thus present complex design challenges in maximizing overall decentralization and utility.

Technical Decentralization (T)

**Technical decentralization mainly involves the security and structural mechanisms of the web3 system. **Programmable blockchains and autonomous smart contract protocols can support technology decentralization by providing an autonomous, permissionless, trustless and verifiable ecosystem to enable the transfer of value. Products and services can be deployed and run without relying on trusted, centralized intermediaries, opening up vast possibilities.

Technical decentralization is an extremely challenging problem for blockchain protocols, requiring a balance between multiple competing forces. But for smart contract protocols, this type of decentralization can be achieved relatively quickly and easily by making smart contracts immutable (i.e., no one can control and upgrade them). For more examples, see here and here. (3) (4)‍

Economic Decentralization (E)

Blockchain and smart contract protocols, with their own native tokens, unlock the potential for these open source and decentralized systems to have their own decentralized economies (i.e. autonomous free market economies), enabling more people to participate and benefit from these Benefit from a decentralized ecosystem.

Through careful design decisions, builders of web3 systems can facilitate the formation of a decentralized economy, exchanging and accumulating value (including information value, economic value, voting rights, etc.) from various sources. If constructed correctly, decentralized ecosystems can use tokens to incentivize participants to contribute value to the ecosystem and distribute value more fairly to the system's stakeholders based on their contributions. For this to happen, web3 systems need to give power, control, and ownership to system stakeholders (via airdrops, token distribution, decentralized governance, etc.). Therefore, the value of the entire ecosystem will be attributed to a wider range of participants, rather than being concentrated in the hands of a central entity and its shareholders. **

Continuous incentive balance among stakeholders (developers, contributors and consumers) can drive more value contribution to the whole system, benefiting all. In other words, it’s all the benefits of **modern network effects(5) without the drawbacks of centralized control and closed economies. **

Legal Decentralization (L)

**Legal decentralization depends on whether the decentralization of a system removes the risks that a particular regulation is intended to address. **

For example, technically decentralized blockchain and smart contract protocols can eliminate the risks associated with trusted intermediaries. Thus, the technical decentralization of such systems also means that they are legally decentralized when it comes to regulations against trusted intermediaries.

Other risks can also be removed for technical and economic decentralization, including those associated with the web3 system's token and its underlying value. This decentralization would eliminate the need to apply U.S. securities laws to token transactions, which could severely limit the widespread distribution of tokens.

Following the SEC's guidance, we can define legal decentralization as the degree to which a web3 system eliminates the potential risk of important information asymmetries and does not rely on the significant management work of others to drive the success or failure of that enterprise. Once this threshold is reached, the system may be deemed “sufficiently decentralized” such that U.S. securities laws do not need to be applied to the system’s tokens. As a matter of threshold, this requires that a particular token does not confer upon the holder any contractual rights to the ongoing efforts, assets, revenue, or resources of the issuer or its affiliates.

Decentralization elements

**In a web3 system using native tokens, three types of decentralization, technical, economic, and legal, must be fully considered. These types interact with each other, and changing one may affect the other two. **As an example, a decentralized economy can drive the system toward legal decentralization by prioritizing decentralized ownership of stakeholders, accumulation of value from decentralized sources, and distribution of value to decentralized standardized stakeholders. All of these factors reduce the risk of information asymmetry and reduce reliance on individual management efforts.

Conversely, if the digital asset value of a web3 system depends on the continuous management efforts of the original development team, then the system's decentralization at three levels: technical, economic, and legal may be threatened. For example, the departure of a management team could put significant downward pressure on the price of a digital asset, making the system more vulnerable to a 51%(6) attack.

Given this interplay, we break down decentralization into a number of factors that can affect it. Figures 1 and 2 above provide a comprehensive list of the most important elements of a tokenized consensus blockchain protocol and a tokenized smart contract protocol, respectively. These elements are broken down by type (technical, economic, and legal) and category (computation, development, governance, value accumulation, and usage and accessibility).

Decentralization is an evaluation process, not based on absolute criteria, but on a range of circumstances including the full extent of any web3 system. The relative importance of the factors will vary depending on the purpose of the web3 system and the evaluator. Additionally, the trade-offs between different types of decentralization may vary by project and person.

The two matrices, Figures 1 and 2 above, should be useful tools to provide a more concrete and standardized definition of decentralization. Hopefully this will enable web3 players to contribute to building more decentralized projects, while enabling policymakers and regulators to design regulatory frameworks that recognize the power of decentralization to reduce and eliminate risks.

Original reference link: ‍‍‍‍

1/

2/

3/

4/

5/

6/‍‍‍