DeFi governance tokens offer a decentralized decision-making process. Their success depends on how well the community participates and whether their proposals are effectively executed on-chain.
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Projects can use eligibility criteria like wallet age, user activity, or staking to ensure only engaged participants benefit. Anti-Sybil measures like identity verification and Proof of Humanity also help prevent abuse.
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To assess decentralization, examine the project’s governance model—how are decisions made, and who has the power? Ideally, the decision-making process should involve the community through a decentralized voting system, where token holders can propose and vote on important changes. Also, review the project’s network structure—does it rely on a small group of validators or miners, or is power distributed across many participants? A truly decentralized project will have a distributed infrastructure, limited control by a single entity, and transparent mechanisms for decision-making. Over-centralization can be a red flag, as it may compromise security and trust in the project.
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