So, if the coding is accessible to everyone, the project can be considered more decentralized than if it’s closed to the public. This also raises further questions — does the coding even exist on an open source platform such as GitHub? And if so, who controls the access?

3. Do mining/staking pools exist? How much validating influence do they have on the network?

This check is to determine the concentration of validating power on the network. Ideally, the validating/mining/staking power should be evenly distributed, both in terms of geographic location and the power of validating pools.

With Bitcoin, currently it seems that four mining pools control over 50% of the mining power. Only recently this has changed from three pools, so there is a slight improvement in terms of distribution. Nevertheless, the centralization of Bitcoin’s hashing power in China remains a distinct concern, especially given that Bitmain affiliates have frequently exceeded 50% control over the last few months.

NEO, meanwhile, owns all of the validating nodes that run its network, meaning that its centralization issues are arguably even more acute. Although it promises to move towards a more decentralized architecture when it releases the full protocol, it’s worth acknowledging that its current arrangement is far from ideal.

4. Are validators incentivized to secure the network?

Validators are rewarded for their work of ensuring consensus and securing the network. But if they are not being compensated for this work, why would they be incentivized to continue working? As such, this would strongly imply that a protocol is exhibiting centralization in consensus.

With Bitcoin, for example, miners run code in order to validate transactions and secure the network. They are incentivized to continue mining by having the chance of earning block rewards, as well as earning transaction fees.

Ripple, however, employs its own consensus mechanism (RCPA). And given that the coins on the Ripple network are already ‘pre-mined,’ validators running nodes are not rewarded for providing their services. As such, the Ripple team is essentially controlling the consensus of its protocol, which again indicates a high degree of centralization.

5. How does the governance structure work?

The decision-making process on the network should, ideally, also be as decentralized as possible. If one person, or one entity, is responsible for changes and/or updates to the software, it suggests power is centralized.

A recent paper from University College London, “Egalitarian Society or Benevolent Dictatorship: The State of Cryptocurrency Governance,” looked at how many developers are contributing to, and commenting on, the Bitcoin and Ethereum codebases. They found that “Ethereum appears more centralized than Bitcoin in terms of improvement proposals, but is more decentralized in terms of the discussion around its codebase, according to our metrics.”

This issue is particularly important when investing in ICOs, whereby new projects may make a number of governance claims that may lead one to expect certain features directly coded into tokens or other smart contracts. In reality, however, many ICOs have failed to do so, with issuers retaining more control than was promised.

Indeed, a new report from University of Pennsylvania on ICOs concluded the following: “Surprisingly, in a community known for espousing a technolibertarian belief in the power of ‘trustless trust’ built with carefully designed code, a significant fraction of issuers retained centralized control through previously undisclosed code permitting modification of the entities’ governing structures.”