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What FIT21 Means for the Future of Decentralization
On May 22, 2024, the U.S. House of Representatives passed the Financial Innovation and Technology for the 21st Century Act (FIT21), a new bipartisan framework for the digital asset ecosystem. This act establishes federal requirements for digital asset markets and clarifies what constitutes ‘decentralization’ in blockchain technology.
The Five-Prong Decentralization Test
FIT21 introduces a 'five-prong decentralization test' to determine if a blockchain can be considered decentralized. Here’s what the test entails:
1. No Bosses: Over the past year, no single person or group should control the blockchain or its governance. The blockchain must be permissionless, allowing anyone to use, earn, or transfer digital tokens, create apps, participate in governance, and operate nodes or servers without restrictions.
2. No Big Owners: No individual or group should own or control more than 20% of tokens or governance votes in the past year.
3. No Major Changes Without Users' Agreement: In the past three months, the blockchain's code must have remained stable unless changes were made for bug fixes, security improvements, regular maintenance, or community-approved updates.
4. No Investment Pitch: Tokens must not have been promoted to the public as a profit-earning opportunity in the past three months. This includes avoiding promotions paid to influencers.
5. Tokens Created Fairly: Over the past year, all new tokens must be created by users through smart contracts, not artificially minted by the issuer.
FIT21's comprehensive approach to defining decentralization ensures that blockchains maintain integrity and openness. The act promotes a genuinely decentralised ecosystem by preventing single entities from exerting undue influence. This fosters innovation, inclusivity, and trust among users, aligning with the core principles envisioned by blockchain pioneers like Satoshi Nakamoto.
The 5 principles described above are the basic principles that always considers in its work. It is gratifying that the Blockchain Foundation and support the law. FIT 21 contains basic definitions that will be considered the beginning of regulations related to crypto assets.
The Five-Prong Decentralization Test
FIT21 introduces a 'five-prong decentralization test' to determine if a blockchain can be considered decentralized. Here’s what the test entails:
1. No Bosses: Over the past year, no single person or group should control the blockchain or its governance. The blockchain must be permissionless, allowing anyone to use, earn, or transfer digital tokens, create apps, participate in governance, and operate nodes or servers without restrictions.
2. No Big Owners: No individual or group should own or control more than 20% of tokens or governance votes in the past year.
3. No Major Changes Without Users' Agreement: In the past three months, the blockchain's code must have remained stable unless changes were made for bug fixes, security improvements, regular maintenance, or community-approved updates.
4. No Investment Pitch: Tokens must not have been promoted to the public as a profit-earning opportunity in the past three months. This includes avoiding promotions paid to influencers.
5. Tokens Created Fairly: Over the past year, all new tokens must be created by users through smart contracts, not artificially minted by the issuer.
FIT21's comprehensive approach to defining decentralization ensures that blockchains maintain integrity and openness. The act promotes a genuinely decentralised ecosystem by preventing single entities from exerting undue influence. This fosters innovation, inclusivity, and trust among users, aligning with the core principles envisioned by blockchain pioneers like Satoshi Nakamoto.
The 5 principles described above are the basic principles that always considers in its work. It is gratifying that the Blockchain Foundation and support the law. FIT 21 contains basic definitions that will be considered the beginning of regulations related to crypto assets.
Disclaimer: Includes thrid-party opinions. No financial advice. May include sponsored content. See T&Cs.
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