Clearly, a lot of thinking has gone into this already!
I’d like to bring an angle so it can serve as feedback and to advance this further.
Quantification works great in well-defined domains e.g. we know now how to compare DEXes. However, quantification often performs poorly in poorly defined domains, or it can even be counterproductive as it reduces success to an artificially narrow set of metrics.
For example, European VCs are significantly funded by the EU, but are subject to constraints that reduce their ability to produce valuable startups compared to USA VCs as Europeans need to fit everything into a formula, and said formula can’t account for the complexities on the ground startups face. Even USA VCs can often harm startups by forcing focus on certain metrics that look good short term but not necessarily lead to a sustainable business. Quantification is full of perils.
As the proposal says, the idea is to compare apples to apples. My concern is how to avoid under-funding all the other fruits that can’t as easily demonstrate value and yet are fundamental for a healthy, thriving ecosystem.
A few examples to look out for:
- supporting early stage vs more mature projects (early stage projects could have greater potential but will require more time to give ROE)
- supporting well identified use cases (e.g. NFT marketplace) vs innovation (the first offers no USP value to Arbitrum but offers fees short term, the later could provide differentiation and an advantage to Arbitrum).
- supporting financial applications vs culture building ones (ecosystems thrive on vibez and not just capital, hence why many people pick London and Paris instead of Dubai, as community flocks where there is a good atmosphere and not just where there is money).
- Antisocial vs pro-social projects (some projects succeed at the expense of the ecosystem, while others generate value more broadly).
The above are just a few examples, but the peril is that the metrics are unable to address the complexity of an ecosystem, and in overly simplifying it, end up harming it and driving funding away from that which is valuable but harder to measure. Usually when a metric has been defined, that which is not quantifiable is systematically ignored (unfortunate human bias).
Now, I do believe metrics have a place. It would be great to think through which categories they can apply well to (e.g. DeFi) and which not (culture, collab tech, etc). And then create purposely defined KPIs per category.
What do you think?
A step can be understanding the research that has already been produced over the last decades on ecosystem health, cities attractors, and more recently web3 communities (e.g. article link). A 2-3 month reserach project on this could save major headaches and complement more short-term initiatives that define categories for a first cycle.