Why This Matters
The regulatory treatment of a decentralized protocol depends materially on how decentralized it actually is — not on how it is described. Under the framework articulated by former SEC Director William Hinman in 2018 (“Hinman speech”) and refined in subsequent guidance, a token that begins life as a security-like instrument can mature out of security classification as the network becomes sufficiently decentralized that the value no longer depends on the “efforts of others.” Areal is designed to start in a posture that acknowledges centralization by necessity (team, multisig, bootstrap bots) and to progress through measurable, public milestones toward a state where no single party’s efforts are load-bearing for value accrual. This page is the public commitment to that progression.The Five Dimensions
Decentralization is not a single metric. Areal measures progress along five independent dimensions, each with published metrics and target thresholds.1. Governance
What fraction of protocol decisions happen through futarchy conditional markets vs. Team Multisig execution.
2. Operations
What fraction of agent actions are executed by autonomous agents reading
StrategyConfig vs. team-operated bots with human discretion.3. Token distribution
Share of circulating ARL held by team, investors, insiders vs. community. Gini coefficient of top-N holders. Time-weighted voter participation.
4. Infrastructure
Diversity of RPC providers, frontend hosts, indexer operators, off-chain service providers. Censorship-resistance of the operational stack.
5. Development
Distribution of commits, proposals, code reviews across independent contributors. Multi-entity contribution. Non-team development velocity.
DecentralizationMetrics account when deployed).
Dimension 1 — Governance
Measured: fraction ofupdate_strategy_config calls (and equivalent parameter changes) that originate from a resolved futarchy proposal vs. direct Team Multisig execution.
| Stage | Criterion | Target |
|---|---|---|
| Launch (V1) | Team Multisig is the executor; decisions are publicly disclosed with rationale before execution | 0% futarchy-sourced |
| Phase 2 start | Futarchy V2 contract deployed; first operational-tier parameters routed through proposals | ≥ 20% futarchy-sourced |
| Phase 2 maturity | All operational-tier parameters require resolved futarchy proposals | ≥ 70% futarchy-sourced |
| Sufficient decentralization target | All non-emergency parameter changes route through futarchy; Team Multisig retains only Pause Authority | ≥ 95% futarchy-sourced |
Dimension 2 — Operations
Measured: fraction of agent actions (grow_liquidity, compress_liquidity, vault_swap, nexus_swap, etc.) signed by autonomous-agent keypairs vs. team-operated bot keypairs.
| Stage | Criterion | Target |
|---|---|---|
| Launch (V1) | All actions signed by team-operated bot keypairs | 0% autonomous |
| First agent deployment | At least one agent role replaced by autonomous agent (suggested first: Rebalancer) | ≥ 25% autonomous |
| Mid-transition | Two of four agent roles autonomous | ≥ 50% autonomous |
| Sufficient decentralization target | All four agent roles autonomous; team-operated bots retired | ≥ 95% autonomous |
Dimension 3 — Token Distribution
Measured: three sub-metrics for ARL distribution.Team + insider share
Fraction of circulating ARL held by entities affiliated with the team, founding contributors, or known early investors (based on public disclosure).
Holder concentration
Gini coefficient of top-1000 ARL holder balances. Lower = flatter distribution.
Voter participation
Unique voting addresses per proposal, weighted by ARL. Indicator of active governance participation.
Vesting progress
Fraction of allocated-but-locked ARL that has vested and entered circulation.
| Stage | Team + insider share | Target Gini |
|---|---|---|
| Launch (V1) | Initial vesting posture — likely high team/insider concentration | Starting point, disclosed |
| Year 1 | Public market participation diluting insider share | Decreasing trend |
| Year 3 | Meaningful community holder base | Insider share < 40% |
| Sufficient decentralization target | Community-dominant distribution | Insider share < 25%; Gini of top-1000 < 0.6 |
Dimension 4 — Infrastructure
Measured: diversity of the operational stack outside the on-chain protocol.| Component | Current state (pre-launch) | Target |
|---|---|---|
| RPC providers | 1-2 team-selected | ≥ 5 independent, user-selectable |
| Frontend hosts | 1 (areal.finance) | ≥ 3 independent mirrors with verifiable build reproducibility |
| Indexer operators | 1 team-operated | ≥ 3 independent (e.g., Subsquid, team, community) |
| Off-chain cranks | Permissionless but primarily team-run | ≥ 3 independent crank operators per function |
| Merkle publisher (YD) | Single team keypair | ≥ 2 independent publishers with redundancy |
Dimension 5 — Development
Measured: distribution of contribution work across independent parties.Commit distribution
Fraction of commits by non-team contributors (measured by GitHub identity, cross-referenced with affiliated-entity disclosure).
Proposal origination
Fraction of governance proposals (parameter changes, agent rotations, rule updates) submitted by non-team addresses.
Code review
Fraction of merged PRs reviewed by at least one non-team reviewer.
Bug bounty participation
Number of unique security researchers submitting reports, regardless of validity.
| Stage | Commit distribution | Proposal origination |
|---|---|---|
| Launch (V1) | ~90% team | ~100% team |
| Year 1 | ≥ 20% non-team | ≥ 15% non-team |
| Year 3 | ≥ 40% non-team | ≥ 40% non-team |
| Sufficient decentralization target | ≥ 60% non-team | ≥ 60% non-team |
Public Reporting Commitment
Areal commits to publishing a Decentralization Report every calendar quarter, beginning with the first quarter following mainnet launch. Each report contains:Authority changes
Any modification to Team Multisig composition, Pause Authority, Upgrade Authority, or agent keypair assignments during the quarter.
Progress toward milestones
Which thresholds (per the tables above) have been crossed; which remain pending; any revisions to the target thresholds (with rationale).
Regulatory interactions
Any material engagement with regulators, sandboxes, or legal counsel that affects decentralization posture.
Compliance and referenced from this page.
What “Sufficient Decentralization” Means Here
Areal does not claim that the Hinman framework, or any regulatory safe harbor, automatically applies upon crossing these thresholds. No party can unilaterally declare a token non-security — only applicable regulators and courts can. What Areal does commit to:Measurable progress, not claims
Every dimension has public metrics with on-chain verifiability. Progress is demonstrable, not asserted.
Documented transition
Quarterly reports create a public record of decentralization that regulators, legal counsel, and participants can reference.
Non-reversibility commitment
Once a threshold is crossed, moving backwards requires a critical-tier governance proposal with 7-day timelock — making recentralization visible and contestable.
Engagement over avoidance
Areal engages with regulators where engagement is productive (sandboxes, safe harbor programs, public comment processes) rather than treating decentralization as a shield against dialogue.
What This Does Not Claim
- No jurisdictional outcome is guaranteed. Token classification remains jurisdiction-specific and subject to regulatory action. This framework does not pre-empt any regulator’s authority.
- No safe harbor is assumed. Hinman’s 2018 remarks were personal views, not binding SEC guidance. Similar frameworks in other jurisdictions are similarly non-binding.
- No automatic reclassification. Even upon meeting all thresholds, tokens remain whatever they are under applicable law until explicitly ruled otherwise.
- No substitute for compliance. Participants in restricted jurisdictions must still comply with local law regardless of protocol decentralization status — see Geographic Restrictions.
Related
Legal Architecture
Full Howey-test analysis, entity structure, jurisdictional considerations
Risk Disclosure
Comprehensive risk factors including regulatory risk
Roadmap (V1/V2)
Protocol-level transition phases that drive the operational decentralization metrics