There’s been an explosion of new DeFi projects and businesses this year but few ways to evaluate or compare them. I am introducing a new framework that I built using my experience at Tiger Management, Kingdon Capital, and even my own fund, Sureview Capital, that I call OPENFI.

Analysts across Wall Street use several methodologies and frameworks to evaluate companies and industries. The key to any sound framework is distilling the most important metrics and factors that can measure a company’s success. With the rise of DeFi, many view “hype” as the only requirement to having a successful project. On the contrary, lasting businesses built in DeFi likely share many common traits with traditional companies. I created OPENFI with this in mind to better assess a project’s potential impact on DeFi and how it disrupts traditional finance.

Before going any further, I must emphasize that this is not investment advice . OPENFI was created because I found myself asking the same questions every time a new project launched. This enables me — and hopefully others — to keep up with how quickly DeFi evolves.

OPENFI

Opportunity

How large is the Total Addressable Market? Does the project disrupt an existing market, or does it create a new market?

Product

How innovative and differentiated is the product? Is there product-market fit? How easy is it to use the product (i.e. good user interface and experience)?

Experience

Does the team have any previous experience building software and technology? Is the team well-versed in blockchain? What previous experience does the team have to ensure success?

Network Effects

Will more people in the network benefit when others join? Are there high switching costs and stickiness in using the platform?

Fundamentals

Do the underlying unit economics make sense within the current network? How quickly are users growing? How much value has been transacted or locked up?

Incentives

Are there proper cryptoeconomic incentives in place for network stakeholders and users to support blitzscaling?

Going forward, I will evaluate one DeFi project each week against this framework using publicly available information. Each project will receive a score of 1–5 in each category, with a maximum score of 30 across all categories. Make sure to check back in next week to see how I use OPENFI in practice!

As always, I welcome community feedback, especially as it relates to this framework and potential projects to assess in the future. If you share our vision to grow the DeFi ecosystem for current and future users, come build on Avalanche. Feel free to reach out to talk about use cases and partnerships by sending me a note. Let’s build out the future of DeFi together.

Originally published at https://johnwu.finance on November 11, 2020.

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