Decoding Token Economics: Insights from our Token Engineering & Token Economy Design Workshop at Berlin Blockchain Week
On 6 September 2018, Token Engineering Berlin, Ocean Protocol and OST co-organized a workshop to discuss why businesses tokenize, the optimal use cases for tokenization and the best approach to engineering and designing token economies.
Mohit Anand, Director of Blockchain Strategy Consulting, OST.
4. Historically, major leaps in technology have been transformative for society
GUTENBERG PRESS
PARCHMENT
▼
PAPER
KNOWLEDGE
Renaissance
Scientific Revolution
RELATIONSHIPS
Protestant
Reformation
Nation State
MONEY
Bank Notes
Banking System
INSTITUTIONS
Corporation
Bureaucracy
ONE-TO-ONE
▼
ONE-TO-MANY
Credit: Mark Bonchek, Shift Thinking, OST Advisor
5. In the Internet era, Blockchain has the potential to drive radical transformation
INTERNET
ANALOG
▼
DIGITAL
MONEY
Cryptocurrency &
Branded Tokens
ONE-TO-MANY
▼
MANY-TO-MANY
Blockchain
KNOWLEDGE
World Wide Web
Web 1.0
RELATIONSHIPS
Social Media
Web 2.0
INSTITUTIONS
DApps & DAOs
Web 3.0
Credit: Mark Bonchek, Shift Thinking, OST Advisor
6. At the core of this transformation is the changing nature of trust in transactions
SENDER
SELLER
BUYER
RECEIVER
Trusted Intermediary
Trust Through Credibility
Blockchain
Trustless Through Transparency
SENDER
SELLER
BUYER
RECEIVER
Past Now
Credit: Mark Bonchek, Shift Thinking, OST Advisor ; OSTCredit: Mark Bonchek, Shift Thinking, OST Advisor ; OST
7. …and the power of dynamic digital communities
Photo by rawpixel on Unsplash
8. For many, this is an opportunity to recapture value from entrenched giants
Early Internet
Open Protocols
(1980s-2000s)
Recent Internet
Tech giants
(2000s-now)
Coming Internet
DApps
(now-future)
MANY-TO-MANY
(negligible marginal cost)
FEW-TO-FEW
(exploit economies of
scale)
EVERYBODY-TO-
EVERYBODY!
(reduce negative
externalities)
Credit: OST
9. For others, tokenization can transform businesses into valuable, self-growing economies
SOCIAL NETWORKS
▼
USER COMMUNITIES
MULTI-SIDED PLATFORMS
▼
MARKETPLACES
TOKENS
▼
MEDIUM OF EXCHANGE
ON-CHAIN RULES
▼
TRUST
BUSINESSES AS
MICRO-ECONOMIES
Credit: Mark Bonchek, Shift Thinking, OST Advisor ; OST
10. Tokenized Waze - where community is empowered to get much more from its contributions
Photo by Fahrul Azmi on Unsplash
Financial Incentives
Social Incentives
BRANDED
TOKENS
Credit: Mark Bonchek, Shift Thinking, OST Advisor ; OST
11. This gives a wide spectrum of tokenization use cases….
Transactions
On-Chain
Incentive Games
On-Chain
Governance
On-Chain
Degrees of Decentralization
Token
Use
Cases
Proof of Stake,
Proof of Work,
Proof of Location,
DAOs
Increasing
Decentralization
Community Markets,
Trust-less Registries,
Collaboration Markets,
Information Arbitrage
Rewards, Payments,
P2P Transfers
Off-Chain
Transactions
Token
Models
Micro and Behavioral
Economics of Token
Flows
Token Primitives Protocols
Example
Businesses
OST Works
With
Company to User
Rewards
P2P Transfers
Cross-Ecosystem
Payments
User Reputation
Market
Photo Attribution
Market
Ecosystem Curation
Market
?
?
?(250m users)
(70m users)
(25m users)
Credit: OST
12. Governance
On-Chain
This spectrum of decentralization gives a rising curve of value shared with digital communities
Increasing
Decentralization
Transactions
On-Chain
Incentive Games
On-Chain
Net Value
Shared
Web 2.0
To Web 3.0
0
Negative
net value
shared
Increasing,
positive
net value
shared
Credit: OST
14. For businesses, their goals define the scope of their token economy
GOAL
Actions
Actors
Incentives
(Social & Financial)
Attacks
Credit: OST
15. We use micro and behavioral economics to model economies with transactions on-chain
General users in
community
Power users in community
Shaded area shows in-economy
flows due to tokenization:
Buy
Hold/Exchange
Earn
Spend
0
+
+
+
+
1. Rewards for user contributions
2. P2P transfers for sharing and
collaborations
3. In-platform purchases
4. Attribution for user
contributions
5. Recognizing user reputation
6. Recognizing user loyalty
7. Distributing platform value
Simple Transactions On-Chain
Credit: OST
16. We use token primitives to model economies with transaction rules on the Blockchain
Validated
Lists
Validated
Quality of
Work
Validated
Contribution
Validated
Expectations
of Future
State
Prediction
Markets
Curation
Markets
Reputation
Markets
Attribution
Markets
1. Content curation market
2. Curated registries
3. Proof of ownership market
4. Proof of origin market
5. Decentralized collaboration
driven by community validated
attribution
6. Information arbitrage market
Token Primitives -
Building Blocks
Incentive Games On-Chain
17. Let’s see how that works using the example of Medium
180 mn MAU 2.16 avg page visits 1.51min avg visit 6-7min avg article length
18. Let’s see how that works using the example of Medium
19. Workshop exercise: Solving ‘Actors’ for Medium
Audience to fill out all the actors involved in the Medium platform
Goal/Objective: 10X growth in platform use
Actions
Actors
XXXX Incentives…
YYYY
ZZZZ
….
….
….
Handout
20. Audience to fill out all the actions involved on the Medium platform
Goal/Objective: 10X growth in platform use
Workshop exercise: Solving ‘Actions’ for Medium
Actions
Actors
… … … … … …
Normal
readers
Incentives…
Premium
readers
Writers
21. Goal/Objective: 10X growth in platform use
Workshop exercise: Solving ‘Incentives’ for Medium
Actions
Actors
Read Write Clap Comment Highlight Share Tag Follow Flag
Normal readers
Incentives
…
Premium readers
Writers
Audience to fill out all the incentives involved on the Medium platform
22. Goal/Objective: 10X growth in platform use
Workshop exercise: Solving ‘Incentives’ for Medium
Actions
Actors
Read Write Clap Comment Highlight Share Tag Follow Flag
Normal readers
Be
entertained
- Support Engage - - - - -
Premium readers Knowledge - Support Share ideas
Draw attention
to important
points
Distribute
Increase
discovery
Curated
feed
Writers -
Share
ideas/
knowledge
- Respond - Distribute Discovery - -
23. Workshop exercise: Illustrating incentive group interaction for Medium
General users in
community
Power users in community
Shaded area shows in-economy
flows due to tokenization:
Buy
Hold/Exchange
Earn
Spend
0
+
+
+
+
‘MediumCoin’
Earn
Buy
Spend
Credit: OST
24. Workshop exercise: Incentive mechanisms for Medium - today
‘MediumCoin’
EARN BUY SPEND
Claps
$5/month Claps
Claps
Actions
Actors
Read Write Clap Comment Highlight Share Tag Follow Flag
Normal
readers
Be
entertained
- Support Engage - - - - -
Premium
readers
Knowledge - Support
Share
ideas
Draw
attention
to
important
points
Distribute
Increase
discovery
Curated
feed
Protect
Writers -
Share
ideas/
knowledge
- Respond - Distribute Discovery - -
Goal/Objective: 10X growth in platform use
Audience to fill out earn, buy, spend involved using a MediumCoin
25. Workshop exercise: Implementing incentive mechanisms for Medium
‘MediumCoin’
EARN BUY SPEND
10 10 20
80 20 100
120 - -
Actions
Actors
Read Write Clap Comment Highlight Share Tag Follow Flag
Normal
readers
Be
entertained
- Support Engage - - - - -
Premium
readers
Knowledge - Support
Share
ideas
Draw
attention
to
important
points
Distribute
Increase
discovery
Curated
feed
Protect
Writers -
Share
ideas/
knowledge
- Respond - Distribute Discovery - -
Goal/Objective: 10X growth in platform use
26. Workshop exercise: Implementing primitives to validate incentives for Medium
‘MediumCoin’
BUT to 10X growth in platform use
we need
more reputable articles
Flag content
Violate TOS (Yes/No)
Publish article
Vote
(Standards enforced by community)
Mechanism for improving standards in a decentralized way? —> Curation Markets?
Mechanism for recognizing writer reputation in a decentralized way? —> Reputation Markets?
List of articles that meet the
Terms of Service standard
27. Engage
OST
Decoding Token Economics:
Token Economy Design
Workshop
Ben Bollen, Chief Blockchain Scientist, OST @benjaminbollen
Mohit Anand, Director of Blockchain Strategy Consulting, OST @anandm86
Berlin Blockchain Week September 6, 2018