Michael Wuehler - “Building decentralized applications on Ethereum using Infura” Blockchain Summit Kyiv 2018

1. © 2018 ConsenSys
Effective Token Design for
N-sided Markets
Michael Wuehler | Director of Infrastructure | @wuehler

2. © 2018 ConsenSys
Michael Wuehler, Director of Infrastructure at ConsenSys - Infura Founder
Introduction
Education
• Masters Degree in Information Systems Management
• MBA from the University of Chicago Booth School of Business
Career
• Internet Engineer in 1995 at startup
• 10 years as Systems Engineer
• 11 years at Bank of America in Technology Infrastructure roles managing Middleware and Messaging for
the Global Markets line of business, COO for Global Engineering
• Joined ConsenSys the summer of 2016
Experience in the Blockchain Space
• Involved in Bitcoin starting in 2011
• Became heavily involved with the Ethereum community as the founder of NYC Ethereum Meetup in 2014,
now with over 6,500 members, second largest Ethereum meetup in the world
@wuehler

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Hello World
GLOBAL
850+ blockchain experts, entrepreneurs, computer scientists,
designers, engineers, consultants, and business leaders with delivery
experience across 6 continents

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Infrastructure
Help grow the ecosystem by
building and maintaining core
developer tools and clients
Capital
Provides token services,
crypto asset management
and venture capital
Products
Incubate new companies developing
decentralized applications on the
Ethereum blockchain
Education
Educate developers and
entrepreneurs about Ethereum
through training programs
Services
Consult and deliver production ready blockchain
solutions for the Enterprise and Government markets

5. The digital economy is
heading for decentralization

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Digital business models transformation
driven by reduction in intermediaries

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What can be digitized?

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The rise of multi-sided markets
Any company will be able to create digital marketplaces for their services and products using Ethereum smart contracts
CENTRALLY OPERATED AND
GOVERNED PLATFORMS
Intermediaries own identities,
pricing, openness of platform, etc.
PEER-TO-PEER GOVERNED MARKETPLACES THROUGH A
DECENTRALIZED LEDGER
Blockchain governance replaces intermediaries,
allowing individuals own identity, pricing, etc. = more
value for contributions

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Building businesses is hard
• A product market fit is difficult to achieve
• Finding paying customers is hard
• Generating profit requires tuning and market awareness

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Building two-sided marketplace business is harder
Need to facilitate a relationship between two interdependent
groups of customers to create a value proposition:
easy to find | aggregate audience | save on cost
Companies such as Airbnb and Uber created two-sided markets;
it’s expensive to get it right (e.g., Uber spends $1M / city to
launch and stabilize a market)

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Building a multi-sided market is even harder
• Communication channels: n (n – 1) / 2
10 participants create 10 (10 – 1) /2 = 45 potential communication channels
• Finding optimal pricing structure between many partners
becomes difficult to predict
• Centralized control of the marketplace is hard to manage

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Token economies are multi-sided markets
Token economies are complex ecosystems that must be
coordinated effectively to achieve network goals
Market participants must consistently engage in productive
behaviors to maintain the value proposition of the network*
• keep a thick market - enough participants
• reduce market congestion - right balance of participants
• keep participants safe - trust in the system
•
*Alvin E. Roth

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Token economies are multilateral by default
• Each participant (customer) type significantly contributes to the
the virtuous cycle of market improvement
• Removal of one customer type may cause market failure
• Improperly identifying or ignoring the needs, drivers,
motivation, and feelings of each customer will lead to failure

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Difficulties we’re seeing ...
• Unchartered territory and rush to be first to market
• Clients understand only one or two market participants
• Oversimplification of the game theory nuances (market design)
• Uncomfortable with loss of control through decentralization

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Validate marketplace viability with customers
• Design Thinking Methodology to deep dive
into use cases
• Identify customer needs & create empathy
maps
• Create customer Journey Maps
• Rough prototype - paper is OK
• Business Model Canvas show the flow

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An example: what we thought and what we found
Objective:
incorporate
fungible tokens
into a project
based learning
system to reward
students’ progress

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Integrate lean methodology with a Token Utility Canvas
The criticality of Lean and iterative approaches to
business model creation and customer
development is well understood and documented
in closely aligned movements and methodologies.
Couple business canvas development activities with
ConsenSys’ Token Design process to yield a Token
Utility Canvas to inform future direction of marketplace
design.

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Token design is an iterative process
Token Utility
Canvas
Token
Mechanics
Token Legal
Review
Token Technical
Design

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Steps leading to the Token Utility Canvas
Identify Economic
Drivers
Prioritization and
tradeoffs
Develop Token
Utility Canvas
Test Token Utility
Canvas
● Define token participants
● List of desired behaviors
● Incentives
● Proposed token solutions
Initial Focus
● Prioritize token functions
● Determine tokens needed
● Specify corresponding utilities
● Shortlist necessary tokens
Token
Mechanics
Token Legal
Review
Token
Technical
Design
Token Utility
Canvas

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Draft template

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An Example: Token Curated Registry

22. "Market design is the engineering part
of game theory, it's the underlying
science of how the details work and
how the parts fit together. We deal with
much more complicated games than
the game theory usually deals with."
[Classification: Confidential]
ALVIN E. ROTH

23. Michael Wuehler
ConsenSys
@wuehler