But for those of us who have been around here longer, that bravado is losing its wireframe integrity and giving place to fear.
Unlike before, we now are all packed with quite a few coins beyond bitcoins, so there’s an increasing itch to get rid of most of them, leaving maybe a couple (but which?). Of course, the search for undiscovered gems is never stopping either, although the best dev teams seem to be wise enough to abstain from ICO announcements anticipating the major narrative shift.
Token Picking Technique as Self-confidence Doping
Crypto is hardly the first technology concept to use human physiology dysfunctionalities such as gambling for development advantage, of course. However, inner confidence is a fragile thing. Doubts are finding cracks in even the most steadfast minds.
What if it’s all nonsense?
We hear that, subliminally, in Mr. Buterin’s words, “There will be no “killer apps” for blockchain technology,” that are old enough to verify themselves. We sense the fear in multiple dissertations on how tokens can reduce the illiquidity discount substantially by reducing frictions to trade and on how the traditional assets will tokenize because they will lose the liquidity premium if they don’t.
The very sophistication of those analytics stirs more doubts. So, what are those real tokens? Regulation obstacles? Fine, but why are the real adults of the quasi-currency business who should not be bothered by financial regulations ignoring our platforms and exchanges? Why are we lately becoming very aware of — and some of us very worried about — the intrusion of celebrity culture into the realm of technology development? How come boxers are now to decide which decentralised framework is good? Do we need to remind ourselves of how that form of glamour functioned in the past?
During moments which lack confidence, it is good to get back to the roots.
To get a fleeting reminder of deeper realities, here’s a simple mental exercise. I suggest you try it to evaluate any random crypto asset. The technique seems to give some answers and not shake confidence. It’s quite unscientific and it goes like this, in three steps:
Look into your head and clearly divide your personality into the two: you as a consumer and you as a businessman. These personalities are in opposing camps, the very fight between which creates the market forces. It is impossible to make judgements without taking either side first.Take your businessman-spirit only, travel back in time to 2008, and imagine the project [behind the token you consider] being pitched to you (as a VC) back then with no Bitcoin itself, no blockchain hype or anything like that in existence. One important thing about the crypto and distributed ledgers is that unlike in many other sectors (mobile apps, for example), technically, everything was possible back then. See if the project still makes sense “in a vacuum”.Now take only the consumer part of yourself and see if the token and the system behind it can continue the scenario of the tragedy of the commons in any meaningful way. Lovers of crypto, and of the culture that surrounds the modern speculation, owe an unpaid debt of gratitude to the essential idea.
Now. Let’s see some examples and crunch some definitions.
Evaluating Tokens through Time Travel (Examples)
Imagine the Byteball team pitching to you. It’s 2008. A directed-acyclic-graph-based, completely integrated payment system with a full set of merchant and consumer tools, all at ultra, ultra, ultra low costs looks like a brilliant deal. Adoption scenarios and compliance look hazy but, man, isn’t the project easy to love?
With its energy ‘waste’ problem, Bitcoin, by the way, couldn’t be presented as a corporate project in principal. It wasn’t a problem for it back then because it always had its own narrative and never needed a justification under the “tokenize everything” umbrella or any other. Similarly, it has no problem now. Bitcoin has fought its way to the digital gold status and the monstrous electricity waste and all sides of scaling debates may just be ignored.
Or take Steemit. Zero censorship media. Compare its technical brilliancy to Wikileaks. Great project. Great stand-alone value. We may never care about the stance of decentralization or general crypto adoption. Those who really have something to say would surely make an effort to get some tokens.
Look at Filecoin. If compared to the weird chaos of torrents, Filecoin’s logically beautiful system is an amazing step forward. Costs? Yes, it’s not free, but it is very likely to be able to beat incumbent cloud prices. Reasonable costs with clear and predictable network development is a good combination.
Aragon? Very, very sophisticated tech (it had to be stand-alone back then) but the utility is out of question. IOTA? Hmm, maybe somewhat premature, but it definitely makes a lot of sense, both technically and commercially. Adtoken? What a witty and unusual solution. Uncompromisable ranking agency. It sure can work. QRL? Well, that’s is really peering into the future. But who knows? What if the cyber threats of new Cold War get even worse?
There are quite a few systems that would make perfect sense “in vacuum” back then. And some kind of decentralization is the key answer to problems they solve.
Now look at some other [very well capitalized] tokens. Bankor? Ripple? Pure, distilled, crystallized nonsense. Makes it slower and otherwise technically inferior in return to distributing the thing among those who never cared about hosting a part of it in the first place. Just picture someone pitching you “the world’s only enterprise blockchain solution for global payments” back then. Even now, with the legend of being a weapon against an undefined and largely inexistent ‘crypto-threat’ to the incumbent financial system, such projects are self-contradicting on the edge of being absurd.
Ethereum? Who are the clients, you-the-VC asks? What particular customer pain does it relieve? How will a smart contract enforce anything? What sort of a computing system is that which has no advantages in computing? There are more question than answers. Without the [possibly fake] “ICOs are great” and “Bitcoin is great but outdated tech” narratives, Ethereum makes little sense to a goal-focused corporate mind. And, please, don’t put the libertarian advocacy here — guys are making money and playing oligopoly left and right. And they did start to publicly disown the ICO phenomenon [that they host, mind you] as well.
Gnosis, Augur, Brave, maybe? But why? Why do what they do in this grotesquely over complicated [distributed tech] way? Who is going to hack that stuff? Why in the world decentralize it? Civic? Isn’t that an oxymoron? Free people under no rule trying to number-brand themselves voluntarily?
You may play this game with your favorite tokens and it’s fun. Besides being fun, it serves the three serious purposes:
It helps a lot when you feel the founders are just trying to fool you as an investor, but you lack technical knowledge to be sure your confusion isn’t only your problem.It helps you see the inner value of a system, especially in the case that the crypto implodes and the coin you own will have to survive after the apocalypse.And most importantly, especially for decent projects, it allows you to look at what you invest in without unneeded color illumination by crypto dominants.
To better understand this last point, try asking an Ethereum fanboy about how their community stowaways the Bitcoin ‘brand’ image. The characteristic peccadillo of Ethereum devotees — or maybe, more broadly, of anybody who invests too earnestly in the fortunes of a particular fundraising framework — is a mostly groundless, benign prospect. You will get a pretty mad reaction and the degree of irritation gives away the fact they know it is partially true. When picking projects to invest in, any references to Bitcoin [as a parallel or a contradistinction] should be a red flag. Before killing himself or detaching completely in some other way, one must not try to get a free ride on the idea of a pure public domain project.
Evaluating Tokens through the Tragedy of the Commons
The public domain aspect is the unifying factor for most good decentralized projects. It is not the [failing] anonymity or [questionable] convenience of Bitcoin that makes me use it. It is that by using bitcoins I am the least engaged with anyone, and I receive few questions and inquiries. Ideally, I get to interact with no one. It is like when I chose to use the commons to walk my kids and go to a public playground; it’s not that I am unwilling to pay for a sophisticated child area somewhere in a mall, it’s that I’m not in the mood to go there this time and interact with whatever is going on. Or, for example, when I drink water from a faucet, not from a branded bottle bought in a grocery store, it’s not really about the money saved, it’s an act motivated by the conceptual vision — I trust my municipality, my county and I feel that I should have that fresh water as the commoner.
Furnishing new commons to the public is a single indubitable utility of decentralized systems.
Blockchains are not about efficiency or convenience, obviously — there’s nothing technically there that would do anything about that. They are not about anonymity or, in a broader sense, any other libertarian or anarchist stuff, as we can already see. What they are is the phenomenon that has been identified a few hundred years ago. That phenomenon is known as the commons.
The commons is the resource that I can access without permission, and when I use it, there is no way someone can force me to use it in a manner different than was originally publicly announced.
Some additional durability many commons boast is not something that is based on a specific ‘secret’ technology, it is the logical consequence of the fact that a public domain is often just large enough. An unregulated grazing on common land is not going to destroy that land as long as it is vast enough. BTC is safe to use because the loyal community is huge. Decentralized architecture doesn’t make a system hacker-proof, it is the fought and won status of the common that does it.
So, how do we evaluate the applicability of a particular system to be considered as the commons? What things need to have a public domain version and what don’t? Levels of the reasonable requirement for a resource to have a common version may differ:
A basic human right (fresh water)A constitutional provision (access to zero censorship media)A ‘we-better-have-it’ improvement to life (file storage)
This is where your consumer-self judgement steps in. As a consumer, you should feel whether a considered projects delivers something that deserves to be the common.
Not any less important is whether the project has a token that is designed well enough to be able to soften the “tragedy of the commons”.
To illustrate this “tragedy” and the typical lifecycle of a common resource, let’s consider one example: the accessibility of the Internet.
1. In the beginning, the resource was available as the common.
Just as pure nectar and fresh water were free and [reasonably] plenty for the limited audience of the Garden of Eden, the Internet access of the early days was free to those who needed it. Scientists and students used it for free around the Globe. Yes, there was someone in the background to actually finance it, but that doesn’t diminish the Internet’s status as a common in the early days. The common does not mean it’s not being paid for. It means one can use it and not be approached by anyone with any questions or requirements.
2. The free version of the resource becomes spoiled or inaccessible.
Reasons may differ, but we always get thrown away from paradise. It could be an overpopulation of the user community. It might be a voluntary seizure of the resource by the mighty. It may be a resonant case of abuse. The result is the same — the resource becomes a subject of the commercial and, not rarely, a political game. Internet access business has quickly become a big source of revenue and the battlefield with telephony, television, and other then-incumbents.
3. The commercialization stage is likely to slide into a quasi-monopoly.
By definition, a resource that qualifies for a public domain status is of high importance. It is therefore a very probable victim of the monopoly positive feedback loop phenomenon — the big get bigger, the rich get richer. For any selected region now, there are normally up to three landline Internet access providers and about the same quantity of mobile services. These low figures are not the result of a technological reasoning. Additionally, three is the number of parties where a cartel talk is relatively easy to arrange.
4. General democratisation process and technology advancement recreate the common, often in a parody form.
At some stage, the technology becomes ubiquitous enough for a variety of players to come up with a ‘free’ version. This version of ‘the common’ does not replace existing centralized commercial providers, but instead creates an alternative that probably has more emotional impact than a real service provision. At some point in time, it was a sign of good taste to provide free Wi-Fi.
5. The common gets abused and becomes inferior.
However, free Wi-Fi has become a source of problems, not a solution. Sometimes, your expectation to locate free Wi-Fi in an airport or in a hotel may be a sick guess. Expecting these facilities might have prevented you from taking proper care of your roaming tariff. The free access status has also been lost and some identification procedures are applied in most places. Hotspots have also increased the malware distribution threat. Criminals might have tried to use it too. Thus, it was abused from all conceivable directions.
6. Decentralization and tokenization fixes the tragedy of the commons completely.
This is yet to happen in the sector, but if something is capable of fixing public access to the Internet, decentralization and tokenization-based techniques are the first candidates.
The way a token operates to fix the tragedy of the commons is where we get the most chances to evaluate the feasibility of a project. Say, founders plan to establish a distributed organisation, fund it with the sale of voting tokens and build a network of stratosphere balloon-based transmitters. Possible? Yes. A good value token? Probably not. This is such a gigantic endeavor that it is doomed from the start.
What if a token incentivizes hotspot owners to provide a reasonable bandwidth at a reasonable price? That might work if firmware for popular routers could be upgraded to coexist with a crypto wallet client. That would be a good token.
Good protocol-type tokens are a rare investor’s luck, though. Many of them don’t get qualified at the first checkpoint — they serve the purpose that we, the people, don’t really need in the form of the common. Ethereum’s case of contractual relations does not qualify, for example. Such common needs as agreements with landlords, storages, leasing, tax verifications, most types of notaries, car licensing, and other civil stuff just can’t be taken off from where they grow right now. Moreover, if I had an app for those contracts which would be close in usability to Google Drive, I would care the least about it being decentralized, considering it’s not giving me any extra protection, convenience, or anything. I can’t really think of where and why I would enjoy an extra-automation or conditional enforcement.
Storage is often cited as a good example and a good example it is — there are several successful projects. The demand has always been there and it is partly (and poorly) satisfied by torrents. The solution when people share individual resources and the value of the token corresponds to the physically measurable contribution (space, bandwidth) seems correct. The problem is that it is probably the only truly good example.
Ride sharing, from various carpools to more Uber-like apps, doesn’t look as a promising model for some reason. In the decentralized space, La’Zooz has been offering that for at least three to four years. Maybe we feel it, deeper somewhere, that taxi-type transportation doesn’t have to have the commons version so the apps don’t fly?
While there aren’t that many things to tokenize at the protocol level, pretty much any organization deserves to be tokenized (but not all tokens are worth paying for, of course). I can’t recall where it is coming from originally, but I just love this example:
Great Britain would have zero problems with Brexit if it was tokenized. With every citizen owning some tokens of the DAO “Britain”, to do a Brexit type business, it only takes to table the issuance of the two temporary tokens. One would be redeemable to whatever 1% of Britain’s GDP (automatically calculated in real time in a tokenized organisation, by the way) worth in 2030 if Brexit takes place, the other would be worth of the same 1% at the same point in time if Brexit doesn’t take place. So it’s a derivative. One may buy as many of each as she wants and soon the market defines the price. As long as those two tokens can only be purchased with DAO tokens, it makes buyers’ decisions perfectly economically and civilly responsible. You consider the issue, take an educated bet on an outcome, and temporarily reduce your other civil abilities by decreasing your basic token stake. Whichever token price is lower (token markets are free and common, remember?) at some preset date, it gets ditched and the money comes back to buyers. The corresponding event (more expensive token) then is automatically enforced (smart contracts, B!) and takes place. So now the supporters of either outcome (say, Brexit did happen) are directly financially dependant on the results of the solution they’ve pushed through. Importantly, that will happen exactly to the extent each supporter has desired to expose herself to.
But, since nobody offers us a Great Britain token, let’s think of some realistic examples where a DAO token can make sense as the provision of a common resource.
There are two sides of this exercise. One is to look at a project and decide whether the resource it creates needs to be accessible by everyone. In most cases, that would be pretty easy so many tokens would have to leave the portfolio.
However, to really validate the concept, you should perform some reverse engineering and come up with a newly invented example of a good and valuable token starting from an unsatisfied need for a common resource. Any enterprise can be a DAO, so we need to limit the search somehow. Perhaps, deliver clean water to Africa? But who’s going to pay for that at the end of the day? And why should I expect a DAO to function well in the environment where other types of organisations have failed so severely?
In my case, to invent a sample project, I’ve tried to marry the two popular concepts, the universal declaration of human rights (by the UN) and the hierarchy of needs (by Maslow). See, the first document fails to cover even the initial stages of the second one. I think that’s not right and has to be fixed: in an advanced society, the two concepts have to completely overlap. For quite a while, I have tried to advocate that — as technology develops and we potentially get swamped by VR and bodily upgrades — general curiosity may soon remain the core individual motivation. So the basic human right for an adventure is my answer. And, sure enough, there’s the project that does just that.
NEMO FoundationDECENTRALISED COMMUNITY TO ORGANISE EXPEDITIONS AND TREASURE HUNTSnemo.foundation
Let’s look from a consumer perspective and see how the token selection technique works in this case.
Almost everyone would like to at least once take part in an expedition, maybe even in a treasure hunt or something as crazy as that. The problem is that without some sort of global scaling, most of us can’t make it affordable. The beauty of decentralized initiatives is that they have better scaling likelihood. People might not be willing to join some private initiatives, even if led by a star of Elon Musk’s size. At the same time, the same conservative folks may consider, if properly informed, to support an organisation with no particular owner. The DAO concept itself is cool enough to provide some free marketing and, with no fixed costs to cover every month, an organisation like that can grow for indefinitely long to become indefinitely large.
Of course, the question remains whether this particular DAO’s regulation will be capable of tweaking incentives such that a system behaves in a way that’s globally optimal. But ‘normal’ regulation — the one enforced by humans — isn’t any better, anyway. Worst of all, it’s mutable so we never know what organisation we evaluate exactly. In a DAO, no one will at least bribe or cajole anyone. If the organisation does not have enough money and user support for a chosen adventure, there’s no political clout to lobby the expenditure anyway.
When the time comes, this token that supports the ‘not-so-basic’ need for adventure can be mathematically examined for the soundness of service provision. Regulation and governance practices that we have today are impossible to scientifically analyze. Specifications are fuzzy and edge cases are numbered in thousands. We don’t know how well a particular basic need is satisfied. On that murky background, a clear quantitative value even of a secondary need might be a useful thing to possess.
Now, combine the two checkpoints. See if that is also a business idea that would make any sense to you if pitched with no particular blockchain hype background. Then, you’re done deciding.
The corporate perspective of evaluating tokens may be complex since we are talking of trying to make money on the technology that was explicitly designed to let systems protect their users from tariffing. Walking in a businessman’s shoes may be a different experience for everybody and may create a variety of opinions about a particular project. On the contrary, the consumer part of the truth is quite universal because an evaluation of a token from a consumer perspective is comparatively simple.
Tokenizing stuff without “commonizing” something important to all people is like going to a nightclub to stay sober and not trying to get laid; it misses the whole point. You can’t remove something so essential to the decentralization idea, at least before we satisfy most of the common needs. Most ICOs, however, fall victim to the cargo cult and create problems for everyone — for the crypto community that will have to survive the inevitable blow when ICOs collapse and for themselves since it became pretty clear token sellers will be chased by the authorities sooner or later.