I have finally found a proven, working token economy! Now bear with me.
Every day I have 2-10 conversations about tokenomics with people who want to write an ICO whitepaper, or with people who want to do an ICO, or with my ICO whitepaper writers. One thing I’m painfully aware of is that we don’t know how this is going to work. This is all one big experiment, and nobody knows what will work because none of it has been working long enough, but I have finally found a pre-blockchain live example of a working token economy.
Keep an open mind.
It’s called ESLprintables.com, and it’s a one-token, self-sufficient economy. You can’t buy your way in or out with these tokens, but the system has almost a million users and has been functioning at least 8 years.
The site is for ESL (English as a Second Language) teachers and I found out about it from my Mom. Like many of these “teachers”, my mom is a retired person who volunteers in her community. She isn’t a formally trained or paid teacher, so when she creates a new worksheet for her students (Making an Appointment with the Doctor is a popular one), she’s happy to upload it to the site and get her “tokens”. ESLprintables is old-school, so they call them points. When people rate her sheet, she gets more points from their ‘likes”. Every time she downloads a worksheet, she pays a point.
I’m telling you about this site because it’s the best answer I have to the question (I get every day): What is a working token economy? It isn’t a 1-to-1 fit for what we are trying to do with blockchain but it’s an extremely useful example of what it means to have a circular economy where “contributors” and “consumers” are all built in, and it’s completely independent of the outside world. No ESL teacher ever asks “How much are my points worth in dollars/pounds/rand?” (English-teacher currencies.) The creators of the site aren’t in it for the money. In fact, I can’t even figure out how to make a contribution. They have volunteer moderators who get nothing for their time.
“I’ve only been on for 2 weeks and I already have 31 points!” exclaims my Mom. “I’ll never use that many worksheets, but it makes me feel great when people give me good reviews.” My mom holds a PhD in biology, has founded and run a mutli-million dollar company, speaks 5 languages, travelled the world, has 4 children and 9 grandchildren, lives on 100 acres she bought in cash, and she’s still thrilled with her freaking 31 non-fungible point tokens.
You can’t do anything with the points on the system. They aren’t worried about ROI. It’s also what we in ICO world would call kind of suspicious because you can’t tell who owns it. Apparently it’s a guy name Victor who doesn’t always have time to answer his mail and he also apparently runs the equally suspicious site https://www.liveworksheets.com/, which purports to save trees by allowing people to use cyberspace for teaching instead of traditional paper worksheets. Who are these crazies who just do public goods and don’t expect anything for it? Very suspicious.
For the purposes of thinking about ICOs, this case is useful. It shows how a community self-regulates and creates an economy with no outside help and no outside money.
The missing pieces/areas to consider are:
- How does this community interoperate with other communities? Specifically, if you have earned “token”, how do you exchange with other communities for their tokens. If they were to move to an actual blockchain economy, how would the exchange rate look? In the blockchain community, we recognized that different professional communities could look like this, and that they would interact with exchange rates, just like governments with fiat currency have fluctuating exchange rates.
- In this economy, because points cost nothing to mine, the “government” can just give them out and destroy them. The central algorithm is the central bank. So if I get a point, it’s generated from nothing by the central bank and if I spend a point, it’s “burned” into nothing, all in the central bank. Also, an interesting feature is that the bank always makes sure people get more points than they can spend. If I post a worksheet, it’s only 1 point, but as soon as someone likes it, I get 10 points or more! Awesome. So, for every 1 piece of work I produce, I could have dozens or even hundreds of points. In the real world, that makes sense, right? If someone views my work, that’s 1 person who benefited, and if they downloaded this worksheet and taught 30 people with the worksheet, it really does have a value of “30” in real-life value. However, in an economy, even an inflationary economy, there is some limit on how many points you can give to people to make sure the economy works. Because they are non-fungible, there’s no consequence to having someone have a billion tokens. In our ICOs, there is a consequence.
- There is no governance model. If Victor and the moderators get fed up, the site could disappear. For our blockchain organizations, we need to think about self-governance and how to transition from one leader (or group of leaders) to the next.
Note that I don’t point to the problem of ROI as an issue. That’s because the problem of ROI is a non-blockchain problem. It’s a problem you have in a world where we have one form of value called “money”. In that world, we reward people for making good guesses about what stocks will go up and down. Those people aren’t creating value in the world, but we give them money for it. We don’t give money to grannies who help immigrants successfully navigate a medical appointment, even though they are truly creating value in the world.
If we keep thinking in terms of ROI in the blockchain world, we will miss the point of the New Economy we can produce. The point of the new economies is that they have the potential to allow humans to trade in “goods” that are really good. I don’t think that ESLprintables will do an ICO, but if they did, they would be a natural fit in the economy of people doing actual work, producing actual value, and getting tokens that represent that value in the world. If we can create a multitude of these economies, and the platforms for trade between them, we will have succeeded in our mission as an industry.