In our previous blog, we talked about the fact that decentralised public networks, like blockchain, are working to create a new global digital commons for the wealth of the world. This new commons is largely advocated and used by us, the early adopters, who as a collective support an alternative world view. We believe in a crypto-centric world, run on tokens, and we can see that the revolution is already underway, but it is still very early and there is a huge amount still to build.
As all public networks are community led, this blog looks at the ideological ingredients that are necessary to build a successful public ledger community.
A Differentiated Reason to Exist
Technology only forms one component of this. There are many examples of technical undifferentiated products that coexist in the public ledger space.
Ideology and greed are the two biggest driving forces in the blockchain space today. While greed is a good short term motivator, it does not fire the imagination of the communities that are needed to actually support the building and maintenance of a decentralised public network.
Ideology creates long term communities that are willing to get over short term usability pain and inconvenience.
“He who has a why to live can bear almost any how.” - Nietzsche
An Engaged Community of Believers
Product market fit for a decentralised public network is found at the convergence of personal ideology and justified belief in its future utility.
The more ideologically aligned the purpose of the ledger is with my own ideology (or an ideology I can be convinced of), combined with the more certain I am of the team/technology/communities ability to deliver a product that helps my ideology become a reality, the more successful a token will initially be.
For the community to be actively engaged, it cannot feel or seem invincible - people need to feel they NEED to help to make sure it succeeds, because that is in fact the truth of it. It must simultaneously sound robust enough that it might be important, but weak enough that if you don’t help it won’t win. People mobilise to help vulnerable things they believe in.
The basis for ideological trust in a public network, such as blockchain, is the degree to which it is decentralised. This has four main drivers, three are covered in great detail here, and the fourth in detail here. In brief:
- Fault Tolerance - decentralized systems, such as blockchain, are less likely to fail accidentally because they rely on many separate components that are not likely.
- Attack Resistance - decentralized systems are more expensive to attack and destroy or manipulate because they lack sensitive central points that can be attacked at much lower cost than the economic size of the surrounding system.
- Collusion Resistance - it is much harder for participants in decentralized systems to collude to act in ways that benefit them at the expense of other participants, whereas the leaderships of corporations and governments collude in ways that benefit themselves but harm less well-coordinated citizens, customers, employees and the general public all the time.
- Resistance to Arbitrary Change - public networks provide infrastructure that is intended to be integrated deeply into the lives of the people that rely on it. This means any change, even small ones, to how the protocol works is likely to have massive ramifications.
Nothing galls people more than a perception of injustice. If token distribution is done badly, or is seen to massively favour “insiders” it creates a bad taste in the mouth for anyone who is coming to fight the cause. People do not like to feel that their efforts are going to make other people unreasonably wealthy without getting a “fair share”.This component is critical as even if the ideology is right, if the value attribution feels unfair, the movement will fail to get off the ground.
Functional Governance in a decentralised public network
Do I have a voice if I need it? Does anyone have an outsized degree of control or sway? Are decisions made in an open and honest way?
Minimally Extractive Services of a decentralised public network
“Protocols provide structure for businesses, but are not businesses themselves; they are systems of logic that coordinate exchange between suppliers (businesses) and consumers of a service. As coordinators of exchange, protocols should be minimally extractive, whereas businesses are incentivized to be maximally extractive (that’s profit, and a business is valued as a multiple of its profit).” - Chris Burniske, Placeholder
As a network grows in size and moves from being an ideologically experiment to something more serious, businesses and individuals will start to make more economically grounded decisions. The cost now becomes a huge component in the choice to use a network.
This is where the normal maxim of “build a product your customers love and charge as much for it as you can” is turned on its head. In order to achieve network dominance, you need to remove any possible barrier that may turn the choice away from your network.
This is an important consideration in how you build your economics and incentive structures. The functions and security of a network is either paid by the user or paid by the balance holder - there are no free lunches. This means that either the fees charged in a transaction cover the marginal cost of processing a transaction (currently true of NO current public ledger), or there is an emission of new tokens (e.g. bitcoin blockchain block rewards) that increases the circulating supply of tokens, reducing the value of token balance holders holdings, but making up the additional cost of running a node.
In many ways this can be seen as the equivalent to VC funded growth in a social media application. Building the network effects until an inflexion point is critical, and should be subsidised up until the point that the platform has established a critical mass.With a token, even this function can be done in a decentralised manner.