TEGG 2019 — the current state of building blockchain token economies
The TEGG 2019 (Token Engineering Global Gathering) took place during Berlin Blockchain Week 2019 in Berlin. Since it’s inception in May 2018 the Token Engineering community has grown quickly and made some major steps towards establishing Token Engineering as an engineering discipline in its own right.
How to design a token economy, how to leverage its potential? How can we create sustainable tokenized networks? What are today’s major challenges to be solved? TEGG 2019 focussed on the how of developing token economies. Here’s a wrap-up of talks and discussions at TEGG 2019, you can find the full program here.
Six key takeaways:
- Fundraising is still the most important motivation to launch a token, despite regulatory uncertainty and highly volatile markets
- Knowledge and sophistication in establishing and maintaining an active token network is still early-stage
- Trust and stability are key factors for successful token economies, hence all projects will benefit from collectively maturing the space
- A first definition of Token Engineering as a new scientific discipline is currently emerging
- There’s a new role in blockchain project teams for building token economies, combining expertise in data science, economics and engineering
- First token engineering open-source tools available, plus funding initiative kicked off for progressing the field
We’ve been working with principles like double-entry bookkeeping, the theory of a firm etc. for around 500 years. Now we got an opportunity to turn the concept of debt and equity with a rather trivial kind of financial instrument into a much broader universe, call it a form of collective capitalism — more effective for the business, and actually ultimately more progressive and more equitable for society as a whole.
That’s due to this infinitely programmable nature of an underlying token. The tools now at disposal of an entrepreneur are way more potent than they’ve ever been in history.
Richard Muirhead, Fabric Ventures at TEGG 2019
Without a doubt, the potential of tokenized economies is huge: We’ll be able to design economies from scratch and reward new, more complex value contributions. We’ll have data available and can establish feedback loops to monitor and improve. Due to these feedback loops, we’ll be able to create highly adaptive systems which we are lacking today, while facing increasing pressure to address global-scale complex problems, like sustainability.
Shermin Voshmgir elaborated on this new potential and suggests a new classification beyond security/utility tokens:
a) Asset and access right tokens (challenge mainly in legal engineering)
b) Purpose-driven tokens (challenge in economic engineering)
Research to build the foundations for token economies
Economic engineering is what we are currently trying to establish with Token Engineering. Why is research so important here?
Think of those new economic systems like the engine of a car. Over time, certain well understood components become a standard, like cylinders, valves, or spark plugs. For token economies these could be mechanisms for funding (bonding curves), staking and verification (consensus), signaling and reputation (TCRs), voting and structured decision making (governance/DAOs).
In order to develop robust building blocks we need basic research and experimentation — Shruti Appiah gave a great example in her talk on Artificially Intelligent Economies.
The good thing about token economies is that we don’t have to start from zero. We can benefit from decades of research e.g. in economics, decision theory and game theory. Jamsheed Shorish’s talk offered a great overview on how incentive reward mechanisms have been (theoretically) explored since the 1950s. Computationally driven approaches like machine learning enhanced the methods to study more complex, decentralized systems— and finally blockchain distributed ledger technology allows us to eliminate shortcomings (e.g. Byzantine Fault Tolerance for consensus mechanisms).
The challenge for this new scientific field is to combine and align different disciplines, all based on different mental models, scientific schools and languages. Kris Paruch outlined the current definition of Token Engineering as a scientific discipline — “using tools from mathematics, physics, biology, computer science and engineering and applying them within the domain of economics”.
Michael Zargham then vividly demonstrated why and how we can engineer these systems, similar to how engineers create complex systems in robotics or industrial automation.
A new role in blockchain project teams
The challenge for blockchain projects is to apply these components to specific cases: select the right building blocks, refine and adapt them, and establish feedback loops that will help grow a specific economy. Just like optimizing universal car engine components towards specific use cases, eg. a racing car or a public transport vehicle.
This challenge requires specific competences — we’ll see a new role emerging for blockchain projects.
Ben Livshits shed a light on recent project failures and the root cause of such problems. Simulating designs will be key to prevent flaws in a system — including the relevant knowledge in data science, analytics, engineering and economics.
On top of this, being able to transfer a strategy to a token system will be a key competence as Sebnem Rusitschka exemplified in an energy sector case study, The TAO of Token Economies.
Sharing knowledge and experience
We can’t develop this new role without sharing knowledge and practical experience. Some of the highlights at TEGG:
- Ocean Protocol’s Dimi de Jonghe shared his „Engineering Notes on Launching the Ocean Network + Token — and all the things we didn’t think of“,
- Nina-Luisa Siedler introduced an initiative to define governance structures and provide transparent and coherent information on decentralization (highly relevant in the light of Libra),
- Jamie Burke, Richard Muirhead and Erick Zhang shared an investor’s point of view on launching a token economy, a panel moderated by Jonathan Gabler
- Cassidy Daly showed the long-term impact of wealth distribution on network prosperity (Why Should We Care about Token Distribution?)
- Paul Kohlhaas reported on legal challenges for bonding curve designs and Caleb Sheridan on irrational behaviour of system agents
- Wassim Alsindi presented A Visual Approach to Characterising Cryptoassets
- we had three projects presenting their efforts and results in token engineering and research: Status/Jarrad Hope, Truebit/Jason Teutsch and ditCraft/Marvin Kruse.
- and two crowded workshops (cadCAD introduction with Michael Zargham, Jeff Emmett and Cory Levinson / AMA Tokens & Regulation with Nina-Luisa Siedler and Alex von Goldbeck)
Token Engineering Commons — first tools and funding
Last but not least, to put Token Engineering into practice we need funding and tools. The Commons Stack is working on this by building a library of DAO components to provide sustainable funding and decision making infrastructure for community-driven economies. They have invited the Token Engineering community to fork the Commons Stack components (when they become available), and launch the Token Engineering Commons.
This ecosystem funding DAO (think MolochDAO but with continuous funding through the Augmented Bonding Curve, to start) will unite siloed researchers under a common incentive framework, to provide ongoing funding for the further development of Token Engineering tools & practices. As one of their first major releases, the Commons Stack open-sourced cadCAD at TEGG: an emerging standard cryptonetwork simulation tool, developed by the team at BlockScience.
The Commons Stack project is now live and seeking funding to produce their rigorously engineered, interoperable components for use by any project — if you’re interested in becoming a contributing member, click here!
Token Economies are one of the most disruptive tech innovations of our time. For putting them to good use, we need to develop and grow our knowledge and community.
You can be part of this. Sign up for our newsletter at tegg.io, join one of the world-wide Token Engineering meetup groups or become a member of Token Engineering Gather — the tokenized Token Engineering Community , which we‘ll launch together with Protea (thanks Florian Bühringer and Wayne van Niekerk!) to experiment on token-driven community development.
Many thanks to all speakers at TEGG for making this another milestone for Token Engineering. And to the volunteers of TEGG — without you, TEGG wouldn’t have been possible.
In particular I’d like to thank Kris Paruch for curating TEGG’s research track, and Shermin Voshmgir, Michael Zargham, Jeff Emmett, Jakob Hackel, Trent McConaghy and Anish Mohammed for most valuable discussions prior to and at TEGG.