A lot of people are asking us what value of iO2 economics? So in this post, I would like to give my explanation here.
(If you only wish to know the economics urgently, please go to the last two paragraphs.)
Let’s first understand what is iO2 tokens and what is iO2 tokenomics. iO2 token is fundamentally a cryptocurrency to exchange data with all stakeholders of social development, including 2.6 billions people in developing context. iO2 tokenomics is about the economic activities using iO2 tokens, for people to use digital utility or asset to trade for social services or commodities as incentive. When there is a scalable solution for data ownership, iO2 tokenomics is the marketplace of personal data in developing regions for sustainable and ethical social development.
I think a lot of people will then ask why we need to create a cryptocurrency to lift up the bar for data analysis, because all current data collection and generation processes are almost free in developing region. When I say it is ‘free’, usually the data owners do not know their data is used. Or in some cases, compensation is available but the value obtained by the corporation is way bigger than those who contributes it. Lastly, for data collectors or analysts, it is only shifting the cost from paying directly to the owner for quality data, to intermediaries providing services of data cleaning, data auditing, and fixing problems of bad analysis due to low quality of data. In fact, free data is a lose-lose game.
Therefore, I approach this question not only about fairness, but more about maintaining the quality of analysis from its source through taking away those middlemen. Garbage in, garbage out! We need quality data to run good analysis. I have been to many meetings that data scientists were asked to create a genius algorithm, but the data source is poor. There is really nothing they can do with the algorithm. Especially in social development space, high quality data collection is extremely costly, labor intensive and time consuming. For example, an RCT (randomized control trial) can take years and spend millions of dollar on hundreds of people to collect data. Eventually impact can be measured after years, and new policy can be made after a decade. Therefore, policymaking is always lagging behind.
Accountability method, or any kind of deincentivization system, as a way to control data quality, will only further complicate the operation, than make it more costly. Therefore, we need a fair and win-win situation, a trusted environment, to incentivize quality data generation.
Data ethics is the fundamental source of quality, and eventually going to save cost. Doesn’t it sound strange that when we help everyone to better protect their data, the cost of gathering quality data and running quality analysis can be more efficient?
Data Divide and Data Literacy
Internet technology improves urban life, but further widen the gap between the developed and the developing. It is not only about accessibility of information, but also about disconnection between databases privatized by different corporations. Data literacy is the capacity of individual to manipulate, argue and make use of data or data technologies to optimize their decision. It can be as simple as using uber App to get a taxi, or as sophisticated as developing an AI to trade stocks in a bank. Data literacy causes significant data divide, thus contemporary inequality and poverty.
If one does not aware of the value of their own data, they will not care the quality of it. In our experience, we saw a lot of different strategies of data collection. There are mainly two ways.
(1) Deincentivization mechanism. If the quality of data is bad, data intermediaries (those we collect data) or data contributors will be punished.
- Usually involve another level of middleman to audit and check data.
- Usually involve a fix pay, and a deduction rate.
(2) Incentivization mechanism. We can also call this value co-creation. If a good quality of data is uploaded, the data intermediary or the data contributor will be rewarded.
- Reward can be a game, or a fun experience.
- Reward can be convenience.
- Reward can be monetary.
We see a dramatic growth of data quality from incentivization mechanism, comparing to those from deincentiviation mechanism, because the process of data generation becomes relevant to the data owner. However, such game theory only incentivizes people to earn instead of being honest. I discussed in my last post about the concept of bilateral trust. It is a systemic interaction between people and machine. In the world of blockchain, people keep using the term trustless. It does not mean no one trusts each other. It means trust is no longer relevant, and the trust is particularly to the middlemen. As middleman is decentralized, the transaction environment is trustless, so that people can actually trust system. This is the starting point of bilateral trust and quality data.
People care about their own possessions more than others’. Facebook and Linkedin incentive good data, because they let people manage their own account. Therefore, people will take care of it and maintain it. The incentivization mechanism is no long convenience, but ownership. I care how other people see me digitally so I will always update it. Therefore, it becomes a big deal when facebook’s data is used for other purposes, literally because it touches the concept of data sovereignty. The paradox is again, even though it is my data, but Facebook is hosting that. They promise they will not exploit it. So it is a choice of me to trust or not trust them. ‘Trust’ becomes the source of the problem.
Data sovereignty let people define their own territory of privacy digitally. When half of everyday life of everyone is digitized, there is a bigger need to create mechanism for people to protect and maintain their data territory. Centralized data technology requires middleman to protect everyone’s privacy and people will undoubtedly raise the question of trust.
Data is value. Not the commercial value, it is literally the economic activities of everyone. In a traditional term, data is GDP, which is the measurement of how wealthy a country is. In digital world, data is not only a value for analysis or utility, in terms of megabytes, but also representing the value of personal possession, such as my rights to use my land or my rights to access my house. Mr. Zhang Wei from Mana Data Technology Foundation in China, an expert of data ethics, stated that, previously it is only a process of datafication of objects, but now it is the process of objectification of data, due to decentralized technology or unreversable digital ledgers.
Here comes to the actual argument about why iO2 cryoto economics (or tokenomics) is valuable. In the iO2 blockchain stake, there are two levels of data. The offchain data, data stored in local servers, are personal data of individuals. Same as typical internet technology, each person’s data is gathered together in a ‘container’, but different from internet technology, the ‘container’ is guarded by a smart contract. Every one has a decentralized authentication system, i.e. decentralized. So no one can change or steal the ‘password’, but only the owner. If it got change, such activity will be prenamently documented on blockchain network. For example, if I am using Gmail, technically Google can cancel my account if they do not like me. In this case, we only need to decentralize the authentication part, but still able to keep the big amount of personal data locally, but guarded by the smart contract, in order to compile GDPR requirement and create the trustless ownership environment.
Once we do that, all data is no longer free, but owned by the owners. To create concept of ownership for originally free resources is very usual in human’s history, such as land ownership. Originally everyone farmed on a territory, but modern society created land ownership, then the marketplace of real estate appeared. Marketplace is needed because such resource is scarce or highly demanded. It is the same for personal data nowadays. There is no way to delay the inevitable about this, and the Facebook incident is only a start. When data is tradable and a marketplace of data has already been there. The most possible exploitation targets will be those without data literacy — the lowest hanging fruit. Then no one will trust any system to contribute real data. Inversely, if we are able to create ownership for those people, the size of data marketplace will expand dramatically, because we are talking about another half of global population to join the digital economic space.
About the onchain data of iO2 tokenomics, it is all about the meta data of transactions, i.e. who collect data from who at when and where. Because iO2 tokens are used to exchange data, all transactions are documented on the chain of iO2. Therefore, the entire impact data marketplace for social development is transparent and unreservably documented on the blockchain network of iO2. Then this will replace data auditing middlemen, minimize fake data, and avoid data crimes essentially.
If iO2 tokenomics is the marketplace of data exchange in developing world, iO2 tokens are the cryptocurrency to compensate or reward data owners for others to use their data. The use case is explained in our White Paper v3.2.4. But in short, one needs to receive iO2 tokens, in order to give out his data from his data container guarded by the smart contract and only able to be unlocked by his decentralized ID. iO2 token is the consent of authorizing a third party to use the personal data, because such transaction is documented on iO2 chain between specific decentralized ID holders.
Why social enterprises and local people wishes to use iO2 tokens instead of fiat to reward data contribution? There are three reasons:
1. If they are not using fiat to reward, they still need to spend more money to conduct some sorts of data auditing. But rewarding with cyprtocurrency and with iO2 onchain data, all the auditing has automatically been done for free.
2. iO2 token value is solely depending on the demand and supply of personal data marketplace, and independent from macroeconomics. For example, the growing collective desire to privatizing personal data, the higher the value of the tokens are, so the beneficiaries can exchange for more social services. If a developing country in developing regions bankrupted, and its currency’s value is zero. All the personal data value is maintained by iO2 tokenonomics. In simple words, iO2 token, as a collective representative of personal data’s value, will be more resilient than economic systems in developing world.
3. Fiat is not that useful, comparing to digital payment solutions in developing world. In a village in Africa, people tend to digitally trade items, instead of spending 1 days to go to a bank.
Then what is the value of iO2 tokens? There are three angles to estimate that.
1. As iO2 tokenomics is originally designed to serve social finance data analysis, or in the blockchain term, the oracle of social finance smart contracts. So from this perspective, the overall tokenomics (all tokens added together) equals to the need of the social finance market to gather data for analysis. According to 2030 SDG plans, there are 32 trillion funding gap needs efficient impact measurement data. Usually the cost of data collection for impact measurement ranges from 2% to 20% of the budget of investment. We will set the value of token according to how much social finance uses iO2 system from the foundation, starting from US$0.001 for fixed 114 billion tokens. In our model, if we serve only 1% of the SDG funding gap market, the token value will be US$0.076. For detail numbers, please check the White Paper. The growth of the value of the tokens will depends on the size of social finance funds adopting iO2 system. This estimation is from the utility and demand side.
2. The second consideration is the awareness of individual to own their personal data. I will argue the majority users of iO2 system are from developing regions. So far, the awareness is very low, therefore data can be free or very cheap (US$0.001). It takes only 10 years to urban people to realize the value of personal data. It takes US$50 to bring a new users online for some taxi App to contribute their travel data. iO2 will engage 100 millions users in year 4, all from developing regions.
Data marketplace has already been there supported by blockchain, such as streamr.io, a blockchain technology for people to sell personal data. I had a long discussion with the founder at Zug, it creates a marketplace for data. Money is always the scarcity in development regions, but digital devices penetrate such market so rapidly. It will take 3–5 years for people in developing regions to catch up the speed, not because who is learning from who, but literally because digital economics is in fact more effective in developing regions. We cannot quantify awareness for the model, but the higher the awareness of data sovereignty, and the higher the desire for data marketplace transparency, the higher the value iO2 tokens will be. This is arguing from the supply side.
3. The last argument is the new ways for data to be used supported by blockchain. Blockchain technology helps the transformation from digital utility to digital asset. This idea does not only refer to how people can keep their own data, but directly link to their asset in reality. For example, the aerial image of farmland defines land ownership digitally. The data is not only a utility for research or census, but actually represents the real asset of farmland. Decentralized ID creates the linkage between the owner and the asset in reality through decentralized technologies. The value of the 5mb image data thus represents the value of the land, instead of just the data flow. One can use this data (or the smart contract) to become the mortgage for a loan to buy seeds. Therefore, iO2 tokens and iO2 tokenomics then set up the marketplace of shadow economy, a specific economic system based on digital exchange of possessions in developing regions.
About Impact Oxygen Foundation (iO2)
Impact Oxygen Foundation, iO2, is a Hong Kong-based decentralized autonomous organization for crowd-enhanced impact investment on the blockchain, underpinned by iO2 Token which incentivizes the communities to provide trusted data for impact measurement. Since 2015, the iO2 team has successfully developed and executed over a dozen social impact projects in China via its service platform named “ShanZhai City” (shanzhaicity.com), and now are engaging blockchain-based projects in Myanmar, Laos, Thailand and Brazil. Join our Telegram group (https://t.me/io2_impact_oxygen) to share your thoughts and get your questions answered.
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