Community Sacrifice In Cryptocurrency

Community Sacrifice

Every ICO talks about the value of their ‘community’. This article takes the stance that ‘community’ means nothing while community sacrifice means everything. Community sacrifice is the willingness of any individual in a group to commit resources ( time, wealth, social capital, etc ) to the relevant group ( protocol ) with no clear expectation of return for those committed resources. The sacrifices can manifest themselves as a variety of things including mining or spreading the word, but the important piece is that those initial adopters do so without an obvious payoff or upside.

Furthermore, the level to which individuals in a community are willing to sacrifice is an excellent predicting factor in long-term network value.

Bitcoin as an example

Bitcoin is a great example of a protocol and token that was bootstrapped with community sacrifice. Satoshi made the initial sacrifice with everything from the ideation, to the implementation of the protocol, to the initial POW contributed to the chain. These initial sacrifices bootstrapped the network and encouraged other early adopters to join and sacrifice their resources as well.

In this sense community sacrifice, taps into social proof and mimetic theory where the action of sacrifice encourages others to do the same. Community sacrifice signals a strong ethos, mission, and as is the case with crypto-assets, token value.

The beautiful thing about community sacrifice is how well it scales. To this day people build products and features on top of the Bitcoin and Ethereum ecosystems without any expectation of payoff.

The ICO Problem

A network with little to no sacrifice has a lower chance of sustaining long-term value. Unfortunately, this an issue that plagues most ICOs.

Running an ICO takes many opportunities for community sacrifice off of the table. In the best case, ICOs allow founders and early members to pay themselves comfortable salaries. In the worst case, ICOs enable people to become millionaires almost immediately and without having to provide any value. I’m not here to debate the morals of these decisions, but purely to speculate on the effects ICOs may have on the sacrifice is a community is willing to make.

An ICO has two large negative effects on community sacrifice. Firstly it increases the initial market cap by a few orders of magnitude before would be ‘sacrificers’ can join in. The higher initial market cap lowers the upside that any marginal community member can gain from joining the community and purchasing the token. This market cap jump lowers participation in the community.

Secondly, sacrificing one’s time and resources in a way that directly enriches others without reciprocation does not feel right. Resentment and envy are very large players in the human psyche. Any logical person who is choosing which community to commit resources too may see the individuals who launched the ICO as freeloading from their sacrifice to be. Who wants to work for free for the clear monetary benefit of others?

The same benefit from mimetic theory in previous examples becomes a detriment to ICO enabled networks. People don’t want to do work for free when they see others doing the same work and getting paid. In this scenario, one of the only ways to attract the marginal dev, user, or speculator is to pay them rather directly. This behavior leads to a more mercenary-style culture, where the first thought is whether one can extract value from the network rather than if one can provide value to the network.

Eventually, these organizations run out of money. What happens to development and community management when there is no longer a guaranteed pay? Zombie networks. Networks with no devs, no active GitHub, and no network value. The only thing that remains is the token that may forever remain as an unspent transaction output.

State of today

Today most crypto-asset networks have little to no community sacrifice. This should be a cause for concern on those networks. On the other hand, some networks ( BTC, ETH, XMR ) appear to be kept alive and thriving due to those who continue to build on them without a clear value proposition. As time goes on, it can be expected that community sacrifice will continue to be seen as a main driver of network and ultimately token value.

Shout-out to Chris Derose for inspiring many of the points of interest here and needmoney90 of the XMR community.