Incentivising participation and growth in communities (using crypto-economics)
This post in co-written with Adriana Truong and meant to be accessible to a large non-technical audience. This is a continuation of the more technical article I wrote on Dynamic Token Bonding Curves.
Introduction
A common tool for building communities is the ‘Commitment Curve’. It helps community leaders map the level of commitment a member has and the effort they are willing to expend for the community. For example, a member with a low commitment level may be able to attend an event passively, whereas a member with a very high commitment level may be able to organise a community event in a different city. This is best visualised with a graph:
The Commitment Curve helps community leaders to organise their ideas on how to improve the experience and increase engagement of their community members. However, it is a subjective tool and requires clarity/guidance on the activities to engage members.
Applying crypto-economics to Commitment Curves
What if we could apply the game theoretic and crypto-economic principals inherent in cryptocurrencies to improve the design of the ‘Commitment Curve’, making it more objective? If a community could create its own token to reward, on its own schedule and according to its own criteria, members who contributed to the community, what possibilities would be created?
In this post we highlight some areas which we believe community specific tokens can empower community leaders to build more sustainable communities, helping to surface everyone’s contributions to the community. We call this the Khana framework.
The Commitment Curve vs Dynamic Token Bonding Curves
Previously we put forward the case for using individual dynamic bonding curves for each token holder. This resulted in a few important properties which are best highlighted with the following examples (as shown in the top right graph):
- Person A (blue line): Early contributors to the community would be rewarded, but the value of those rewarded tokens would reduce over time, if those early contributors became less active in the community.
- Person B (red line): A regular contributor would continually earn more tokens over time, with each successive token making all their individual tokens worth more, incentivising them to continue to contribute more as long as they truely believed in the community.
- Person C (brown line): A periodic contributor would earn tokens according to when they were active in the community, therefore their contributions would still be recognised even if they stopped contributing for a few months.
In the above scenarios, the ‘worth’ of the tokens can be either economic (e.g. have some dollar value) or non-economic (e.g. only have value within that community, such as allowing entry into an event). This is discussed in detail later.
When we overlay the dynamic token bonding curve graphs with the ‘Commitment Curve’, we see that the bands for each commitment zone still apply. This creates an objective indicator for where a member is at anytime in the ‘Commitment Curve’. In other words, the number of tokens a member has in proportion to the token supply is a good proxy for a member’s community engagement. This enables community leaders to customise certain activities to ensure members are continually moving up the ‘Commitment Curve’, helping to create an objective measure of community engagement on all levels of the community.
The rest of this post will go into more details on the problems the Khana framework solves for community leaders.
Problem 1: Lack of participation or engagement in communities
Many communities suffer from a lack of participation from members — this can be easily seen from groups with thousands of members, but only a handful of active participants. For these communities, the handful of active participants are mostly intrinsically motivated, so will not feel the need to earn tokens for their contributions.
However if these members no longer receive their intrinsic rewards, then they will burn out and stop participating. These intrinsic rewards are specific to each individual, and can range from their alignment with the core value proposition of the community, or how much they feel they belong to the community. We therefore believe it is important to ensure all current and future members are highly aligned to the health and growth of the community, to ensure these core intrinsically motivated members remain active contributors.
For the extrinsically motivated or passive members (those who only consume and do not contribute), we believe we can increase their participation and convert them to active members by incentivising them with both non-economic and economic community tokens, explained below.
Non-economic tokens
For community tokens with no economic value, the community leaders can create significant social value within them. For example, community leaders could create a VIP member tier which gives access to invite only events. To become a VIP member, members need to earn at least 1000 tokens from contributing to the community.
Since communities inherently ‘know’ who the highest contributing members are, the tokens in this case help surface and emphasise the importance of member contributions. The community leaders decide what these tiers are and whether there are other benefits to achieving different levels. For example, the top 10 contributing members could be invited to a special event or to help govern the community as part of a DAO.
Economic tokens
Community leaders can also back the value of their tokens with real funds. These funds can come from a variety of sources, from sponsorships to ticket sales. In this case, the members are able to earn tokens with real tangible economic value, which they may liquidate for a portion of the underlying funds.
It is important to note that in both cases, crypto-economic mechanisms ensure that members are continually incentivised to contribute, as the ‘turn over’ of tokens is designed to redistribute token supply portions. More details can be found in the previous technical post.
Problem 2: Not knowing the high value assets or skills that are within a community
Communities are made up of many individual members, whom may have certain skills, resources, or connections that may be greatly valuable to the community. These members may happily contribute these skills/resources/connections to the community, however they may not know that the community needs them.
In these cases, we can incentivise the surfacing of these skills and networks by creating mechanisms to highlight where the community needs help. Simplistically this could be the community’s leaders putting out a call for help in certain areas with incentives to refer members (e.g. we need to find a larger venue for our meet ups, starting in January), or more complex mechanisms can be implemented that involve the top token holders in a Token Curated Registry to list the top community priorities. [1]
Problem 3: Not having enough resources in a community
Incentivising and awarding community members in the early stages is incredibly difficult for resource restricted communities. The usual approach is to find a core group of supporters who are willing to volunteer in the early stages.
Khana creates an early economy based on community contributions. This allows the early community to leverage the tokens as a resource, by rewarding tokens (that have no economic value at the time) to contributors, with the ‘protocol’ level promise that the tokens will be economically valuable in the future if the community succeeds.
How do the tokens gain value in the future, on a ‘protocol’ level? Using dynamic token bonding curves, the tokens can be funded by future revenues of the community. For example, as the community becomes more successful, it may begin to generate revenues from donations, ticket sales, or sponsorships. When this happens, a portion of those revenues can be sent to the smart contract to give the tokens economic value. The more revenues which are sent to the smart contract, then the more economic value the tokens will have backing them.
Problem 4: Finding early adopters
One of the challenges we have faced in building communities is finding the early adopters who will actively participate and contribute to a community. Using the same mechanisms as above (for resource restricted communities), we are able to award the early adopters for their contributions in helping to build the community.
As the Khana framework is designed to be economically valueless in the early stages, the types of people who are willing to contribute in return for (or perhaps, in spite of) valueless tokens, are exactly the types of people you want in your early community. These are the aligned members who want to see the community grow, with no guarantee of their contributions being rewarded in the future. They are ‘the crazy ones’ who will usually be your most dedicated members. With the tokens, you are able to reward them to acknowledge their contributions, and if the community ‘succeeds’ in the future, they will receive some upside from their contributions. This creates a win-win situation for both the community leaders and early adopters.
Problem 5: Ensuring the community continues after core leaders move on
A problem in many communities, especially non-commercial communities, is continuation and succession of the community when community leaders step down from their positions. Khana can help solve this problem by incentivising community leaders to complete a succession process before they leave, ensuring the successful handover of the community. Besides the intrinsic motivation of seeing the community continue to grow without them, community leaders can be further motivated with the tokens they have already earned. In other words, the tokens they earned will either increase or decrease in value, depending on how well the next community leader succeeds in growing the community. Therefore they essentially have a ‘stake’ in the future success of the community, even when they have stepped down from the community.
We experienced this when trying to scale the Creative Coffee events beyond 15 cities around the world. Initially volunteer community leaders would organise the events, however due to resource restrictions, the effort needed to organise the events, and generally life happening, the community leaders needed to step down from organising the events. We believe that if we had access to a framework such as Khana, our community leaders would have been more strongly incentivised to seek out a viable and successful succession plan and new community leaders, to ensure their communities continued to thrive on after them.
Frequently Asked Questions
We don’t want to make money from our community or involve money in any way. Can this still work for us?
The Khana framework is not designed to enrich community leaders. It is designed solely as a way to incentivise and award participation in communities. Community leaders can also decide to have no economic value captured in the token, to keep their community purely non-monetary. The crypto-economics still work in non-monetary situations.
Does this mean some rich person can take over the community?
No. There is no buying mechanism, so people cannot buy the token. They can only ‘earn’ the token by actively contributing to the community in some way. Depending on how strict the community leaders want to be, they can also disable ‘sending’ of the token to ensure that the community tokens are not sold on secondary markets.
However there may be reasons to allow secondary market activity, as it may also incentivise stronger community participation if the bonding curve is not sufficiently funded.
For details on the backing of the dynamic bonding curve, see the technical article.
When is the ICO? When moon lambo?
There is no ICO or unnecessary tokens forced into the Khana framework. All community tokens are specific to that community, with backing funds being the choice of the community (but will most likely be ETH or a stable coin). At the moment the Khana framework is an open source MVP (solidity contracts + dApp front end) with a relatively well-thought out crypto-economic design.
How does Khana make money?
We have a few ideas around this (add on services, analytics, etc) however we do not plan to monetise at the ‘protocol’ level. Due to the open source nature of our smart contracts, if we did monetise at the ‘protocol’ level, developers could easily fork the project and remove any rent seeking we implement.
We are also keen to experiment with crypto-native business models, e.g. earning the community’s token for providing the service for free. In this case, we would only make revenue if the underlying community succeeded in growing.
This is an area of open experimentation for us.
Want to be involved?
If you’re interested in trying this out in your community (whether big or small), reach out to us — david(at)truong.vc. We’re looking for communities with strong leadership and some base level knowledge of ethereum, or at least, the motivation to learn the basics of ethereum (we can teach you).
If you’re a developer, we have deployed contracts on Rinkeby and a simple dApp interface that can be used via dApp browsers such as Coinbase Wallet and Status. We’d love other developers to contribute with issues and PRs (and we may even ‘eat our own dog food’ and use Khana to grow Khana — more on this later).
[1] Interestingly this opens up potential for adopting aspects of decentralised community governance, where the most dedicated and engaged community members are able to help decide the direction of the community.
Thanks to the following people for reviewing drafts and providing highly valuable feedback: Carrie Melissa Jones, Ariel K, Mackenzie Living
