Developing Micro-Economies via Work-in, Not Buy-in

“When the Last Tree Is Cut Down, the Last Fish Eaten, and the Last Stream Poisoned, You Will Realize That You Cannot Eat Money” — Alanis Obomsawin

As we begin to encounter more and more decentralized applications testing the very parameters of centrally controlled, incumbent systems, the market for app-based token sales has exploded. In fact, over the past month (from the time of this writing), “ICOs” have raised over $1B.

At the same time, many token-less applications that leverage parent blockchains like Ethereum and Bitcoin still force the user to “buy in” by converting fiat currency to the blockchain’s operating token (either ETH or BTC) and each exchange of value requires the payment of increasing transaction fees.

Interacting with exchanges alone serves as a huge barrier to entry for even those with enough capital to invest in cryptocurrency, let alone those who don’t have enough capital to stay ‘banked.’ This obstacle prevents mass-adoption of DApps that try to push the token aspects of blockchain rather than emphasizing the utility of decentralization and trustless economies. From a financial inclusion perspective, the “Buy-In” nature of blockchain applications assumes that under-resourced localities even define value the same way westernized communities do (via fiat currency rather than utility that directly add to the consumer’s quality of life). Remember, you can’t eat money.

The Problem of Buy-In Economies

Both avenues of app tokenization and the general usage of better founded crypto currencies requires that potential users buy in to the digital micro-economy, sacrificing a minimal, upfront cost of participation that can be upwards of $10 just to pay for gas fees on generalized Blockchains like Ethereum (and require an even higher minimal balance cost for Bitcoin).

You’d think that $10 as a minimum cost of participation is quite minuscule, but at least 80% of humanity lives on less than $10 a day, making the investment to participate in the blockchain economy economically infeasible for the majority of the world. More than 80 percent of the world’s population lives in countries where income differentials are widening. The poorest 40 percent of the world’s population accounts for 5 percent of global income. The richest 20 percent accounts for three-quarters of world income.

For these communities, the world’s vast majority, the utility of most emerging technologies isn’t realized until decades after mainstream adoption through charitable, tertiary markets. The irony is that the promise of decentralization upending corruption and relieving macroeconomic issues like national hyperinflation and multi-party transparency is most useful to impoverished communities. In fact, given the high quality of life of the world’s privileged minority, the western world does not need blockchain, it simply wants it in contrast to the surviving majority.

A Work-In Economy

One grand proposition that the SteemIt Blockchain has matured through the development of its decentralized social media platform is the mechanics a “working in” economy rather than a “buy in” economy. In fact, both economic templates can be analogous depending on how your system defines “value,” the way zed value can be transacted, and the user experience constraints you’re binding your system to to ensure user adoption.

“There are two ways people can get involved with a crypto-currency community: they can buy in, or they can work in. In both cases users are adding value to the currency, however, the vast majority of people have more free time than they do spare cash. Imagine the goal of bootstrapping a currency in a poor community with no actual cash but plenty of time. If people can earn money by working for one another then they will bootstrap value through mutual exchange facilitated by a fair accounting/currency system.” — SteemIt

The idea of “bootstrapping value through mutual exchange” is extremely powerful in the context of social impact. Finding ways to mold your blockchain architecture to protect users from transaction fees and build a micro-economy of services that is mutually tethered to incentives (and disincentives) provides a more sustainable pathway to interface impoverished communities with blockchain technology.

The concept is not exclusive to the SteemIt blockchain, and can be implemented in ecosystems like Ethereum and others through the clever usage of smart contracts. uPort, for example, allows its users to evade transaction fees by leveraging its fueling server “Sensui,” which pays gas fees for the user. The alleviated transaction fees widens the potential user base for the identity tool, better democratizing access to the technology.

An Economy of Votes

A major tenant to the “work in” ideal is the establishment of a voting system of token holders. The opportunity to earn currency is directly correlated to the opportunity to work, but the challenge is how to judge the relative quality and quantity of work that individuals provide and to do so in a way that efficiently allocates awards to millions of users (SteemIt).

“The first step in rewarding millions of users is to commit to distributing a fixed amount of currency regardless of how much work is actually done or how users vote. This changes the question from being “ Should we pay? ” to “ Whom should we pay? ” and signals to the market that money is being distributed and is being auctioned off to whoever “bids” the most work .” — SteemIt

The act of minting value within a work in economy that functions on the basis of exchanged services re-establishes economic incentives around enhancing the quality of life of that community. A true utility token only has value when the transactions it accounts for are valuable to the transacting community. The token is just a method ‘keeping score’ between the services being exchanged. What’s even more important is how score is being kept when determining a fair payout system based on the work being done.

“The next step is to reward everyone who does anything even remotely positive with something . This is accomplished by ranking all work done and distributing proportionally to its value. The more competitive the market becomes, the more difficult (higher quality or quantity) it becomes to earn the same payout.” — SteemIt

In a social impact economy, ‘ranking all work done’ could be accomplished by simply letting community members determine which services (or, better put ‘actions’) are in most demand via a vote. This is the near equivalent of developing a curated registry of needed services, a system well-supported by the Token-Curated Registries (TCRs) protocol, which literally dedicates its micro-economies to curating lists in a well-ranked order, where token holders are the voters.

Edit* Of course, this is not to say that token holder voting is the sole solution for a local micro-economy, particularly one that is under-resourced. A proof-of-concept demonstration may simply use highest service transaction volume as a list curation determinant, rather than a more complex voting system. In the end however, the issue of voting speaks to the need of economic self-governance, and to posit that under-resourced communities do not have the ability to self-govern the value of bare-necessities is an extremely ethnocentric view.

In this example, with a TCR layer as the foundation of ranking service exchange in a work in economy, capital is directly tethered to the overall community’s quality of life, with no transaction fees or even the need to convert to crypto. All transactions would be in that community’s local token and transacted automatically between vendors and consumers alike.

Accounting for Quality of Life

In the end, a utility token work in architecture is simply an accounting mechanism for that locality’s quality of life. Developing micro-economies like this are essential to fast-tracking development in impoverished areas and recreating economic incentives that have since failed due to corruption and corporate exploitation. Hopefully, with time, blockchain can change the world for people who need it.