Boson Ecosystem Value Flows
What values does $BOSON represent? Which incentive mechanisms make value flow in the Boson dCommerce network?
“It’s the carrier properties. Boson carries non-fungible value between the metaverse and the universe”, explains the physicist when asked where the name came from.
“I wanted to share some docs on the importance of developing our dynamic capabilities. Business models, dynamic capabilities, and strategy are interdependent. The strength of an organization’s dynamic capabilities help shape its proficiency at business model design” says the business strategist.
“Boson Protocol enables a commerce ecosystem which is resistant to capture by monopolies and where participants are not farmed by platforms.” says the product visionary who uses ethical modes of reasoning.
The best part of token engineering is getting to work with polymaths — and yes, all three quotes above are from Justin Banon, CEO of Boson Protocol.
The initial mapping of value flows based on the whitepaper was an easy ride, as the thinking was clear. Continuously checking our assumptions is the adaptive fun ride: when strategy and product teams reach out into the real world ecosystems and come back with insights that inform the incentive mechanism design, model, and simulations. This actually is the system modelling the system.
In previous blog posts, [Marina Markezic's Governance Design Principles] we also elaborate on how that system will progressively decentralize. A process that already is in progress through knowledge sharing and empowering team members within an open learning organization that is Boson Protocol.
In this post, we focus on the questions of how value flows into and through the dCommerce network, which Boson Protocol enables:
The Value Creation: Commitment Token
“Commerce refers to the exchange of goods, services, or something of value, between businesses or entities.” — from Investopedia.
eCommerce, i.e. the commercial exchange in the digital, with the delivery of the actual goods, services, experiences in the physical world, has come to be dominated by a few. Even in new markets they enter, they quickly create monopolies. Antitrust laws seem to be ineffective. Their success is because they “seemingly” optimized away “friction” of commerce: you can expect to get the quality product signalled by the star ratings — and if you don’t you can send back the item and get a new one “at no additional cost”. Seemingly — because they have optimized their system for customer satisfaction (lowest cost, express delivery) but externalized the negative effects (actual cost of their inefficiencies) by making everyone else and nature pay. The customer isn’t really given a choice but to be an accomplice.
Boson Protocol, in order to be able to deconstruct that broken system and rewire valueflows optimally, uses what we call a Commitment Token: a non-fungible token, which represents the promise of the exchange between commerce partners — and embeds a game-theoretic solution to keeping promises:
Commitment Tokens are governed by Boson’s core exchange mechanism, which is a type of sequential game in which buyer and seller commit deposits up-front. Game rules and the final deposit transfer scheme are designed in a way that coordinates transactions and incentivizes parties to behave fairly. Or more formally, we say that: “subgame perfect equilibrium” implementation corresponds to the honest behaviour of both players.” This is what we refer to as “no-complaint redemption”: Practical atomicity here means the buyer either gets the item or gets refunded. There is also a quality check, where game theory comes into play: Deposit transfer scheme incentivizes that either the seller delivers high quality goods and the buyer does not complain, or the seller delivers low quality goods, then buyer complains — and seller admits to it.
With this value creation pattern to enable trust-minimized crypto-native commerce in place, we can now move on to understanding the value accrual and distribution mechanisms through $BOSON:
The Value Accrual and Distribution: $BOSON Token
The token of the network, $BOSON, not only represents the value of the growing dCommerce network. $BOSON also incentivizes to optimize the network’s primary goal:
Maximize supply of high-quality no-complaint redemptions.
In the following section, we will discuss the network and its tokens in 3 phases, and the approximate roadmap: Phase 0 “Ecosystem Success” describing the dynamics of open-source protocol development and Phase 1 “Things” describing the dynamics of bootstrapping of the ecosystem. Phase 2 “Money” and Phase 3 “Data” will be detailed as we progress. Eventually, Boson Protocol foresees a three token model: $BOSON the token representing the value of the network, the “Commitment Token” smart contracts, stateful NFTs which handle the exchange of goods & services from the digital into the physical world. “Thing Tokens” as ERC20 fungible counterparts for buying particular Commitment Tokens will be introduced with Phase 2.
We make use of valueflow diagrams as a common language. Valueflow diagrams is an established best practice in token engineering thanks to Zargham and his background in both systems engineering and systems thinking: These are stock & flow diagrams with slight adaptations to annotate “policies” on the flows as labels. These policies make up the incentive mechanism design space, which we shape and verify through computer-aided design and simulations. When viewing the Systems Dynamics with value-flow diagrams, actors (agents) are abstracted away to bring focus to system level properties, such as conservation laws. For the agent-based simulations, our assumptions of the behaviour of specific agent groups (roles) are added in the mathematical model and computer simulations. These assumptions are continuously updated through actual information from the deployed system.
Now you’re ready to…
…Follow the value flow…
Phases “Zero to One” are all about bootstrapping:
Ecosystem Success: Community-first Development
In Phase 0 we focus on community-first open source software development. $BOSON in the Ecosystem Fund is distributed to developers and participants to incentivize for optimizing the dCommerce networks goal: Maximizing supply of high-quality, no-complaint redemptions. Incentives are set to create projects and products from the community and ecosystem for the ecosystem.
This pattern draws from Trent’s Web3 Sustainability Loop and was explained as part of our adaptation in the dCommerce Sustainability Loop post: “Network rewards are distributed to staking participants. This creates growth and incentivizes new network users… Participants propose and stake on features they want to see, co-creating a dCommerce stack that satisfies the needs of developers, sellers, and buyers. This causes the network to grow in revenue and $BOSON to represent that value.”
The distribution policy of $BOSON from the Ecosystem Fund will be determined by the state of progressive decentralization we are in: “The process we are in right now is the vision transfer process, where the founders are transferring their vision of the Protocol to the core community” of designers and developers. Network rewards for incentivizing further participants such as aggregators, resellers, curators etc. to increase the supply of high-quality Commitment Tokens, will also be distributed from the Ecosystem Fund.
How does the Ecosystem Fund grow? As we will see in the following sections, network usage is one of the multiple network revenue streams.
Commitment Tokens in Metaverse to move Things in the Universe
Sellers offer “Commitment Tokens” for the delivery of physical things in the universe. These NFTs get minted when a buyer commits to buy a Commitment Token. The game theoretic approach unfolds, which in its happy path leads to delivery of the physical things, and no-complaint redemptions of the extracted NFT — make sure to watch the repo for documentation updates!
Aggregators, e.g. platforms or marketplaces for sellers, can increase these value flows in bulks, and hence are to be incentivized through network rewards. Sellers and Buyers temporarily lock up deposits during the game. Using $BOSON as the deposit can be rewarded with reduced network fees. Every successful no-complaint redemption results in release of the deposits in full. In this phase, the steady growth and network activity can be measured by $BOSON locked in deposits in relation to lock up durations. No-complaint, low-complaint redemptions can be measured in deposit retainer amounts.
Resellers have intrinsic motivation to curate high quality Commitment Tokens, i.e. popular or rare products for which no-complaint redemptions are likely. Aggregators already have some information on the reputation of sellers, which they will use to enable offering and minting of Commitment Tokens for which no-complaint redemptions are highly likely.
Every participant who works for the common goal to maximize the no-complaint redemption is incentivized by network rewards in $BOSON.
In this phase the Ecosystem Fund in $BOSON grows through network fees.
Speed of Flow! Financialization and Data enter the Equation
As explained above, Aggregators and resellers have intrinsic motivation and sufficient insights to curate high quality Commitment Tokens. There are however, additional, systemic incentives for a liquid curation market: every time Commitment Tokens are offered and bought, commercial data on the physical things on offer as well as preference data on buyers’ side becomes available. For reference, we label these two phases “Money” and “Data.”
In Phase 2, we make use of cryptoeconomic primitives tested in DeFi for (a) market-driven curation of high quality Commitment Tokens (b) dynamic price discovery, as well as increasing the speed of flow. Increasing speed in fluid dynamics requires decreasing viscosity, i.e. in our case creating liquidity for Commitment Tokens. These objectives are realized through minting of “Thing Tokens’’ and allowing them to float in DeFi through e.g. Balancer Pools. Again, these mechanisms are optimizing the network coordination for the goal of maximizing supply of high quality Commitment Tokens:
These “flavoured” Thing Tokens can be used to buy those particular sets of Commitment Tokens. As opposed to value flows around the Commitment Tokens with a static price and non-fungible delivery of specific goods, the Thing Tokens enable a liquid financial representation of those goods. The yield that participants can make through staking, increases with the increasing supply of no-complaint redemptions of Commitment Tokens. The network fees add up in the Ecosystem Fund with this increased network activity and inherent incentives for quality assurance.
The network fee surplus in $BOSON flows back into the Ecosystem Fund to be redistributed as network rewards and fund Ecosystem/Community projects. In addition, some of the surplus can be used to buy back and market make in DeFi.
Every offered and bought Commitment Token creates commercial and preference data. With the speed of quality supply increasing, the potential data available will also increase — making Boson Protocol an enabler of equitable and ethical use of commerce data. Boson Protocol will connect with Ocean Protocol in Phase 3 such that sellers and buyers can choose to share their data in a privacy-preserving manner and get network rewards by doing so. The revenues from the data buyer flow directly into the Ecosystem Fund.
… to its dCommerce conclusion
“Simple, clear purpose and principles give rise to complex and intelligent behaviour. Complex rules and regulations give rise to simple and stupid behaviour.” — Dee Hock, creator of VISA.
The Valueflows diagrams depict how Boson Protocol incentivizes the participation of all existing and new roles in online commerce, by aligning values according to its dCommerce value creation pattern: keeping promises. In the coming weeks and months we will continue building out the products, the pods as we call them, for ecosystem members to dock on to Boson Protocol.
Enjoy the ride!
If the prospect of building the pods to dock on to Boson Protocol together with the core developers excites you, make sure to check the job postings. If you are the free style Bosonaut Join our Gitter to tune in for when our repos go public for contribution.
Acknowledgements
The valueflow diagrams are based on the whitepaper written by Justin Banon, Gregor Borosa, with inputs from Akaki Mamageishvili on game theory; advice from many, especially Trent McConaghy through his contributions to token engineering and through Ocean Protocol v3, Michael Zargham through his advice on the game-theoretic approach and system dynamics. Special thanks to Anish Mohammed on Protocol Design discussions, Shawn “Ygg” Anderson on Token Engineering, Marina Markezic for inspiring exchanges on Governance. Many thanks to Jonas Seiferth for the strategic inputs and Holly Atkinson for reviewing and improving this article.
About Boson Protocol
Boson Protocol’s vision is to enable a decentralized commerce ecosystem by funding and enabling the development of a stack of specialist applications to disrupt, demonopolize and democratize commerce.
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