2023/08/24 Update, This article has been translated by 黃豆泥 in Mandarin! I’m proud to see it’s happening right now, so if you haven’t read this one, also you can read it in Japanese.
- Mandarin version: 賦稅作為終局之戰
- Japanese version: エンドゲームとしての徴税
the internet of money is the fundamental paradigm shift
In the decade, the internet finally got a layer of value as Crypto. which means you can issue tokens by yourself. (but, whether the token has a price or not is depend on you).
It‘s such a huge change in the paradigm, A lot of experiments on valuable internet A.K.A. Crypto are happening right now.
Just as anything that relied upon information was deeply changed by the original internet, I believe that the internet of money will enable a deep structural change in how value transfer occurs in society. While most of the digital asset market is focused on banking (DeFi) and art (NFTs), I remain focused on long tail use cases like The Internet of Jobs and digital public goods
I envision a Public Goods Rebel Alliance that grows to build, fund, and maintain all sorts of public goods. Such an alliance would be a pluralistic, global, decoupled, & decentralized public goods funding juggernaut (as opposed to our legacy infrastructure which is comprised of (1) nation-state governments which is highly coupled + only serves the public goods of its citizens & (2) NGOs, which are high administrative overhead and generally dependent upon large donors ).
I believe that the internet of money is the fundamental paradigm shift that enables the creation of this infrastructure.
There are existential risks that the nation-state public good architecture is not well set up to handle.
- Climate change is a global existential risk that is not bounded to any nation.
- Misinformation is a global existential risk that is not bounded to any nation.
- Underfunded Digital Infrastructure is a global existential risk that is not bounded to any nation.
- There are many many others: nuclear proliferation, environmental risks like deforestation or pollution, resource shortages, etc.
We’ve spent not a short time and wasted a lot of money on scam projects in “Web3”. However, there are some projects that are keeping their feet on the ground, repeating experiments that are “unique to crypto,” and testing their hypotheses little by little.
above text quoted from Kevin Owocki’s post, who is the founder of Gitcoin from the article.
One of the hypotheses of “How we can / should distribute budget for Public Goods (FUNDING PUBLIC GOODS)” is, almost done In my opinion. We have a couple of examples, Gitcoin and Hypercerts are doing well.
There’re “Distribution ways” are good. However, We should find a way to get the budget source and accomplish a more sustainable way to going to be bigger. So, recently, I feel that thinking more deeply about “Taxation” is necessary to advance a lot of projects. Especially, almost project has technology but, if only this, it’s not enough to implement in the world. Distribution is the most important resource to accomplish the project’s goal.
Maybe basically, you’ll imagine a nation when heard the word Taxation, of cause, this concept from the public sector. it was born to build the nation as a community. IMO, taxation is included in social contracts to re-distribute public goods.
the reason why I’d like to mention social contracts in the crypto context is, we finally got currency issuance and enforcement by code. we can see similar points in the nation-born history and the latest crypto stuff.
We must negotiate with budget source institutions if we can’t build a Taxation structure. Our future depends on our ability to implement.
Writer Info: I founded Civichat in Japan which is Web2 Startup in Gov-tech, the chatbot recommends the best public welfare services based on your situation. The reason why I wrote “founded” is, it was a failure. We’ve tried to find a way to become a Gov-tech company as a startup from a Civic-tech project, But selling a service for the government is such a struggle and complicated.
First, Introduce the latest budget distribution way for “How to increase the efficiency of the process of consensus building and funding public goods” which is experimenting in Ethereum Ecosystem with background information. (e.g, Gitcoin, Hypercerts)
In the middle, The Taxation mechanism, like Partial Common Ownership which is such a radical license mechanism, and Retroactive Public Goods Funding which is one of the distribution ways from the budget as retroactively powered by Optimism (L2 Public chain) is the most exciting case to learn
At last, I’d like to share some perspectives beyond crypto:
- How authentic public sector can experiment with some of the cutting-edge technics from governmentality research (e.g., RadicalxChange, Plurality community)
- How NPO find a way to Taxation from their ecosystem and grow the ecosystem around themself
Experiments are what cryptocurrency is all about. The most exciting thing about crypto is, beyond crypto to implement in the world. Let’s get started!
Why Ethereum ecosystem have “the notion of Grants”?
because They have the incentive to increase the ecosystem itself.
Ethereum ecosystem has a bunch of grants. One example is, “EF Ecosystem Support Program” which is Funding open-source projects that benefit Ethereum, with a particular focus on universal tools, infrastructure, research, and public goods. But, Not only from Ethereum Foundation(EF).
- Moloch DAO is Investment DAO for Public Goods, which has been donated by EF and Consensys.
- Gitcoin has been donated by a couple of projects that have grown to a certain scale (including EF and Consensys, above mentioned) and NFTs funds which build themself.
And, you can see some of the grants as project-specific when you go to Grant’s list page on EF.
The public blockchain ecosystem is a nation-state
WHY? Often, I compared Ethereum ecosystem is a nation-state.
In this example, a nation-state is one of the ecosystems. which has the currency, Citizens who live there, work, manufacture, And, the right for Citizens which is “Freedom of Movement” across municipalities, prefectures / States, and nations.
If the nation can’t provide “A Better Public”, Then, decreasing the population, and tax revenue. and again and again and again. At last, they’re going to be stuck to invest in Public because they don’t have much tax revenue. it’s just a feedback loop.
A company or a country is in decline, you can try voice, or you can try exit. Voice is basically changing the system from within, whereas exit is leaving to create a new system, a new startup, or to join a competitor sometimes. Loyalty can modulate this; sometimes that’s patriotism, which is voluntary, and sometimes it’s lock-in, which are involuntary barriers to exit.
…
And we can think about this in the context of various examples and start to get a feel for this. So voice in the context of open source would be a patch; exit would be a fork. Voice in the context of a customer would be a complaint form, whereas exit would be taking your business elsewhere. Voice in the context of a company, that’s a turnaround plan; exit is leaving to found a startup. And voice in the context of a country is voting, while exit is emigration.
…
So exit is really a meta-concept: it’s about alternatives. It’s a meta-concept that subsumes competition, forking, founding, and physical emigration. It means giving people tools to reduce influence of bad policies on their lives without getting involved in politics: the tools to peacefully opt out.
likes above, the concept of “Exit” can see in the nation. And, I’d like to say we can see this Public Blockchain. Ethereum is one of them, and we now have Arbitrum and Optimism…, maybe more example is born-ing right now.
Anyway, back to the concept. I mentioned Ethereum ecosystem is a similar to nation-state. When you hear “the nation”, probably imagine police, military, and law, there public services that are sourced by the tax as budget.
What’s Blockchain (Ecosyetem) provide
As background information, I’d like to introduce what Ethereum and Ethereum Foundation (as government) provide, basically 2 kinds of functions.
- as a “World Computer”
- Fund for public goods
that’s all, I thought.
First, (Public) Blockchain is the business of selling blocks. for unstoppable, decentralized value transfer over the Internet.
All that is needed to provide block space is a minor / validator, which is necessary to run the blockchain itself in the first place.
Daily mining issuance rewards from Ethereum are about 13500 ETH, or about $40m, per day. Transaction fees are similarly high; the non-EIP-1559-burned portion continues to be around 1,500 ETH (~$4.5m) per day
Blockchain sells blocks, and it’s powered by a minor / validator. it’s required to run itself.
okay, who is going to buy blocks? the answer is Dapps / Projects.
For example, the motivation for building a DEX on Ethereum could be purely commercial: “I can make more profit with this application than the cost of buying blocks.”
The structure is not different from that of a normal industry: “buy the infrastructure of block (at a low price), process it (in the context of putting an application on it), and then sell the service. Then, a fee can be charged for the use of the service.
The reason why DEX is being used is that it is expected to work better than the existing Institution (a financial system that runs on top of a world computer).
…
If you have the question: “Why does reworking the existing Institution structure with a crypto project work?”, it is a good question to review the history of the blockchain.
History of Blockchain
- In 2005, Greece was on the verge of a breakdown in talks between the government and its bailout creditors and imposed restrictions on the amount of money that could be withdrawn from bank accounts in order to prevent bank failures.
- In 2008, the subprime mortgage crisis triggered a global financial crisis. Lehman Brothers collapses, and many banks and financial institutions around the world require government bailouts. The so-called Lehman Shock.
Now, maybe you understood what blockchain provides.
but, As I mentioned in the example of the nation-state, even if it’s Ethereum itself, also competes with other L1 Public Chains.
Public Blockchain, by its very nature, is permissionless, which will inevitably lead to more “voting by exit”. The following are the main points:
- Technical Indicators
- Performance as a world computer.
2. Technical characteristics
- Scalability, etc.
3. Ecosystem Growth Indicators
- Are there people and goods circulating in the Public Chain in the first place?
- (In reality, things like “ease of movement between one Public Chain and another” are getting easier and easier)
4. Ecosystem Indicators
- Is it easy to port applications created in other Public Chains?
It is easier to understand this structure if we compare it to other examples. For example, nations or regions.
- The language of the EU is English (I assume) and the currency is the €. In Japan, people move from one country to another with the same ease as if they were commuting to school across prefectures.
- The atmosphere will change as the location changes, but if the language and laws remain the same, you can imagine how much easier it would be to immigrate and emigrate than it is now.
- If, in addition to this, there are no immigration checks or visas (you can become a member of a country/ecosystem without needing anyone’s permission), it would be much easier to move to another place if the atmosphere of that ecosystem does not suit you.
What I’d like to say in the section is, In an ultimately permissionless world, citizens themselves can express the strength of their preferences for the ecosystem through voting by exit/move.
Above, introduced about compare point as a world computer. Next, What public chain should solve the problem is, Funding Public Goods.
Ever since the Declaration of Independence of Cyberspace in 1996, there has been a key unresolved contradiction in what can be called cypherpunk ideology. On the one hand, cypherpunk values are all about using cryptography to minimize coercion, and maximize the efficiency and reach of the main non-coercive coordination mechanism available at the time: private property and markets. On the other hand, the economic logic of private property and markets is optimized for activities that can be “decomposed” into repeated one-to-one interactions, and the infosphere, where art, documentation, science and code are produced and consumed through irreducibly one-to-many interactions, is the exact opposite of that.
There are two key problems inherent to such an environment that need to be solved:
Funding public goods: how do projects that are valuable to a wide and unselective group of people in the community, but which often do not have a business model (eg. layer-1 and layer-2 protocol research, client development, documentation…), get funded?
Protocol maintenance and upgrades: how are upgrades to the protocol, and regular maintenance and adjustment operations on parts of the protocol that are not long-term stable (eg. lists of safe assets, price oracle sources, multi-party computation keyholders), agreed upon?
basically, the public blockchain has a foundation organization itself that accomplishes Funding for Public Goods. and, their purpose is similar to the current traditional government.
I quote the below text from my friend Mashbean, who is a DAO contributor and currently works in the Taiwan government, ministry of digital affairs (moda), section of Plurality. He is actively working to build a bridge between the traditional government and the web3 public sphere, striving to create a connection between the two worlds.
I have had conversations with friends who worked on highly successful ICO projects, such as Mask. I have also chatted with grant reviewers from different public chains, such as the Solana Foundation, Tezos Foundation, Ethereum Foundation, and others. Although their initial intentions may differ, they all play a role in funding digital public goods to some extent. Different investors with different ideologies or policies will bring extremely different prospects to the ecosystem.
fully agree about his comment. And, I’d like to show one of the examples of How the foundation team is working. Which is Ethereum Foundation.
In this article, EF introduced itself, and how grants allocation decisions are made.
In my opinion, The foundation model is basically similar to the concept of “Government as a platform” (from Gov 2.0: The Promise Of Innovation).
Now that you have some understanding of the “Public goods are good” in the previous chapters, let’s look at the incentives to invest in public goods. The incentives for this Ethereum Foundation and others to invest in public goods are much the same as for existing states.
But how to grow those public goods, that is the question. I will first discuss how existing states can support public goods.
Funding Public Goods
The difficulty of funding public goods
Public goods (that is, goods that benefit everyone, non-exclusively) are hard to fund through private markets. Because nobody can capture their benefits, everybody tries to “free ride” and supplies less than their fair share of the shared benefit. It is a classic problem in economics.
Centralized funders, like governments and philanthropists, often step in and try to correct this market failure. But they create issues of their own. Specifically, they sometimes fund things that the community would not have freely chosen
Legitimacy for Distribution Mechanisms
Public goods are good, but funding sources can only have a positive impact on public goods if they can be distributed legitimately.
Legitimacy means different things to different populations. To myself, it means a mechanism is credibly neutral, and can consistently direct funding towards those who are delivering the most value for public goods, without being captured by other interests.
In this chapter, Gitcoin and Hypercerts are presented as typical examples of projects that distribute funds for public goods.
Experiment #1: Gitcoin
Gitcoin is one such project that has greatly improved the “ethics” of deciding how much money to distribute for which goods.
I think it is a notable project in the Ethereum ecosystem in the sense that it has taken the so-called “distribution of grants” to the next level.
Previously, a centralized, single decision-maker such as the Ethereum Foundation determined the projects to be funded and the number of grants, but Gitcoin has introduced Quadratic Funding (also called Plural Funding, Quadratic Finance, etc.) as a method of distributing funds that do not rely on a single decision maker.
What is Quadratic Funding?
Insufficient funding for public goods is a foundational problem in public policy, especially for local governments. The proverbial “tragedy of the commons” occurs because individuals have natural incentives to “free ride” on others’ contributions to public goods.
A 2018 paper by Vitalik Buterin, Zoe Hitzig, and Glen Weyl proposed a new mechanism design, Quadratic Finance, that addresses this problem by redesigning the philanthropic “matching fund.” It optimizes matching funds’ usefulness by prescribing larger matches for projects or causes that received donations from more people.
Namely, the total funding for a proposal is the square roots of each private contribution, summed up, and then squared. We’ll go through this formula step-by-step in the next section. The research behind Quadratic Finance shows that it optimally aligns individuals’ private incentives with the public good. Thus, QF actually solves both the “information problem” (government doesn’t know how much of each public good to provide) and the “free rider” problem (individuals will under-contribute and free ride on others’ contributions to public goods).
The appeal of matching funds.
Matching funds are a valuable fundraising tool for public goods, which helps address this problem. In essence, they allow centralized funders to collaborate with decentralized donors. Central funders (who provide matching funds) and small donors (who provide the “matched” funds) each use their money to incentivize one another in the service of a shared goal.
Matching funds have several clear benefits:
They harness decentralized information about what should be funded
They make philanthropic or government spending more efficient and responsive
They help maximize fundraising by giving central funders and small donors greater incentive to contribute
About Gitcoin
And Gitcoin, which implements this mechanism on the Ethereum ecosystem, distributes funds to public goods projects in roughly the following flow:
- Public Goods projects are listed in a regular grant distribution round called the Gitcoin Grant Round
- Any citizen of the Ethereum ecosystem can donate to their favorite projects
- Based on where they donate and how much they donate, funds are distributed to each project from the Matching Pool (the grant budget)
The points are distributed to each project from a grant budget called the Matching Pool, and the number of donations from citizens can be used to indicate the strength of the donors’ preferences, allowing for more democratic decision-making than is possible with traditional distribution methods.
Gitcoin has distributed $50M+ to projects in the Ethereum ecosystem through this mechanism. experiments with NPOs around the world in cooperation with UNICEF. (which means, BEYOND CRYPTO!!!!!!)
in my view, Gitcoin is the leading crypto project ever born. they’ve tried to experiment and educate about Quadratic Funding, in terms of theory, is such complex but they prove how it works in the crypto space.
Where does the Gitcoin Grants Matching Pool Money Come From?
However, the budget source (QF’s Matching Pool Money) of the Gitcoin grants round is currently dependent on donations. the fund from Ethereum Foundation, some grown projects, and, funded a dozen of community members.
Here is the timeline of Gitcoin Grants fund sources:
- Rounds 1–6 were funded by the Ethereum Foundation (and sometimes small donors).
- Rounds 7–10 were funded by DeFi protocols like Yearn/Synthetix/Chainlink, investors like three arrows capital, and dozens of other Community members
3. Round 11+ is funded by (in addition to previous funding mechanisms) NFTs like Moonshotbots. Gitcoin has tried to fund from NFTs Fund (Moonshot Bots) which achieve to fund $1.8M from the community.
but, they don’t have any update at least recently. And, the website was shut down.
Kevin Owocki, Founder of Gitcoin wrote the motivation for funding gitcoin grants from some projects is some reasons:
- helping build the Ethereum ecosystem
- supporting specific categories (Covid, climate change, crypto for change, media, infra tech, dapp tech)
You can see some insightful notes in Owocki’s post
also, Vitalik Buriten, funded Gitcoin in such an early stage and wrote in Gitcoin Grants Round 7 Retrospective like this:
The remaining question is, of course: how sustainable will these incentives be? Are the altruistic and public-relations incentives only large enough for a one-time burst of donations of this size, or could it become more sustainable? Could we reliably expect to see, say, $2–3 million per year spent on quadratic funding matching from here on? If so, it would be excellent news for public goods funding diversification and democratization in the Ethereum ecosystem.
Absolutely Gitcoin’s experiment is brilliant. but, to be honest, the fund source is still not sustainable. it still has not competed.
Experiment #2: Hypercerts
Hypercerts is a data framework for tracking the impact left by a given project.
Project owners can issue Hypercerts as NFTs, explicitly indicating the “scope of work,” “timeline,” “contributors,” and “rights gained by owning Hypercerts. It should be noted, however, that this is not in itself enforceable.
This project is a framework for evaluating impact, rather than a specific method of distributing funds, such as the Gitcoin described above. It does not compete with the numerous Funding Mechanisms but exists as a data layer.
If you can reasonably expect to be funded retroactively for your work after you have created a positive impact, then you can do your work with the expectation of a probabilistic future cash flow.” As stated, it is hypothesized that the ability to track impact will activate the distribution of grants through mechanisms such as Retroactive Funding.
Actor of Hypercerts
below is my view as a comment:
- Contributors are people who set up projects, and founders of NPOs and the like may also fall under this category.
- I think Prospective funders are often for speculative purposes. However, in the case of a public goods project, the “IPO (Exit)” is the distribution of funds by the retrospective funders. This funder is specifically Investment DAO or it could be paraphrased as “VC who invests in NPOs.”
- Retrospective funders are so-called (conceptual) governments. Who directly benefits from the project? In the case of RetroPGF, it is Optimism itself. This funding comes from L2 Sequencer Fees. (more details explain later)
Example dynamics between actors in an IFS
- Contributors mint (create) Hypercerts
- Prospective funders support the project and receive Hypercerts
- the project proceeds with the money raised
- Retrospective funders pay Evaluators to evaluate the project
Example: (more details to follow) I think the relationship is like “Shibuya Ward tries to implement SIB and outsources the evaluation to a consulting firm”. In this case, I think Evaluators need to be somewhat familiar with the area. The same goes for badge holder - project receives funds from Retrospective funders
- the project receives funds from Retrospective funders
Hypercerts is SIB on Cryoto
When I first saw Hypercerts, my impression was that the structure is quite similar to SIBs (Social Impact Bonds). This form of “measuring the impact produced by public goods and distributing rewards accordingly” is being experimented with in real governments, albeit only partially.
This similarity makes tremendous sense. Since [public blockchain ecosystems are like states], the question of how to distribute subsidies for “good public goods doesn’t really matter whether it’s a state with mass or an Ethereum ecosystem.
The “measuring the impact of public goods projects and retroactively distributing rewards to them” is being experimented with by real governments. Specifically, a system called SIB (Social Impact Bond) has been implemented.
Examples include:
- prevention of dialysis through dietary health guidance for diabetic nephropathy patients
- increase in early detection of colorectal cancer by encouraging people who have not yet been screened for colorectal cancer to take the test
In SIBs, funds are distributed from the public administration to public goods projects. Now, this “administration” can collect taxes from citizens’ transactions of goods, which will provide the financial resources to subsidize public goods.
This begs the question, how do you finance it?
Funding Sources (Taxation, All you need)
Mainly, I introduced two technics of fund/budget distributing for public goods, Gitcoin and Hypercerts. they’re trying such interesting experimenting in crypto and outside of crypto.
The Gitcoin and Hypercerts projects introduced so far are projects that are exploring “how to distribute funds in an acceptable manner based on the assumption that funds are available.
However, is the financial resource sustainable? Therefore, taxation is necessary to sustainably fund public goods.
With the above out of the way, let us explore the most seemingly promising (recurring + deepest liquidity + legitimacy) funding sources for blockchain-era public goods.
In existing states, tax collection was achieved based on coercion by police and military forces. So how can the Ethereum ecosystem support public goods?
One is the same way as taxation on sales, as shogochiai mentions in the following tweet:
The protocols that can generate fee will flow all of its own fee to gitcoin, etc. to maintain the OSS that supports itself.
In a similar opinion, Vitalik also tweeted:
Taxation what crowds (scarce resources, negative externalities) and subsidize public goods
Example of a mechanism that can have its own taxation
Taxation is congested and distributed to public goods. To do this principle in a foolproof manner, it is necessary to start with the tax collection layer.
L2 Sequencer Fees
The founders of the Optimism L2 network have pledged to donate 100% of their network’s early sequencer fees to the public good of the Ethereum network.
Note that these are “private” profits, rather than “public” issuance, so this pledge was made at the discretion of the founders of Optimism, baked into their network design. This sidesteps some of the legitimacy challenges with EIP 1559 / EIP 1890 issuance.
Since Optimism does $100k/day in sequencer fees, this is a promising way of funding public goods. It satisfies both our criteria of being a deep well of funding and being a recurring source of funding.
Since Optimism is a L2, it does not have the same security assumptions (nor need to stay credibly neutral in governance) as the Ethereum network. L2s are islands of experimentation in which funding for public goods can be baked in at the protocol layer.
Retroactive Public Goods Funding is using fees from L2 Sequencer Fees
One of L2 Public Chain’s Optimism’s initiatives to grant funds for public goods is the Retroactive Public Goods Funding (RetroPGF).
RetroPGF works in that all profits on Optimism are allocated to this experiment (funding public goods), as follows:
1. Create a DAO, and turn all Optimism revenues over to this DAO.
Where the revenue comes from the profit from the “Sequencing” work on Optimism.2. The DAO decides which public goods (open source projects) to distribute the accumulated funds to.
The DAO evaluates the results based on whether the project has already made a contribution, not on whether it will be useful in the future. This is why the DAO’s name is described as the “Results Oracle.
The DAO will initially consist of about 20–50 technically savvy people.
The point of ‘choosing among projects that have already made a high contribution’ is important, because it is easier to reach consensus within the DAO since it is more obvious to choose those that have already made a high contribution rather than what will be useful in the future.3. Once it has been decided where to fund, there are multiple ways to fund the project, including
- Individuals and organizations
- Contracts
- Project tokens
The top two are simple funding, simply sending funds (ETH) to an address.
When funding a project with 3 tokens, you create a buy order for the project token using the proceeds to be distributed. This will create a lower limit on the price (the blue line in the figure) so that the project token holders can sell and monetize the project tokens and push up the value.
This mechanism differs from public good funding projects such as Gitcoin and Hypercerts in that the profits from ORU’s sequencing are used to fund the distribution of funds.
In other words, the profits of the Public Chain are distributed to public goods.
Optimism is exploring a structure in which taxes are collected from the use of services and distributed to public goods, and I believe that it is closer to a sustainable structure than the other services introduced in this article.
Griff Green introduced OP’s experiment. quote some images. more details on Youtube.
OP’ll distribute for public goods 30MOP ‘s values 45M$
・・・
Partial Common Ownership
Partial Common Ownership is a mechanism that is expected to allow the goods themselves to have the ability to collect taxes.
Partial Common Ownership is a mechanism that is expected to allow the goods themselves to have the ability to collect taxes.
Specifically, it is as follows,
Assume that a city has space for 100 stores to open a farmers’ market. However, suppose there are 300 local food vendors who would like to sell their products at that market. In this case, how do we select the businesses that can open a stall?
With Partial Common Ownership, the stall space is auctioned off to the highest bidder of 100 stores. The license holder then pays an annual fee “to keep the license”. The amount of this fee is n% of the self-assessed/assessed value. And here is where the magic of Partial Common Ownership comes in: if another business pays more than the license holder’s self-assessment, the original holder must transfer for that amount.
https://www.radicalxchange.org/media/papers/The_Handbook_for_Radical_Local_Democracy.pdf
- Sell a set number of licenses. We recommend using a
Dutch auction (i.e., descending price) or a Channel auction.10 (In a
In channel auction, there is a lower bound price, which gradually
rises, and an upper bound price, which gradually descends.
Buyers are committed to buying, for at least the lower bound price,
but may purchase directly at the upper bound price at any time.) - Holders post their self-assessed valuations in an online
platform and pay annual fees on them (e.g., a 20% fee). As
mentioned above, the right annual fee rate will be somewhere
between zero and the turnover rate (i.e., the probability that a
higher-value purchaser comes along within a year). - Purchasers who value the asset higher may buy it at any
time in the online marketplace.
At first glance, this is an ordinary auction, but by conducting a self-assessment, the “people who can make the most use of the goods” will be allocated. The n% of the self-assessed value goes to the joint treasury as a “tax”.
The theory promises that this gives us more productive and just markets than capitalism and communism. Follow this excerpt from GlenWeyl and Eric Posner’s 2018 book “Radical Markets” to read more about the mechanism’s political-economic philosophy and mechanics: https://assets.press.princeton.edu/chapters/s11222.pdf
RadicalxChange’s Podcast: Partial Common Ownership/Plural Property: In Conversation with Will Holley, Graven Prest, and Kevin Seagraves, they also discussed the topic of “using tax-collected funds to fund QF and UBI (Universal Basic Income) as a source of funds,” among other topics. This meeting is quite long, but it also touches on the concept of ownership, loans, and types of capital. I highly recommend listening to this recording if you are interested.
This mechanism seems particularly applicable to goods such as land and artwork, which are limited in number (competitive) and also derive value from the network to which they belong.
Categorize for Public Goods, what’s the matter to implement PCO:
This mechanism used in the art ecosystem, called “This Artwork Is Always on Sale” is one of the interesting Partial Common Ownership use cases.
First launched on March 21, 2019, these NFT, digital artworks explore digital art with novel property rights associated with it. Using the Ethereum blockchain, it is possible to introduce scarcity of ownership alongside novel economic and property rights. Inspired by Radical Markets, this artwork follows a modified Harberger Tax (COST) property ownership where the tax on the property (patronage) is collected only by the artist. It is perpetual royalty.
Through this, it asks a few questions:
Does this digital art property rights system change the relationship between collector/patron and artist?
Does allowing for a more readily available avenue for patronage create more revenue for an artist?
Does this property rights system allow for more sustainable funding of creative works?
Does an always-on auction and market for arts and subsequent speculation/pricing change the relationship towards the art and the artist?
Does the increased turnover of the digital art and subsequent possibility of ownership by more people increase the value of the art (financially and artistically)?
Does always-on-sale art help us understand how much of our currently life is already always on sale without us knowing it?For more information, read this article: https://medium.com/@simondlr/this-artwork-is-always-on-sale-92a7d0c67f43
The first artwork has a patronage rate of 5%. It was restored after it was discovered that it was damaged. A new edition was created, launched in June 2020, using a new patronage rate of 100% in order to continue experimentation. You can check out more technical details, fork this project, and create your own artwork here:
Side note: In addition to Partial Commons Ownership (PCO), this mechanism is sometimes called “Plural Property,” “SALSA (Self-Assessed Licenses Sold via Auction),” “Harberger Taxes,” and many other names. These names all refer to the same mechanism.
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