Tokenomics: Building a token economy for peace
Update: the below represented our original proposed token economy but we have made some changes in response to feedback, the final version can be found in our white paper at www.ananas.org.uk
At Ananas we are tackling a large problem, the increasing ideological splits in our society. Our solution is to create a resource to map and navigate ideologies, religious or otherwise, with hopes to move some people off “Mount Stupid”, and out of filter bubbles. The goal is to empower people to understand their own and others’ ideological narratives in a more positive way.
We believe this can reduce hate, as facts and non-contextual information alone have not been enough to bridge the increasingly sectarian and polarized society that we all live in.
We will be discussing the structural and technological implementation of this soon, but this piece looks at how blockchain technology has allowed Ananas to create a token currency for the platform, Anacoin, with unique properties that should allow us to build and scale the platform flexibly in the confines of a private ecosystem.
This approach may be of particular interest to charities to serve as an example of a novel funding mechanism for those engaged in building projects of true value, but are suffering from the common chicken and egg situation. Support of charitable causes no longer has to depend exclusively on altruism.
If you would like to discuss some of the more in depth thought/mathematics behind this, feel free to mail us. We are always looking for talented individuals and exceptional thinkers.
In building Ananas, we knew what we had to do.
We had to incentivise the digitisation of an online “knowledge graph”/ontology for ideology, which needed to be comprehensive, up-to-date and authoritative to help both those outside of the ideology understand and those within to learn more about ideologies in a positive way.
Creating a paid version of the platform would be useful, and could be profitable, as shown by Logos just for Christianity. However, we wanted to make this as accessible as possible and thus wanted to make it free.
Unfortunately, running a revenue-less model to build a comprehensive data set is tricky unless you reach mass scale and adoption as Wikipedia has.
We are also sceptical on the efficacy of web ads as a model and expect a sharp turn in this area soon with P&G a harbinger of what may come.
The rise of blockchain technology has enabled the Ananas project to scale as it facilitates the organisation of complex systems and information, something key to building our project.
We have constructed Ananas to build on two properties enabled by the rise of tokens based on the Ethereum blockchain: future expected utility value and digital asset scarcity.
Before delving into these, we need to look first at what Anacoins are actually used for.
Smith and Crown has a good overview of the various rights tokens confer.
Anacoins provide the following rights they list
- Payment — Anacoins are used to pay for research and annual verse sponsorship on the platform, to researchers and the Foundation respectively.
- Contribution — Anacoins are used to reward positive contributions on the platform, either by the Foundation or token holders. Ananas is not just a contextual information platform, but also a community where questions can be asked in a non-judgemental environment.
- Governance — Anacoins are used for certain governance decisions within communities mapping out ideologies.
Anacoins are held by those that want to perform the above actions on the platform, as well as those that believe in its long-term potential. Token holders can build platform value by directing and commissioning research, whilst the consumer version of this research is vetted by the Foundation.
Given these characteristics, we can then look at how Anacoins may accrue value.
Future Expected Utility Value
To put this simply, this is a bet that they will eventually become mainstream and take up x% of a given market, for example a percentage of global remittances for Bitcoin.
This is discounted back to the present depending on how tough it will be for the token to get wide acceptance, so we see the price of Bitcoin and Ethereum, in particular, increase in line with institutional acceptance or increased usage.
In the case of Ananas, it is clear that the completion of the first stage of the platform, a dynamic, Living Quran that can provide contextual information to people from all backgrounds, would be tremendously valuable.
If we achieve our ultimate goal of being able to visually map ideologies and understand what makes them tick, Anacoins will be of even greater value, to users, content creators/curators and society as a whole.
Today, we are just kicking off this project with a structure, some prototypes and a lot of ambition.
Ordinarily, a charity would seek donations for a project like this, most likely from other foundations or governments.
This funding would be provided usually with strings attached but with the intention of furthering the goals of the donor, who would not participate in any of the value creation.
Using Anacoin allows for funders to benefit from valuation creation while maintaining the independence of the platform and allowing for scalability. Contributors also benefit as they can either convert their Anacoins to their local currency or keep them to benefit from growth and gain status on the platform.
Care needs to be taken to adequately balance financial and social incentives under this model, but it hugely widens the range of supporters and parties interested in making this platform a success versus the traditional charitable model.
It would be reasonable to expect that the value of the Anacoin, given its usage in the its particular token economy, will be impacted by a balance of supply and demand. The information will be rapidly more difficult to build and will grow in value as we move past the basics, regarding its global use and need and finally the prestige of the overall project’s aim.
Digital asset scarcity
The potential increase in the prestige of the project allows for the Foundation to benefit from another model made easier by the emergence of the blockchain, digital asset scarcity.
This characteristic, combined with its censorship-resistance, has been a key driver of the price of Bitcoin over the last few years as only 21 million Bitcoin will ever be mined.
In the context of Ananas, for our Living Texts project we are building on the time-honored tradition of sponsorship, but adjusting this sponsorship into a purchase of a scarce digital asset.
Sponsorship or endowment attract the largest cheques to charities as they are a key signalling method for capital rich individuals and organisations, making a statement as well as doing a social service .
We have designed the Living Quran project to be the ultimate Quran as it provides the infrastructure for every relevant resource, digital and in real life, that can be found, to be attached to each chapter, verse, and word.
Therefore, if successful, there cannot be, by definition, a more comprehensive resource out there.
There are only 114 chapters and 6,236 verses in the Quran.
A model that we are implementing is lifetime sponsorship for each of these chapters and yearly sponsorship (per language) for each verse.
The chapter sponsorship is particularly important given there are 1.6 billion Muslims, some of whom are very wealthy.
For each chapter, an auction will be activated that lasts for one month once a minimum bid is hit, which is equal to the number of verses in that chapter multiplied by $1,000. For example, the minimum bid for chapter two, Surah al Baqara, is $286,000 as it has 286 verses, while the shortest chapter, Surah al-Kawther, only has 3 and thus has a minimum reserve of $3,000.
Thus we would be looking to raise a minimum of $6,236,000 in sponsorships in the next few years, half of which will go toward buying Anacoins to give to contributors on the platform.
All sponsorships will be recorded on the blockchain with a hardware proof of sponsorship and status in the application. Individuals who are digging down into the details will be able to see who sponsored that portion of the Quran.
However, there is no reason not to make sponsorships resellable given the value will increase with platform utility and as the 114 chapters are steadily sold down. As such, these scarce digital assets can be resold, but with a smart contract guaranteeing half of any profits made going to the Foundation.
This broadens the potential purchase pool and allows the Foundation to further benefit from the upside in platform value creation.
Sponsorships can be purchased by anyone from any background, further increasing competition.
It could be argued that these are actually Veblen goods as the demand for the sponsorship digital asset will rapidly rise as the cost of sponsorship itself rises.
The classic example of this is fine art, with the Islamic state of Qatar paying $250 million for “The Card Players” by Paul Cézanne in April 2014 and $211m for “Nafea Faa Ipoipo” by Paul Gauguin in 2014. It is difficult to know how high the value of a chapter sponsorship will be, but if the Living Quran becomes the best in class for Muslims it could be very interesting.
Verse level sponsorships are available to everyone who has coins (or the Foundation will buy coins on their behalf), with platinum, gold and silver level sponsorships consuming coins yearly (going to the Foundation) depending on how many you place behind a given verse.
Verse sponsorship conveys status on the platform and any coins pledged in a given language to the Foundation go towards creating extra resources in that language.
As we get sufficient interest and members of the community to branch out into other religions and ideologies, this model can be replicated, from chapters of the Bible to clauses of the US Constitution.
Having looked at two key value drivers of Anacoin, we need to look at the token economy to determine who the marginal buyer or seller might be.
An organic home for knowledge — A token ecosystem
The initial supply of Anacoins is 1,000,000,000. Enough to share amongst the global population.
Anacoins equivalent to 50% of the value of donations and external funding are used for a ‘market buying function’ to supplement the Foundation’s strategic fund. This strategic fund’s sole purpose is to incentivise the growth and positive development of Ananas’ ecosystem, benefiting all parties involved. The other 50% remains in the Foundation for building and maintaining supporting infrastructure.
For example: suppose $20 million is received from auctions from donations and sponsorships. This will lead to $10 million in Anacoins taken from the open market. If the price of Anacoin is $0.5 at that time, with 550 million Anacoins in circulation on the open market, and 450 million Anacoins in the private ecosystem, then donations will lead to an Anacoin migration from the open market (now 530m) to the private ecosystem (now 470m). This further accelerates the development of Ananas’ ecosystem.
Importantly, this aspect of our private ecosystem effectively creates a barrier against external influence, that eliminates possible pathways for external agendas and influences of bias, to influence the sovereignty of Ananas’ internal and collective governance.
In addition to protecting the integrity of Ananas’ private ecosystem, it also is beneficial to the token economy: a win-win situation. Because the token’s value is most strongly tied to the ecosystem rather than simply its parts, the market buying function and strategic fund will improve both the private and external token economy’s health, rewarding all parties involved with Ananas and its platform.
After the initial token sale, the Foundation may buy Anacoins at any time, but may not sell them without 1 month of notice to the market. Foundation Anacoins are initially frozen, but unfreeze at 1% a month from September 2017 over 60 months, restricting potential supply.
Contributors may choose to exchange their Anacoins for other currency, or hold onto it to gain status in the platform and potential appreciation in relative value.
We believe that the above will result in a relatively low correlation of Anacoin to other cryptocurrencies, in line with the thoughts of Vinny Lingham in his excellent piece on “Why Tokens are Eating the World”.
Update: An announcement on our latest whitepaper and summaries can be found here.
Conclusion: Value creation should be valued
Blockchain technology has its positives and negatives, but the formation of “market economies” as described by Naval Ravikant in this tweetstorm potentially lays the groundwork and infrastructure for a novel mechanism for accelerating the development of truly valuable products and platforms.
We believe that the Ananas platform has the potential to make a real difference and we have carefully integrated and constructed our token economy to reflect this, balancing supply and demand for Anacoin while providing an external bid into the system to allow the value of the coin to move with the value of the platform and its constituent elements, building on digital asset scarcity and expected future utility value.
This approach may be of use to other charitable endeavours and we welcome any feedback or support as we kick off what will hopefully be a productive path.
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