The Augmented Bonding Curve, Part 1: A Web3 Way to Fund Public Goods
The Augmented Bonding Curve (ABC) is designed to align the incentives of a community with support for a specific public good. In this new series of articles, we delve further into the “why”, “what” and “how” of the ABC.
Authored by taxil, with edits from Griff Green and Tamara Helenius
When I was a kid, I remember often walking through the mall with my mom after being picked up from kindergarten, regularly begging that we stop and donate to charity on the way home. Not from any emergent sense of needing to pitch in to the world’s woes — no, at the time it was because my charitable donations, quarters and nickels mostly, would sprint down a slide and dance around and around this lovely funnel game. They would stand up like magic, making tighter and tighter circles until they would chatter down into the hole with the rest of the donations.
Afterwards, as mom and I walked home, the real work for all of that donated money would begin. At least, that’s what we’d have to assume; our relationship with that money, and more importantly with whatever organization we’d donated to, was over as soon as our coins clattered into the collection bowl. We wish them, our money and the cause all the best.
While that funnel may have been a fun diversion for me, it still remains an accurate representation of how public goods — parks, municipal art, non-profits and any other good or service meant to benefit us all — are funded by modern society.
A donation, a little dance, and we’re done.
Yet, public goods create real value — but to do so in a free market, they have to rely on sacrifice (of my coins into the funnel, or a volunteer’s time) with no expectation of any return, much less any profit. We wonder, though: Why? A project meant to benefit the greater good should be rewarded for its own success, as should those who supported its formation financially, or with their energy, or both. The result is what we have today: a system in which altruism is treated as an economic defect.
Public goods have no customers (open to all), there is nothing we expect to receive in return for supporting the cause (besides perhaps a tax writeoff?) — and there is no real way to measure, retain and proliferate whatever value a project has created. But a public rose garden has obvious worth to its community; so why is the process of funding and maintaining that garden essentially a losing game?
What if, instead of our coins dropping into the bowl and disappearing forever, they continued to spin — and were joined by others’ donations, too? All of that contributed value, working in concert, observable, accountable, directable and growing. What if the value of my donation would stay alive, spinning perpetually, until I decided to remove it. (By then, it might have even accrued some more value, attendant to the project’s growth.)
Thanks to the technologies enabled by decentralized finance and the blockchain writ large, we now have the means to bootstrap funding for public goods in a way that provides all involved, from financial supporters to volunteers to project leads, a means of safely and sustainably holding onto, and growing over time, the value of their project. On top of this important economic shift comes an equally important philosophical possibility, too — public goods are not just a money pit.
We do this with a new invention: the Augmented Bonded Curve — or ABC. The typical bonding curve is ruthlessly efficient at its job, acting as a primary market maker and price discovery robot allowing a token’s price to move automatically, in step with market demands, while also being under-collateralized. Bonding curves are especially helpful in low-liquidity environments (as could be expected for a local non-profit cause, for example).
The Augmented Bonding Curve works in the same way, with some important structural differences under the hood — including vesting, tributes from entries and exits, and a treasury along side it for funding good work — which allow for public goods do something kind of magical, for the first time: quantify their own qualitative value. As tokenized Commons, the value of these projects — including the work that goes into developing them — is able to be stored, measured, rewarded and grown. Just like any other “startup,” successful Commons will be bootstrapped by labor, capital and expertise, and early supporters will see their risk and work rewarded and the Commons itself will be primed for its promising next chapter.
For a deeper technical primer into the system design of the Augmented Bonding Curve, read this article.
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