Features of economic spaces
The ECSA platform creates a large field of possible use cases, of possible economic spaces. Only time will tell what kind of new forms emerge. But working with the first econauts, the explorers and designers of the first economic spaces, there are a few characteristics that crop up again and again, making possible a rough mapping of some features or types of use for economic spaces that we are likely to see in the near future.
Bootstrapping an organisation or network
When an individual, a group, an organisation, a venture or basically any actor has an idea of what it wants to do or isdoing, it can design a programmed organisation around that idea. The core of a programmed organisation is an operationalisation of the value or values that the organisation creates; an operationalisation that allows the value to be offered for others, both peers and outsiders. The design of the organisation (of the “cyb-org” or “cyber organisation”) describes the role of a peer joining the organisation, and codes it into the operational logic, resulting in a DAO-like smart contract based program (maybe more of a distributed programmable organisation (DPO) than a strict DAO). The DPO can thereafter issue tokens that are used when offering the value of coming together. It is up to the related networks then to (re)value the offering. The relation of a participant to the idea/value of the organisation is described in the token offering, determining the desirability of the offer. For instance, offering a “wage-work” or “equity” partnership in a certain production are two very different offerings and carry different incentives for co-operation.
Tokenised value as bootstrapping
The organisational operation logic can be described as a decentralized business model that invites the participating networks in to the project as stakeholders. Stakeholding means that the relation with the organisation is somewhat long-term and dependent on the success of the organisation, rather than being just a one-time exchange or transaction. This raises the questios of how the value of the organisation is received by members if it is not in the form of exchanging monetary value for goods and services. Is the value a use value, social/political value, financial value or a combination of these? The token operated organisations (so-called-DAO’s) allow to articulate claims for future value that can be offered before the organisation is operational. This is seemingly similar to a start-up company seeking funding for a product or service and offering equity of the company or pre-selling the product, but with the significant difference that the funders of these programmed organisations become at the same time producers, users and shareholders. The possibility of combining these different economical positions in one offer that produces trust based on shared stakes make possible to rethink what organisations can be and do.
Bootstrapping compared to crowdfunding
Bootstrapping becomes important when the organisation requires funds, skills, resources, crowds, etc., before it can become operational or self-sustaining (the chicken and egg problem). Pre-offering an equity-like relation from future co-created value in a money- or commodity-like form opens up possibilities for bootstrapping beyond pre-selling a product. Some of the features of bootstrapping networks are well articulated in Fred Ehrsam’s article on a decentralized business model. This model combines crowdfunding (pre-sale) with equity crowdfunding because the offered token is both a commodity (has use value) and equity (its value is related to the organisation offering it) with the addition that the funders have a significant role in creation of value as first adopters, developers, evangelists, etc. As a result we have an equity-like currency (a token) whose value is backed by the co-production of the people holding it. This makes a conceptual leap from crowdfunding a product or service to the co-production of shared economic space.
ITO, initial token offering
A token offering can be a powerful tool for bootstrapping resources. For example when the Ethereum project needed funds for hiring developers, designers and so on to build its blockchain, it sold a currency, Ether, in its ITO for people who were interest in acquiring the capability to use a technology that didn’t yet exist. This enabled Ethereum to fund the production and build a network to adopt it. The adoption and use of the technology ultimately gave the value for Ether.
Value produced by token holders
The process of producing token value was not articulated in the organisational logic of Ethereum as clearly as it was done in the case of TheDAO which incorporated a hardcoded process for value creation (investment decision making process). TheDAO was a leap forward in the sense that its value was indeed based on the success of the token holders co-production. Therefore the value of TheDAO was dependent on the designed organizatorial process of coming together rather in the use value of a certain technology. This made the token holders the producers of value.
Abundance
While these two models rely on 1. driving the demand of a scarce commodity (Ethereum) and 2. value created from co-production (TheDAO) and captured in a scarce commodity. There is also a way to recognize the value emerging from new peers joining the network so that this created value is recognized and captured in an abundant commodity. An abundant commodity can simply be a continuously running token issuance that is based on produced value. The token is then, via the designed logic, allocated to the producers. For example, if Medium would be an economic space, the content on Medium would be its value and the production of the content would be recognized by issuing tokens to writers who thus would share stakes in Medium.
Bootstrapping potentiality
A DPO can have an escrow pool where it gathers assets required to make bootstrapping possible. The pool can be connected to an operation that it can be used for and which is articulated in the offer. This articulation cements the utilization of escrowed assets much like in traditional crowdfunding an offer describes what kind of good or service is produced if certain financial goals are met. While escrowed assets in crowdfunding have been used for products, nothing prevents from designing organisations that pools assets for social action. This feature can be powerful in creation of social movements where the process of DPO´s coming together cements the financial commitment which describes what kind of social mass action can be produced.
The capability to act financially in social matters under programmed coordination is similar to the capability of traditional unions for labor strike. Through unionising, a group had the capability to coordinate their collective action as negotiation power that surpassed their individual economical significance. The capability to strike was actually so powerful that it was not always necessary to actualise a strike: the possibility alone gave a productive negotiation position.
Likewise, DPO´s make possible to articulate the financial potential of coming together under social or political matters by coordinating financial actions of networks. This can happen, for instance, through the DPO pooling assets into an escrow that releases assets for adversarial actions against an organisation making undesired social or political actions, for instance, arctic oil drilling. In the best case this type of propositional articulation of powers affects the decision about drilling, because the potential downside has been articulated in the DPO. Such an outcome requires enough peer commitment to propose a force bigger than the potential financial upside of the undesired action, but in the best case where the undesired action is aborted the committed assets are not released from escrow and are therefore re-usable. In this way social action can work pre-emptively rather than reactively. The scope of activism is widened into financial negotiations. DPOs like this can leverage potentiality without committing to adversarial actions.
Sub-equity
Programming an organisation that issues its own token that can move like a currency and have equity-like features leads to another interesting field of use cases, that of sub-equity. “Sub-equity” can be seen as traditional corporate equity that enables sharing the financial upside, with the difference that sub-equity can be designed and offered as project based currency. Tailorable equity-like currency can become a very handy tool when distributing an unknown amount of value that small temporary projects produce. This model can be effective for networked production and co-operation that is often quite flexible in time and space. It flares up and dies down quickly, and is often open-ended both with regard to goals and timing. Setting up a traditional company for this kind of production can be very cumbersome and even impossible. On the other hand, networked production greatly benefits from sharing resources, risking together and dividing the rewards. This kind of production needs something more flexible and intermittent than corporate equity: it needs a form of sub-equity that works as equity in tracking risks and rewards but does not have the institutional overhead of a corporate entity.
The sub-equity concept can enable at least two types of organisations that both rely on a network’s capability to co-operate financially in ways which are not possible now. Let’s first think of the case of precarious labour by knowledge workers who need to self-organise themselves in order to be economically sustainable. For instance, currently a graphic designer often works in a job market where non-paid jobs are a fact; the only reward is recognition, visibility and kudos. If the graphic designer would be capable of establishing a (sub-)equity relation with the client by sharing the upside that follows from her work, there would be no reason to push wages as low as possible or ask for charity work: both parties would be risking together in the production. If establishing these type of relations is fluid enough, we can start to question, on one hand, the old principle of squeezing most productivity out of labor and, from the other hand, the question of how to value the work that we produce.
A second strong case is around socially networked creatives such as youtubers, gamers, bloggers, snapchatters and others utilizing social media platforms to express their creativity. This creativity is currently captured and organized financially by the publishing platforms and 3rd party commercial operators. To be more blunt, these platforms serve primarily the interest of platform shareholders and not the stakeholders who create the value. Content producers and their networks do not receive much of the value that they produce. Typically, a youtuber needs something like 1m watches to be economically sustainable. These conditions stem from the business model driven by advertisement profits that does not align with the produced content or the interest of the networks around them, but rather drives “click producing” content to succeed. This problem has been noted, for example, by the #buytwitter movement. The sub-equity concept allows us to think network driven organisations within these platforms where creatives and networks together finance and share the upside (social or financial) of productions.
Get a piece of the action!
When designing a DPO for networked production one is designing an organisation that consists of a membership structure. This structure can be similar to an equity structure, but can go beyond and expand in ways which are not currently possible in company forms. Designing an ownership, partnership or equity structure also includes offering it to networks which then become owners of what is being offered as well as affect the production. The offering can include anything from financial upside to use or participation rights in the DPO’s operations or the assets (monetary, usable or intellectual) belonging or being created by it. This model goes beyond (pre-sale) crowdfunding in offering the participants “a piece of the action” that is not necessarily predetermined but the result of coming together. All of these elements can be present in the decentralized business models of whole platforms, but the flexibility of producing such models/organisations also promises a degree of autonomy for small p2p groups of networked creatives.
Beyond current company structures on blockchain
At the moment, there is growing interest in the space of more flexible blockchain-based company set-up and management. For instance, Otonomos, Boardroom by Consensys and aragon.one offer flexible company set-up and value-tracking on blockchain and thereby facilitate intermittency. Likewise, Freedom Coop offers individuals the possibility of working through/as a company (coop), without having to set up one. However, at least for now these services are replicating current (LLC-type) company structures. With the flexibility of the DPO concept and the liquidity of “sub-equity” tokens that do not represent traditional equity or shares, one can go beyond currently executed business and value creation models.
Economisation due to lower transaction costs
Lowering transaction costs (via disintermediating third parties) has been a goal for distributed ledgers since the original Bitcoin Whitepaper. The overall argument is that when transaction costs fall, at some point a critical threshold is met, after which new behaviors and business models become possible. This is a field where we should expect the unexpected.
Bootstrapping and low transaction costs
The aforementioned bootstrapping DPO models also leverage lowered transaction costs, and have the possibility of changing how peer networks organize themselves. A simple use case could be building a DPO for a shared resource, like a car or a hackerspace, and making a pre-sale of tokens for acquiring equipment for the space. This organisation can then attract peers who recognize the value in the offer and become members of a DPO owning the resource. The utilization of the resources can be based on the token ownership, therefore giving incentive for peers to acquire as much tokens as they need while allowing a flexible partnership model.
The liquidity of the tokens allow members to exit the organisation by selling the tokens for whatever market price is given, which also opens up the organisation for new peers. Token based membership also facilitate other kinds of relations with the organisation’s value offer. For example, if the organisation is built on the use value of a certain asset (say, a shared space) the owners can rent or borrow their share of the use right. This automated coordination of organisational processes, offering shared stakes in a liquid form can turn forms of the so-called sharing economy into network driven self-organisation rather than into forms of centralized platform driven network creation.
Optimizing resource use
In the case of smaller and dispersed groups sharing resources, intentional economisation of resources can allow efficient ways for shared resources to be utilized. For instance, if multiple artists share a space for which they all pay rent for, the space can be designed to become an intentional economic space, the intention being the efficient use of the space. The starting point can be each artist having an equal amount of access right to the space (or an amount of access that corresponds to the artists share of the rent). These use right tokens work in scheduling the use of the space. The scheduling can be tweaked so that more busy hours are more expensive which gives incentive for artists to utilize less busy times since they are cheaper. This system fosters efficient resource utilization and can also reveal constantly vacant times that can be offered for new members. While this economisation is quite straightforward it still makes possible the creation of organisations that function just like service platforms but are run by the users. For the artists, this can mean that something starting as a group of a few people expands over time to be a network of 1000 people utilizing a whole building. Because the functioning of these DPOs is automated, they can scale as much the peers in them are willing to allow.
