A Behavioral Science Experiment

There’s a note at the start of the Loot NFT white paper: “Loot NFT introduces game mechanics that are untested and should be treated as an experiment. Members’ behavioral responses could be different from what we expect.”

Those familiar with our business believe that statement relates to how we incentivize people to participate at auctions (for e.g., the impact of: having limited tokens, the lock-up wallet, the paywall, unlocking status levels by collecting sets of unique creations, etc.).

Yes that’s gamification; and no, that’s not what our statement refers to.

To understand the true scope of our experiment, we need to dig a little deeper into free market dynamics (in particular, the tug of war between members that play by the rules and those that do not).

The Bitcoin Gamble

There is no question that Bitcoin is a technological tour de force. However, I believe its true groundbreaking innovation is how it uses game mechanics to create a system where the incentives for participants to act honestly in its network far outweigh dishonest participation.

For e.g., take a single mining pool approaching 50% of the network’s hashing power. This can cause bitcoin’s value to drop due to a collective fear of a 51% attack (i.e., doubt that the network’s security could be compromised). That result is obviously against the interest of miners in that pool who get paid in bitcoin. To prevent this, they leave to join another pool with less hashing power, resulting in removing the FUD and restoring market confidence.

This self-equilibration is bold in its assumption that the human crowd reacts in a highly predictable manner under certain conditions. Bitcoin uses powerful motivators (i.e., greed, excitement, etc.) to manufacture
machine-like input from humans, much like a mechanical item can form part of and control the performance of an engine; without it the engine blows, and without the engine, it is useless.

My fascination with bitcoin since 2013 was in part due to my realization that for the first time humans were working for a “living machine,” instead of other humans. Yet, at the start, bitcoin’s long-term success was far from a forgone conclusion; it was an experiment (and some say, it still is).

The Loot NFT Thesis in a Decentralized Environment

To grasp Loot NFT’s challenge, consider the following theoretical exercise. Here, I assume that the reader is familiar with the BUN as a cryptographic token, the Oven (i.e., time-locked escrow wallet), and how blockchain wallets and peer-to-peer transfers work.

(a) Sink the ship scenario while in the ship.

Let’s assume an extreme case where bad actors want to destroy Loot NFT by removing all BUNs from circulation. One possible attack vector for them is to acquire a significant amount of the total circulating supply of BUNs and send them to an un-spendable address or to an address they control with no intention of participating on Loot NFT. Due to the limited supply of BUNs, this would bring member activities to a grinding halt.

Note: In a decentralized system, a series of smart contracts manage member activities and interactions. Once those contracts launch, they can’t be changed (assuming an editing functionality isn’t part of the code) — i.e., they live forever, in that state, on the blockchain in which they were created.

Let’s look at the roadblocks to achieve this:

Bad actors must spend a lot of energy and money in this attempt all while being aware that the members have the power to switch to a new BUN2 token, rendering the scheme useless. In fact, it would be significantly more advantageous for them to use these BUNs to obtain and re-list NFTs.

(b) Peer-to-Peer Transfers

Two types of peer-to-peer transfers considered: (i) transfer of NFTs, and
(ii) transfer of BUNs. Peer-to-peer transfers are defined as activities outside of the Loot NFT ecosystem. I’ll address these both in turn.

(b-i) Peer-to-Peer NFT Transfers

The choice of transferring NFTs peer-to-peer should therefore be assessed on where their values are best preserved.

(b-ii) Peer-to-Peer BUN Transfers

As incentives for members to participate in activities rise and fall, the theory is that the desirability for peer-to-peer BUN transfers (and “Hodling”) would auto-adjust in cycles.

(c) Concluding Remarks

Loot NFT is an experiment in game mechanics to control a crowd’s action to bid at auctions in a decentralized network; this can result in valuable NFTs irrespective of the present popularity of its creator. The above is what we expect based on assumptions we made. It may or may not be the outcome.

Let us know if you can think of other Factor-Descriptions? First, that would help us get better at what we do, and second, we can publish our answers in an article so others can be informed as well.

❤️ Loot NFT.