The Democratization of the Platform Economy — The Supporting Activities of Platform Curation & Marketplace Modulation (4/6)

With the democratization of the platform economy, it is essential to preserve the central marketplace. Only the operating platform as an infrastructure is being decentralized. However, in this approach it is crucial that all supporting functions and activities for maintaining the platform and for successfully continuing the marketplace operation are carried out. Such roles are contributed democratically through platform curators and marketplace modulators. In this article, we discuss these aspects in more detail.

By Nicolas Gilgen & Kilian Schmück

In cooperation with our case partner Share&Charge, we describe the Decentralized Platform Framework developed at the Institute of Technology Management at the University of St. Gallen (ITEM-HSG). In the previously published articles, we have addressed the relevance (part 1), the Initiation (part 2) and the established Marketplace of Decentralized Platforms (part 3). In this article, we examine the Platform Curation and the role of the Platform Curator, as well as the Marketplace Modulation and the role of the Marketplace Modulator.

The Platform Initiator (1) develops the platform in a centralized manner and is mainly incentivized by the network’s investment in the Platform. Part of the Platform development is the launch of the Marketplace with all its related activities as well as the implementation of a functioning (ideally on-chain) governance model, which ensures the continuous decentralized development of the Platform and the optimal implementation and support of the Marketplace. Many of these activities are carried out by the other roles, namely Marketplace User (2), Marketplace Complementor (3), Platform Curator (4) and Marketplace Modulator (5). The incentive and governance model as well as the initial embedding of the minimum required roles until the network effects appear must be defined and implemented by the Platform Initiator. If the Platform and the Marketplace operated on top of it are successful, more and more Ecosystem Complementors (6) will be attracted to them and hence increase the overall value of the Platform.

Platform Curation and Marketplace Modulation

In the case of centrally orchestrated Transaction Platforms, the Platform as the infrastructure provider and the associated Marketplace are firmly interlinked. The Marketplace belongs to the Platform Owner, who is incentivized to carry out all the necessary activities for an optimal operation of the Marketplace. This includes both Platform Curation and Marketplace Modulation activities. Platform Curation is an essential activity within the operation of (Decentralized) Platforms, which serve as infrastructure for the Marketplaces established on them. Only by adapting its infrastructure, the Marketplace can constantly adapt to changing customer needs and provide the benefits of an open and central Marketplace.

Marketplace Modulation are activities that directly address and support the specific Marketplace. Without these activities, it would not be possible to execute transactions on the Marketplace. For instance, taking the Amazon Marketplace as an example: if a Marketplace User and a Marketplace Complementor (e.g. a lamp manufacturer) transact on the Marketplace, a logistics provider such as DHL is required to do the shipping of the product. This activity is necessary for the marketplace to properly function — hence, DHL directly supports the Marketplace.

All other activities that are not directly related to the specific Marketplace — only relevant to individual transactions — and take place in the background are subsumed under the term Platform Curation. Among these are, for example, the allocation of Amazon accounts to Marketplace Users and Marketplace Complementors (i.e. account management), the design of incentive mechanisms to continuously engage both Marketplace Users and Marketplace Complementors with the Marketplace (e.g. discount promotions, Black Friday promotions etc.), website design changes, data management and the development of matching algorithms.

Selection of Platform Curator and Marketplace Modulator

In the case of Decentralized Platforms, additional activities related to the decentralization aspect are required. These activities include, among others, the continuous development of the platform governance model, which ensures the alignment of the entire network. A major part of this is the selection of the Platform Curator and Marketplace Modulators. For Central Platforms, Platform Curation is carried out solely by the Platform Owner and Marketplace Modulation is usually performed by a network of partners through bilateral contracting with the Platform Owner. This is very different for Decentralized Platforms, where both activities (Platform Curation and Marketplace Modulation) follow the marketplace principle. Several actors offer their services on the Decentralized Platform and the best offer is selected and integrated by the network. A significant difference between Platform Curation and Marketplace Modulation is the fact that the selection of the Marketplace Modulator only affects individual transactions on the Marketplace while the selection of the Platform Curator affects the entire network. The process of selecting a Platform Curator is therefore much more complex and has to be controlled and implemented by a proper platform governance mechanism. As an analogy, the comparison with democracy seems appropriate. New taxation laws affect the entire population of a state, which is why eligible citizens vote either directly or indirectly on the proposed legislation (Platform Curation). For individual services (for example, tax advisors for the tax assessment) that only affect the individual citizen, the selection takes place bilaterally via the market principle (Marketplace Modulation).

Generally, the Platform Curation process includes three pillars: 1) Underlying infrastructure: application configuration and development as well as adaptation to data protocols, 2) network and interface: network curation and interface management and 3) governance and incentives: design of governance model and incentive mechanisms.

Platform Curation using the example of Share&Charge

As described above, Platform Curation addresses adjustments relevant for the entire network. It is envisioned that in return for proprietary platform tokens (EV Tokens), the Share&Charge Foundation (Platform Initiator) sets the initial rules for Platform Curation in order to further develop the Share&Charge Platform.

The development could include smart contract adjustments (price, participation costs or participation requirements) and the refinement of the governance rules as well as improvements to the protocol.

The governance of the Share&Charge platform rests on three pillars:

1. Equal access to the network: no one should get a privileged position.

2. Fair say in matters of governance: we do not want a system in which the richest participant has the most say.

3. Change over status-quo: naysayers should not have more say over the rules than forward looking participants.

It should be easy to get agreement on such principles in the beginning as no single participant has a dominant position.

More generally, the major curation activities include network curation, interface management, design of incentive mechanisms (for the Platform Curation, i.e. token model) and further development of the Decentralized Platform (front end, configuration of the underlying technology platform). Although being centrally implemented by the Foundation in the beginning, changes can eventually be proposed by the entire network. These proposals are then validated and published by the Foundation and, should they pass this process, voted on by the network (e.g. with an on-chain governance mechanism).

Marketplace Modulation using the example of Share&Charge

In the current stage of Share&Charge (Platform Initiation/early stage), Platform Modulation includes the provision of electricity and payment solutions through Marketplace Modulators. However, these services are not included in the initial version of the protocol and no incentive structure is established yet. Moreover, these services are initially orchestrated by the Marketplace Complementors.

In the near future, power grid operators (e.g. 50Hertz, Amprion, Alpiq, Axpo and Westnetz) independently adjust and develop incentive mechanisms, such as smart charging — or in other words, the monetization of the capacity of the network. For instance, if an end user is willing to charge their EV at a later time, another user can pay them a certain amount to immediately use their capacity. For their services, Marketplace Modulators will be paid some sort of token. As mentioned above, unlike protocol changes implemented through the Platform Curation process, Platform Modulation services are introduced by independent service providers and only affect individual transactions. Marketplace Modulation follows an open market dynamic, meaning the commercial viability of a service depends on its market adoption. For example, everybody in the network can develop and offer a new search service, set a suitable price and publish it on Share&Charge’s Decentralized Platform. If EV drivers use the service, the respective Marketplace Modulator gets paid (open market dynamic: many different services compete within one another on Share&Charge’s Platform).

This is a multi-part post. Links to the other parts can be found below:

• Part 1: Introduction
• Part 2: Platform Initiation
• Part 3: The Necessity of a Central Marketplace
• Part 4: The Supporting Activities of Platform Curation & Marketplace Modulation (this article)
• Part 5: Establishment of a Platform Ecosystem
• Part 6: Rethinking ROI