Tokenomics 101 : The Emerging Field of Token Economics
The Artists Consortium Model — Liga de Artistas (LIGA)
Zach LeBeau, CEO of SingularDTV
Token economics — tokenomics — is the study of tokenized ecosystems and the various economic models tokenized ecosystems can administer.
SingularDTV has developed and is launching over a dozen different economic models for artists and creators with the aim of creating a mesh-web of tokenized ecosystems to ignite a sustainable, decentralized entertainment economy.
Model 4 of 12 — The Artist Consortium Model
One of my favorite tokenized ecosystems here at SingularDTV and the focus of this article, is our 4th token model, what we’re calling the Artist Consortium Model, or the AC model. Puerto Rico is the inspiration for this model and our experiment begins on November 12, 2017 with the launch of Liga de Artistas and the LIGA tokenized ecosystem.
The AC model has been devised for geographical regions that contain a diverse and active community of artists and creators but lacks a prosperous and sustainable entertainment infrastructure. It is through the AC model that tokenomics intends to build sustainable entertainment infrastructures in such regions. Liga de Artistas and Puerto Rico is the first test case to prove such tokenomic models could work for this purpose.
Puerto Rico’s creative scene is prolific, but like most places the infrastructure to sustain its active artists is non-existent. The AC model intends to leverage the creative talent and expression of Puerto Rico and through specific tokenomics ignite sustainability for the purpose of exporting its leveraged expression around the world. In the case of Liga de Artistas it’s to reach Spanish speaking audiences outside of Puerto Rico. To have a truly sustainable entertainment economy in Puerto Rico, amidst all the economic turmoil there, would be an achievement that could help lead to a Universal Basic Income model. If proven in Puerto Rico, various AC models can be established around the world with particular focus on Central America, South America and Africa.
Breaking Down the Tokenomics
Let’s use Liga de Artistas as the example for breaking down the tokenomics of the Artist Consortium model.
STEP 1: Generate a Tokenized Ecosystem w/ Tokit
Tokit generates 20,000,000 LIGA tokens.
STEP 2: Set Token Designations
10,000,000 LIGA are designated as Project Creation tokens. The other 10,000,000 LIGA are designated as Economic Sustainability tokens. These two designations of tokens are entangled mirrors of each other with different purposes.
STEP 3: Establish Fund
From the Project Creation tokens we launch the “Year 1 LIGA Fund”. This Year 1 Fund — and all subsequent annual or bi-annual funds — will fuel project creation and help grow a prosperous entertainment infrastructure in Puerto Rico.
STEP 4: Power the Fund, Create a Reserve
1,000,000 LIGA Project Creation tokens are dropped into this fund. At the same time the other 9,000,000 LIGA designated for Project Creation are put in “Reserve”. The same actions are mirrored with the Economic Sustainability tokens. 1,000,000 LIGA Economic Sustainability tokens are dropped into the Year 1 Fund, and the other 9,000,000 LIGA Economic Sustainability tokens are dropped into the Reserve.
STEP 5: Set the Theoretical Market Cap
The value is set at 1 LIGA = $1 USD equivalent of ETH. This gives the overall tokenized ecosystem a theoretical marketcap of $20,000,000 of ETH and the Year 1 Fund a theoretical value of $1,000,000 USD of ETH.
STEP 6: Private/Public Launch
The 1,000,000 LIGA representing the Year 1 Fund is launched either privately or to the public. The LIGA tokenized ecosystem, if it performs a successful launch, will be the recipient of $1,000,000 USD worth of ETH.
It is this ETH that will be used for Project Creation to begin the 5 year plan to ignite and build a sustainable entertainment economy in Puerto Rico.
Growth & Concentration of Value
This $1,000,000 USD of ETH will be used for Project Creation. All projects created will be placed on the LIGA distribution channel powered by EtherVision. In this case, artists submit proposals to LIGA requesting funds to create their projects. Currently this process is manual but will be automated by smart contracts via a DAO-type architecture in the near future.
It’s important for these projects to be distributable on the LIGA channel, meaning digitally disseminated forms of art and entertainment are preferable. Please note that it is also preferable and in the best interests of LIGA that all artists distribute their content exclusively on the LIGA channel. If artists are unwilling, they may not be ideal candidates. This is because the more value an artist puts into the LIGA economic model in the form of Intellectual Property (IP), the more the artist can theoretically benefit from an increase in that value. Funds are used for the creation of IP. This IP sets value. This value — IP rights and revenue/royalties flow — is embedded in the LIGA token. Audiences interact with this value on LIGA’s distribution channel. Continued creation and placement of content on the LIGA channel is essential to attracting, maintaining and growing an audience-base. Audience interaction is a crucial component to the operation of LIGA’s tokenized ecosystem. The journey to economic sustainability requires a continued commitment of adding value to the LIGA channel rather than utilizing alternative, centralized legacy distribution methods.
Let’s say one of the artists submitting a proposal to LIGA’s Year 1 Fund is the music group International Dub Ambassadors (Int. Dub Amb.) You can sample a little bit of what they’re up to here, “Dr. Dubenstein meets International Dub Ambassadors Vol.2”.
Int. Dub Amb. are looking for $100,000 to produce their next album and go on tour in Asia. They’re perfect candidates because they’re turned on, super talented and believe in decentralization and the LIGA distribution channel. Liga de Artistas gives them $100,000 of ETH for their plans. This $100,000 of ETH will generate the IP they will place on the LIGA channel, which includes a new album, a tour movie of Japan and South Korea and a concert video of their biggest show. Additionally, SingularDTV’s live ticketing payment system is ready so all live concerts can be paid for with the LIGA token and cycled through the blockchain efficiently. A big value add to the LIGA channel.
At the same time Int. Dub Amb. receive $100,000 USD of ETH for project creation to generate their IP, they also receive the equal amount of Economic Sustainability tokens, 100,000. This 100,000 is a representation of the value it took to generate their IP (rights and revenue share) in the LIGA tokenized ecosystem. It cost LIGA $100,000 USD of ETH to produce those rights, therefore International Dub Ambassadors receives 100,000 LIGA tokens to represent those rights. Also, having 100,000 LIGA Economic Sustainability tokens incentivizes Int. Dub Amb. to continue contributing creatively to the LIGA channel.
In addition, the point of the Year 1 Fund is to select scores of artists and projects that can be placed on the LIGA distribution channel. Let’s say 20–30 projects are created and placed on the LIGA channel thanks to the Year 1 Fund. Theoretically, this could add significant value to the LIGA token. When this happens the tokens held by Int. Dub Amb. increases in value. Perhaps by the time the Year 2 Fund comes around, the LIGA token is worth $2 USD per token instead of $1 USD per token, pure speculation. This value increase could be because the LIGA channel charges users either a subscription fee or a per transaction fee and all revenue generated by the LIGA channel is embedded in the LIGA token, theoretically generating more demand for the LIGA token. Please note that marketing prowess is also an important part of this equation and made easier by compounding the social media footprint of all the LIGA artists.
The “Year 2 Fund” could either double in size — because in Year 2 LIGA is worth $2 USD per token, for example. The Year 2 Fund could raise $2,000,000 USD of ETH for that year’s fund, or alternatively use half the tokens to achieve the same $1,000,000 USD of ETH as the Year 1 Fund. It is the author’s opinion that aggressive growth is necessary and that the $/ETH amount of the Funds should increase year by year.
By Year 3, perhaps there are hundreds of pieces of content on the LIGA channel and it is experienced by scores of thousands of people around the world. The LIGA token is worth $4 USD per token. The Int. Dub Amb., if they haven’t let go of their 100,000 tokens that represent their IP, would be worth 4x what they were in Year 1. They could liquidate their own tokens to fuel more of their plans, however, this would burn their portion of the IP generated from their initial project creation. Instead, they are encouraged to submit proposals and draw from the yearly funds for the purpose of new project creation. They are encouraged to hold their IP tokens for their own private purposes, preferably to improve their quality of life and that of their family, friends and other like-minded artists they interact with. Alternatively, they can hold their LIGA to receive revenue/royalties in perpetuity.
Additionally, Int. Dub Amb. could also reach a place of intense interaction with their fanbase and the fanbase of LIGA. Perhaps a large % of the LIGA audience is coming to the LIGA channel to interact with their content, generating revenue for the channel and all that hold LIGA tokens. Int. Dub Amb could either launch their own tokenized ecosystem the “DUB token”, for example, if they feel their audience can bring the DUB economy to sustainability, or the LIGA tokenized ecosystem administrators/DAO could reward them with additional LIGA tokens — both Project Creation and the equal amount of Economic Sustainability tokens.
Ultimately, by the time the Year 5 Fund comes around, it is hoped that a massive movement of creation and a sustainable entertainment infrastructure has been ignited that brings prosperity to the artists and in turn the island of Puerto Rico.
We look forward to the launch of the Liga de Artistas tokenized ecosystem (LIGA), on November 12, 2017.
Zach LeBeau, CEO of SingularDTV