All commerce relies on trust. In a perfect world, buyers and sellers would each have perfect information about a transaction, making it easy to trust the other party. However, it is easy for this trust to break down. Sellers are worried that buyers will use fraudulent payment methods like counterfeit money or double-spending. Buyers are worried that sellers will defraud them with counterfeit or defective products.
The initial solution to any of these problems is regulation. We trust centralized authorities to enforce currency standards and consumer protection laws. Again, this works fine in a perfect world. If you fully trust your central bank, you don’t need Bitcoin. It’s where this trust fails where things get interesting.
The core innovation of cryptocurrencies is their ability to function without a trusted third party.
Whether these trusted third parties (TTPs) are public (e.g. SEC) or private (e.g. credit rating agencies), there is significant risk of fraud and corruption within the centralized authority itself. Nick Szabo’s post Trusted Third Parties are Security Holes details the many ways in which TTPs can be concentrated points of failure in economic systems.
After reading this post, I started seeing trusted third parties everywhere. For every public TTP like the Federal Reserve, there are many private TTPs like commercial banks. And even private TTPs don’t solve the problem of trust, they just change the people we need to trust. That’s why Bitcoin’s decentralized protocol is so revolutionary.
Then it really hit me; my company Labdoor was a TTP too. We saw the limitations of the FDA’s regulatory system and had taken it upon ourselves to independently test and rank over 1,000 vitamins and supplements. But we were also reliant on a trust-based model, and having accepted $7M+ in venture capital investments to build our business were obligated to pursue a profit motive. Was there a way for us to build the cryptocurrency solution to our TTP problem before someone else beat us to it?
That’s when I found this article on token-curated registries (TCRs), which led me to adChain’s white paper and set us on the path to building our own TCR. TCRs aim to solve the problem of fraud in a new way, using an open application/challenge process to curate a list of high-quality registrants. Integrating a native token into this system aligns incentives between participants in this market by connecting the value of the token to the quality of the registry.
Token-curated registries can decentralize the regulation of practically anything.
TCRs are now a reality, with adChain going from white paper to Ethereum Mainnet in less than a year. This run has inspired a new generation of TCRs, including Messari, Civil, Paratii, and our TCR, TEST.
TEST is a TCR designed to fight fraud in consumer health products. Counterfeit, adulterated, recalled, and expired goods put people at risk on a daily basis despite the best efforts of trusted third parties like the FDA. Everyone would benefit from a token-curated registry that incentivizes public testing and certifications for these products.
TEST will use the TCR model to curate a list of consumer health products that have publicly passed our application/challenge process. TEST will allow anyone to sponsor the testing of any product, driving demand for a decentralized network of laboratories to consistently regulate the quality of products in the TEST registry.
After 6+ months of research, writing, and peer review, we recently released our token site and white paper for TEST and opened a Telegram channel to collect feedback on our protocol design. If you are interested in contributing to this protocol or have any comments on our plans, please reply here or on Telegram and we’ll help moderate the discussion.
If you see yourself as a future stakeholder in the TEST network, as an applicant or a challenger, or even as a consumer, we now have a way to pre-order TEST tokens. We have just opened a pre-seed round for TEST, using a Regulation Crowdfunding offering that allows anyone to invest in TEST: https://republic.co/test-foundation. We’ll close this offering when it hits the crowdfunding maximum of $1.07M and will use this money to launch the TEST protocol and token.
This essay was originally posted in 2018 on testtoken.org.