The Design
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The Design

“The Design” Part.3: Changing and controlling behavior

This article introduces the different tools that we might want to consider when building our business model. In fact, there are some super smart people out there that have made the effort to explain those complex tools and make those available to the general public. We, therefore, decided to puzzle together these different explanations, either cited or slightly reformulated, while integrating them into our reasoning towards achieving our goal, explained in Part.1 and Part.2. All the credits go to the people that I hyperlinked throughout the article. I also hyperlinked some additional resources at the end of the article.

The broadest description of what we are trying to achieve:

  1. Create lasting behavioral change
  2. Make people behave in a desired way

Note that by “behavioral change”, we mean a lasting change and not a one-time/finite thing.

We believe that there are two ways towards changing behavior: A)Neuroplasticity and B)Systems

.….

A) Neuroplasticity

It is “the ability of neural networks in the brain to change through growth and reorganization”. To reach our goal we would need to create a permanent rearrangement of the neural networks in people’s brains.

The part of our body that commands our actions is our brain, more specifically our nervous system. In fact, the nervous system is responsible for multiple things:

  1. Sensations: Defined by the receptors that our body has and which enables us to taste, smell, see, etc. We use receptors to capture and consume information from the outside world/environment. It is non-negotiable and it always comes in. It depends on the environment you are in.
  2. Perceptions: Since we are sensing non-stop, our perception is defined by which sensations we are paying attention to. It is negotiable since you can control it, or someone else can control it.
  3. Feelings: Can be defined as a mix of internal emotions and perceptions.
  4. Thoughts: It happens spontaneously but can also be deliberate which means that you can decide to think about a specific thing in the moment.
  5. Behaviors and actions

Points 1 to 4, define the way we act and behave in point 5. Few things we should mention:

  • Changing our own behavior and our own actions without any changes in points 1 to 4 is extremely hard. Unless there is some sort of urgency that forces you to act, we are sort of screwed. (example: a deadline)
  • Changing our thoughts by introducing new thoughts, either by ourselves or through thoughts and ideas from someone else is one way to change our behavior. For instance reading, or listening to podcasts. The changes in behavior are not permanent.
  • Changing perceptions, which is difficult to do by ourselves, but not impossible. Someone or something else could change our perceptions by redirecting our attention to other sensations. Also here, the resulting changes in behavior are not permanent.
  • Sensations can not be changed and feelings depend on perceptions.

To change the way we behave and act in the long term, it is a waste of time to try to change our feelings, thoughts, or perceptions directly. Ironically, solely writing this article and publishing this reasoning towards cultivating social connections, wouldn’t create any permanent behavioral change in the reader's mind, even if the reader agreed with the reasoning. In fact, we need to think about it the other way around: we need to use behavior and action to change feelings, thoughts, and perceptions. Using repeated action is the solution towards permanently changing the arrangements of our neural networks.

A permanent rearrangement takes a lot of resources, such as knowledge, money, time, external help, and other external influences. In fact, a permanent neural change doesn’t happen overnight simply due to the biological way our brains are built. Using neuroplasticity to generate a permanent change towards cultivating social connections, seems extremely inefficient.

B) Systems

To solve this problem of inefficiency, we humans have figured out other ways to change and control the behavior of other humans. We create systems of incentives (intrinsic or extrinsic) which are taking advantage of thinking errors, biases, and psychological tendencies. This way we don’t need to actually change the neural network of the brain while maintaining the ability to create a permanent change in actions and behavior.

The general thinking path and things to consider when creating an economic game (which is a specific kind of system):

  • Code is the writing down of human thoughts.
  • We, humans, are just like machines, we are programmable.
  • By using mechanism design we are able to program human behavior through carefully designed incentives.
  • Incentives are produced by economic games that can be crafted and engineered.
  • Incentives are often more powerful than the moral frameworks of players in economic games.
  • By designing economic games appropriately we can force selfish humans to execute useful behaviors.
  • “Man tends to “game” all human systems, often displaying great ingenuity in wrongly serving himself at the expense of others. Anti-gaming features, therefore, constitute a huge and necessary part of almost all system design.”

Creating a system for our business model: Theoretical concepts

To understand the reasoning behind our business model and to underline its feasibility, we need to introduce a few properties of some important concepts.

The following citations originate from “Token Economy: How the Web3 reinvents the Internet Second Edition”. We hope that the clarity of these citations and the order in which these concepts are listed, allow for a quick and comprehensible understanding of the matter. By clicking on some of the concepts, you can take a “comprehensible deep dive” into what this specific concept is about. It isn’t necessary for a general understanding of this series.)

a. Blockchain:

“Blockchains allow for distributed control, where different parties that do not trust each other can share information without requiring a central administrator. Algorithmic administration of business logic and governance rules, with consensus protocols and smart contracts, provide for the next level of automation of our socio-economic activities.”

“The Blockchain concept builds on the idea of P2P networks and provides a universal data set that every actor can trust, even though they might not know or trust each other. People and institutions who do not know or trust each other and reside in different countries, being subject to different jurisdictions, and who have no legally binding agreements with each other can now interact over the internet without the need for trusted third parties like banks, internet platforms, or other types of clearing institutions.”

Consensus mechanisms, such as proof of work, allow for distributed control. They are based on the combination of economic incentives and cryptography. Applied game theory is used to reward network actors with a native network token. This reward mechanism is designed in a way that it is economically infeasible to cheat the network. It makes it exceedingly difficult to falsify the blockchain, due to the immense amount of computing power that would be required to do so.”

“In their institutional structure, public and permissionless blockchain networks resemble nation-states much more than they resemble companies. Its structure includes a monetary policy (token supply) and fiscal policy (transaction fees) and actors are subject to a network constitution (actors are sovereigns of the network).”

b. Cryptography:

“Cryptography in blockchain networks allows for transparency of interactions while maintaining the privacy of all network actors.”

c. Smart contracts:

“A smart contract is a piece of software that is processed by a distributed ledger. It is a rights management tool that can formalize and execute agreements between untrusted participants over the internet, and comes with inbuilt compliance and control.”

“Smart contracts use cases range from simple to complex. The most complex form of a smart contract is a decentralized autonomous organization. Smart contracts can also be used to create tokens.”

d. Oracles:

“Oracles provide the external data necessary for the smart contract and trigger smart contract executions when predefined conditions are met. Oracles are services that find and verify real-world occurrences and submit this information to a smart contract, automatically triggering state changes on the blockchain. The primary task of oracles is to provide these values to the smart contract in a secure and trusted manner. These data flows stem either from software (big data) or hardware (internet of things).”

e. DAOs

Decentralized autonomous organizations

f. Tokens

“Tokens can represent any assets or access rights and are collectively managed by distributed ledgers. Tokens can be issued with just a few lines of code in the form of a smart contract.”

“Tokens can represent anything from a store of value to a set of permissions in the physical, digital, and legal world. They facilitate collaboration across markets and jurisdictions and allow for more transparent, efficient, and fair interaction between market participants, at low costs. Tokens can also incentivize an autonomous group of people to individually contribute to a collective goal. These tokens are created upon proof of a certain behavior.”

g. NFT’s (Non-fungible token)

“While fungible tokens are identical, non-fungible tokens are unique in nature, with varying properties that can be distinguished from each other. Non-fungible tokens are a more diverse asset class and can also represent identities, wills, voting rights, tickets, loyalty tokens, copyrights, supply chain tracking, medical data, software licenses, warranties, and many more.”

h. Systems thinking/ Design thinking

“The design of token systems also requires ethical and political thinking. What type of system we want to create is not a technological question but a socio-economic and political question. Questions of politics, morals, and ethics will need to be answered, ideally before the design of such systems, the most important of which revolve around the questions of “transparency vs. privacy” and “power structures”. If we fail to incorporate ethical questions in the design thinking process of such systems we will create “protocol bias”.”

i. Token economy

“Tokenized incentives are not a new thing and have been experimented with in psychology to condition behavior. In psychology, the term, “token economy” refers to a type of behavior modification program using “operant conditioning”, a learning process through which behavior is modified by reinforcement or punishment. It studies the relationship between behavior and external stimulus or events that influence behavior.”

“Purpose-driven tokens incentivize individual behavior to contribute to a collective goal. This collective goal might be a public good or the reduction of negative externalities to a common good.”

“Purpose-driven tokens provide an alternative to conventional economic systems, which predominantly incentivize individual value creation.”

“The design of purpose-driven tokens uses game theory to model human reasoning into an automated steering mechanism formalized by the protocol or smart contract and should account for the behavioral complexities. There is, furthermore, an entire class of games in the network science literature, called “network formation games” (…)”

j. Mechanism design

“The design of consensus protocols is related to a sub-field of economics called “mechanism design” which deals with the question of how to design a game that incentivizes everyone to contribute to a collective goal. It is also referred to as “reversed game theory” since it starts at the end of the game, then goes backward when designing the mechanism.”

k. Engineering

“Engineering is the practice of creating a technology that ultimately always has a social goal. Looking at engineering through a purely technological lens perpetuates a reductionist mindset on why and how we build technology. There seems to be a growing understanding for the need of using the term “engineering” in the broader sense when designing a token system.”

l. Design engineering

“The terms “design” and “engineering” are closely related but not the same. Rather, they complement each other. While the term “design” might be a more known and intuitive term, carrying a more subjective, creative, and even artistic meaning, the term “engineering” tends to bring to the forefront the technical aspects, the composition of inert parts to create a predictable and robust whole.”

Conclusion

Being aware of the existence and the use case of these concepts, we are now able to create a system that incentivizes humans to act in the desired way. As long as the system is running the way we intended it to, the change in behavior and actions should last and are therefore permanent. The next article will make use of these concepts and start to explore the possible systems that we might want to create.

Additional links:

Neuroplasticity:

Psychology of human misjudgment:

Blockchain related:

Vitalik Buterin about Blockchains

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