Blockchain? Nah. Human Chain!
Tokenisation of MLM
Groundbreaking Tech for Loyalty and Network Marketing or How Tokens will Bring Soul to Business
Great inventions are multi-bottomed and unfold themselves in several generational waves.
We went to sleep knowing social media has wasted another day of time and another zillion bits of data storage on cat photos. Then, we woke up to find it feeds artificial intelligence development. There has rarely been a sharper moment in political life — also sprung by social media [this time, its flaws] — a very timely debate that promises to bring positive reforms on a scale we haven’t seen for decades.
Blockchain will follow in a similar fashion.
By now, a typical business owner is irritated by the blockchain hype. They are annoyed in such a way that confirms something absolutely and permanently is going wrong. People are ready to pay Deloitte just to be sure ignoring crypto is safe and we can live on, normally.
Sure enough, all major consulting firms exploit that and already offer some blockchain services, directing customers to their limited, “corporately sterile” toolset. Both IBM and Microsoft — the only two companies featured in the world’s top 10 consultancies who could be considered as being from a purely technological background — offer only few particular ready-to-use blockchain platforms.
They advertise a tousled-looking but narrow class of use cases. One can see about fifty apps. However, an attentive look collapses the apparent diversity into a couple of topics: supply chain optimisation and streamlining complicated-over-average sales processes.
I agree with most of the statements by Clemens Vasters in his article above. I think blockchains themselves are NOT the solution to anything yet. Instead, they are THE PATH TO THE EXPERIMENT that guarantees results. That’s perfectly normal.
Before “everyone has crypto” in some form, no new business and social model can work. Uber became possible AFTER we all got GPS sensors in our pockets; Amazon became possible AFTER we all got our homes connected.
The secondary (not side-) products of blockchains — broadly adopted tokens and other crypto primitives — will soon spawn applicable results such as “human chains”.
What is a human chain exactly?
I don’t try to invent puns. I literally mean chains of humans.
A few examples:
People often associate bucket brigades with disasters, but they are mostly used in normal conditions to load or unload something, for example a truck of watermelons. Another example of human chains is a warning beacon, like those of Gondor we saw in the Lord of the Rings. Probably the most requiring in terms of chain participants’ qualification is the transfer of spiritual knowledge from generation to generation (“designated gurus”).
In every case, a human chain compensates for the lack of technology, temporary or permanent. In the former example, written information (“holy scrolls”) suffers from the technological shortcomings of all natural languages to deliver the information unambiguously. The language of mathematics doesn’t allow for multiple interpretations, so modern prophets can avoid the need for gurus if they write their manuscripts in formulas.
Human chain, as a whole, is a fairly reliable technology.
In one of Isaac Babel’s novels, there’s a hilarious episode when the team of the gangster, Krik, suddenly pushes a few dock workers at the end of the long bucket brigade to the water, redirecting the flow of goods to their own cargo. That is funny because it doesn’t happen in real life. Although, the basic function within the chain may be primitive (pass a bucket), a node being a human means it can redirect efforts quickly and kick the shit out of those gangsters or apply a different broad range of functions.
It is the core principle that the subject of handover is self-sufficient and locally managed. No one centrally controls buckets in a brigade’s chain; God doesn’t have to edit and comment on scriptures he once descended; Gandalf needs not to worry about firewood at beacon points.
Humans are smart nodes, very smart nodes. And that is the essential advantage.
Now, look at this guy’s golf trick:
In a non-human-chain technology set (where it is now a stronger than ever trend to avoid the human factor altogether) each node is as dumb as a stone tile in that video, unless it is perfectly prepared for the job. Each element has to be precisely calibrated or the system dysfunctions. Even if some aperture is allowed, an error propagation is a strong and nasty phenomenon — three errors in a row kill almost any system.
You might be wondering:
Where is the room for innovation there? How can we go forward by going back to something this ancient?
Let me answer with the…
… Loyalty Marketing Example
Let’s innovate the items being passed so they remember, interact, and, therefore, motivate human nodes they are being propagated through.
Imagine this magic ten dollar bill. It looks and feels normal and you can pass it over to anyone, it is not connected to you in any specific way, and it carries none of your sensitive personal data.
Whenever a shop or a cafe you’re in at the moment gets crowdy (and many bills change hands) it becomes eleven dollars. So you get the temporary “sorry-for-inconvenience discount”.
It also has information about how many times it was used as payment and for what segment of goods, so you can see in what store the discount effect can be even mightier. You can write and pass comments on it.
And, importantly, the discount power grows when other customers are more relevant to you.
How can that possibly work?
Tokens, handed over from one man to another, without any centralised system watching or authorising interactions.
Tokens aren’t anything new. Each of us use incumbent tokens daily without even noticing: invoices, keys, tickets, bonds, receipts, reservations, bills, browser certificates and cookies, etc. Ordinary tokens are already vital, but they are dumb. More importantly, they are expensive to issue and even more expensive to maintain, with a large portion of costs being associated with security.
All tokens have a foundation — the carrier media. Theater tickets’ carrier media is recycled paper. Tokens on blockchains or other distributed digital substrates are known as crypto tokens.
Creation of crypto tokens is a simple event and you, as a process organiser, don’t have to pay for their further circulation. Crypto tokens are self-sufficient.
How can consumers handle tokens?
You can carry tokens in mobile wallets, many of which are open-source and free.
To those of us who are old enough to remember, it is reminiscent to handling emails in the early days — you possess your permanent ISP-dependent email address (blockchain addresses now), install the email box software of your preference, and go. If you decide to migrate to another software, your address goes with you and, yes, you have to handle the stack of letters (tokens today) manually. Modern culture of email use is far from how it was seen at the time it all started. The same will apply to tokens.
How can tokens change the way we do business and consume?
As open token-carrying substrates (platforms) become ubiquitous, anyone can maintain an unlimited number of token emissions. Soon, myriads of tokens will represent everything that can be counted in an economically meaningful way.
Within token-enabled supply chains, every participant seamlessly contributes to the quality automated data and event flow. Most economic acts can be done through token exchange, issuance or redemption. When tokens circulate, things that you normally run accounting, operations, and procurement departments for happen “by themselves”, with much less overhead than normal.
As many cross-blockchain bridges are already in their alphas, crypto tokenization promises new productive economic scenarios when any two random crypto tokens can become mutually usable.
In addition to providing a previously unthinkable level of automation, tokens add to the quality of data streams — many essential business parameters can be articulated with greater precision. Many human errors can be omitted. With tokens, people tend to make more reasonable data inputs. On one hand, they can be rewarded immediately in tokens. On the other hand, it always costs some number of some tokens to do something. So people either make an economically-responsible decision or do not contaminate the feed, abstaining from any involvement.
A separate crypto token can be smart. Many crypto tokens — when continuously changing hands — can be very, very smart. They can form entire new worlds.
When Alice passes a token to Bob, they perform one elementary act of physical calculus. This event is “fundamentally local” — it only takes Alice, Bob, the token, and the law of transaction that Alice, Bob, and the token carry in themselves. No one else and nothing else needs to be involved (of course, we consider distributed token-carrying substrates and bridges between them as free-access, self-maintaining ownerless entities).
Examples of that ubiquitous miracle of local interaction are everywhere:
The great complexity of physical phenomena we see around us is the result of endless iterations of similar “local acts”: circles on the water don’t need a concentric dispatcher.
Look at what beauty two simple local rules in Conway’s game of life can create:
Tokens will bring soul to business.
Junctions in tokenized interactions in human chains can be much smarter: each time Alice passes a token to Bob, she undertakes a complex analysis which only humans are capable of processing. Human chains can also bear an often-needed note of sensitivity and even wounded virtue rather than the iron brashness of software automation alone.
How do we calculate more complex things than just transfer of value, such as level of relevance?
True, the key to many “local” interactions is level of relevance so we must be able to calculate it.
While general quality of information is not possible to quantify, relevance can be. Consider the following example. John tried to call my neighbour, Sam, to ask whether he is going fishing tomorrow, but Sam never answered the phone. So, John calls me instead. John believes in my non-zero ability to predict Sam’s behaviour tomorrow. Apparently, I am relevant to the task. Now John needs to calculate that relevance.
What does John need to know about me to calculate my relevance? That I am Sam’s neighbour and can just walk to his door and knock, if required. This is one point (or token, if you will).
But if John knew I’m also into fishing and I kept hearing from Sam during the entire week about this trip tomorrow, he’d account even more relevance to me. That’s the second point (token). John tries on, within his information relevance evaluation task, but soon finds out that he probably shouldn’t bother much more with getting to know me, as the next piece of data didn’t raise my average prediction quality.
Of course, I may happen to be a pathological liar or a pranker and John’s measurement is wrong, but this is an improbable way for a typical, quick business-related measurement to become corrupted.
Network Marketing Example
Network marketing (MLM) is now mostly seen as a simple and uncomplicated evil, not as something fatefully divided — an opportunity but with a great deal of economic inequality — which is closer to truth. Tokens and human chains can fix that.
In network marketing, each participant essentially has one core asset — the position (order number) in the network. The higher the position, the less money has to be paid as royalties to higher levels. The “downline” (part of the network under the node) can have any size and any structure.
That position (core asset) is recorded somewhere in the system annals and:
- it can’t be transferred to anyone within the network;
- it can’t be used in another network;
- it can only be deployed within the specific procedure in that one network.
The same effort propagation effect as MLMs achieve can be designed through ownership of special (compatible but not fungible) tokens: the greater number of tokens in possession, the higher the effective position. Notably, each of the three indicated drawbacks disappear:
tokens are perfectly transferable among people and among networks.
They are “stake tokens”.
The model is straightforward and powerful. Tokens “locked” into the system provide privileges in using the system in its intended commercial way. It could be revenue share as in a typical MLM scheme or it could be a discount on fees that the system charges for its services.
The fair value of stake tokens can be estimated as the net present value (NPV) of the expected monetised privileges they provide. For example, if tokens grant rights to discounts, to estimate the fair value, the NPVs of costs avoided should be added up for the entire investment horizon timeframe. Stake tokens potentially generate more value for their holders if holders actively use the system, rather than remain passive “investors”. Thus, tokens have value even outside of typical token speculation narrative.
Since most MLM distributors place too much emphasis on the “opportunity” as opposed to the sales of the product, this troubling aspect must be carefully mitigated. Tokenized systems allow us to do that with ease.
If needed, the pyramid concept, as in MLM, may be removed altogether by killing the particular dependence indexing (Charlie under Alice only, Kulia under Grace, etc.).
Or, otherwise, a balanced retail scenario can be achieved through various combinations of fungible and non-fungible tokens deployed. The system can have adjustable bias to direct sales rather than having the dominating incentive to concentrate on creating the downline.
On misunderstanding the purpose of the technology
I think the big corporate world doesn’t completely get it for some reason.
Quote from the report by Deloitte: “Tokens are digital representations of ownership of currency, equity, and other tangible or intangible assets. Some benefits of tokenizing assets include increased speed of transaction settlement, increased liquidity of assets and mitigation of investment risk.” Compare this grey primitive description to the picture I drew above.
I think there’s also some misunderstanding about trust and trustlessness. Below is the complete quote from IBM’s handbook for business owners about determining blockchain fit. They suppose your business needs modernisation through blockchain only if you have some issues with trust.
This looks weird, and ultimately, wrong. An attempt to place a permissioned large-corp-led blockchain in the position of the ultimate trust source is an unneeded fantasy of semi-messianic redemption. By the way, the other useful-to-know-about extreme of the wrong is here.
I think no single stand-alone platform can create any “above-average” trust by definition (except for BTC, but that’s another story, tokens on top of Bitcoin won’t have the full decentralisation of bitcoins). But when we are talking about dozens of collaboration platforms and thousands of tokens that constitute the ecosystem, we shouldn’t worry too much, on average. It surely won’t get any worse than today and today is not that fatally bad.
We are wrongly tamed. We are all too scared about having to trust someone. We transfer our reasonable fears of monopolies such as Facebook to smaller companies, which are all closed black boxes too. Every time you do business with a large service, it feels like playing an extension to the classic pirate game where you are exactly at the end of the chain. They don’t even talk to you these days.
In crypto, it will be different. Systems are pretty compatible and people can migrate (or fork, if there’s a crowd big enough).
And, after all, there’s no need to trust each other. We don’t need blockchain to act as an intermediary between companies and our own paranoia.
On the contrary, business is a trustless game and it’s going on! Here are some less typical hints for good students: rich people are more unethical and testosterone levels aggravate that; aversion to the economic risk (losing money or opportunity) has been proven to be lower than aversion to being betrayed; the reciprocal feedback method which centralised monopolies like Airbnb deploy actually spoils reputation information and trade efficiency.