3 Layers of Decentralised Equity

This week I am collecting together a set of recent posts exploring business models for web 3.0, that is blockchain. These models exist in 3 levels: the application, the network organisation that is the DAO and the platform itself. User access is via the tokens in the wallet.

Token economy - is this a valid investment for grown up investors?

Well, here is my take. We have a 500 year old system for ownership in businesses. It is the Venetians, in the Renaissance, who get the credit for separating the ownership of a business from the management of a business. This has created the equity and larger credit (non sovereign) markets of today. It's been a HUGE success. Everyone, one way or another, is invested in it. I certainly am. And it's not going away in a hurry. BUT - this is very analogue. You need a lot of intermediaries to trade. They skim a LOT for themselves, thank you very much. We now have a new digital ownership system called the Token Economy. This is a change in a 500 year old system. It creates a new form of decentralised equity. Digital or web 3.0 business will be ecosystems or networks, with their own internal market currency. This token - this utility token - will govern everything from funding, to voting to buying & selling, to incentives for helpful behaviour. A reserve fund will control volatility in exchange to fiat, and as that link is loosened, it will allow equity-like growth in the "industry protocol." This is digital investing in the 21st century.

Token economy - why will this take some time?

Well, we are talking about the wealth of the world. You don't change that in a hurry. The last time was 500 years ago - now that is a long time. The west - the east - incentives - politics- economics - philosophy. I reckon this is 10+ years to change. In the past that was 100's of years of change - but we are a LOT faster now.

Token economy - No incentive, no blockchain.

No incentive, no blockchain. No network, no blockchain. No token, no blockchain. Without an economic incentive you won't get folks to collaborate - so you don't have a network. What you need to build an economic incentive in the first place, is a marketplace currency that you can control, to democratise value over the ecosystem to encourage that collaboration. For me “token” means the same as “digital asset”. And a digital asset covers a security, a utility or a value token. It isn’t only crypto currency and even then a fully asset backed stable coin counts as crypto. Now does that mean we need a better understanding of what the word token means, in a web 3.0 context which implies a virtual economy?

Token economy - what does the word “token” actually mean

Token economy - what does the word “token” actually mean, when we say “token economy” - to me at least? For me “token” is the same as “digital asset”. And a digital asset covers a security (includes identity and an NFT), a utility or a value token. It isnt only crypto currency and even then a fully asset backed stable coin counts as a crypto. Most people use the word “token” just to be a crypto. Whereas I think you can tokenise anything. Actually i think data itself becomes tokenised to drive this new data economy as a currency. Now does that mean that we need a better understanding of what the word “token” means, in a web 3.0 context which implies a virtual economy? Now that is my conclusion here

Token economy I have always thought that key to adoption

I have always thought that key to adoption is the business model design for this new type of business model, that looks more like a network. Rather than assemble all the capabilities needed under the roof of one company, rather work together as a community. Here there are no “non core capabilities” as my non core is your core. We assemble components potentially on the fly, so the context drives the selection of services and service levels.

Blockchain - is a governance technology.

So you see there are rules or better described principles to govern each level. If you combine this with a decentralised incentive model then you are cooking. The internet is everything and everyone. I know of consortia that spend the whole time talking and never actually do anything. In bitcoin we can think of governance being defined by proof of work. My thought is that is one app only, so governance models for further apps. are yet to be defined.

So here’s the thing. If web 3 is about ownership and especially ownership of identity. Then what are the rules to define how the rules to govern how identity on web 3 is governed? So in my diagram that is talking to just one bubble - the SSI one - every part of diagram needs the same level of thought. So question - is TOIP complete? I dont think so but what do we do about that - not at the level of TOIP - but at the level of digital marketplaces where we need KYC/AML and compliance around identity?

If you want to learn more about this thinking you can read or reference my whitepaper about all of this which is published on SSRN.

Suggested Citation: "Martin, Andy, The Token Economy (October 16, 2021). Available at SSRN: https://ssrn.com/abstract=3972111 or https://dx.doi.org/10.2139/ssrn.3972111 "

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