The DAO Tokenomics Equation

This week I am summarising my recent posts on the DAO Tokenomics Equation and how this applies to the incumbent enterprise in the post consortia era.

First lets define some terms

web3 as a Token Economy = New internet owned by innovators and users governed by tokenomics

Metaverse as a Token Economy = permissionless economy of connected “verses” built on tokenomics

DAO Tokenomics = born digitally native economy plus monetisation of real-world data in new virtual economies

And lets define how the user drives web3, supported by back-end governance of the state of their assets.

Post consortia Era

The concept of enterprise blockchain is evolving into a post consortia era where openness and ease of adoption / network effects are paramount. Here it is the Token Economy that excites and the problem solved is reinvention of how whole industries work based around the user experience as they, that user, now governs that critical data based around the user as a full member, for the first time, of the internet / web3.

I have been deeply involved in enterprise blockchain since it was born in 2017 or so and its evolution in the post consortia era into the Token Economy. Because we are reinventing whole industries based around the user experience and because we are talking about a back-end and not a front end revolution (though the Metaverse as a token economy?is emerging) then the timescales we talk about are not years but a decade or more. This is a generational thing in my opinion, but now it is starting to happen so we are well into that decade.

Now let's talk about the DAO Tokenomics Equation

We are building a new type of digital economy and this digital economy will be abstract but it could be born natively digital, like a cryptokitty , or we could be going into a traditional industry and saying - "Can we abstract out the data and build a new digital economy with that data?"

For example in healthcare 3 key problems to fix in this virtual economy are to:

1. Put the patient in control, so that they have visibility and control of what is going on
2. Use patient data to help develop new diagnosis and treatments
3. Fund the most promising projects

Web3 is driven by the user. We're trying to change their behavior. A blockchain changes a lot of peoples' behavior a little bit and a lot of little things add up to one whole load of change. We are looking to reward helpful user behaviors as for example, they share their assets, like that patient's health data, that can be tokenized and can be traded for research. We are also looking to reward user creativity as they create assets, for example that could form part of a game or larger solution. We can drive derivatives from these assets, for example don't just trade in tokens representing diamonds but we create derivatives for the carbon footprint behind that diamond. I can't own the Mona Lisa but I could own a fraction of it.

We can design to lend these assets out, for example for rent. If I'm not using it, then you can use it and you pay me rent. We can start to design in a yield. What is it going to cost to borrow this asset? What's wonderful about the funding model is that all the component parts we need to bring borrowers and lenders together exist as components. It's all composable. You can quickly design a new protocol to use the work that's been done before and to create something new a new value proposition really quickly.

As we bring these buyers and sellers together, we now have our digital economy, our Token Economy. Here we represent value in our own marketplace token. The reason is because many of these transactions may be very small (micro transactions) so we don't want to do it in fiat. Also we can use this value token as a reward or an incentive to encourage helpful behaviors.

This whole thing has to be governed. It's governed by the community of users and innovators who own the assets, the NFTs and who own the applications, the composable library of components, which are driving innovation. We do this in a DAO where we link the funding to the bests project. So to go right back to the beginning, the patient, with that rare condition, can get together with others and can fund the research to drive the resolution of the new drug. Ain't that neat?

4 minute video on the DAO Token Equation

Conclusion

DAOs are important in both web3 as a Token Economy and for the Metaverse as a Token Economy and we can think about this as DAO Tokenomics summarised into the DAO Tokenomics Equation.