exploring Blockchain Enabled Positive Sum Business Models
Circular economies are based on a closed-loop production-consumption model that turns trash into treasure. Consider corn husks: to many businesses, the food waste is trash, but in a circular economy business, these same corn husks can be used as fuel.With the growing popularity of environmentally minded communities — from composting at home to producing one’s own energy — “circular economics” has become a favorite, often ideal model in private, public, and business life. Designed to cut waste and create value beyond what’s measured on balance sheets, naturally, circular economics have become popular in the cryptocurrency world.
https://cdn-images-1.medium.com/max/750/0*zJNDksdXUQQOImo9.With the invention of blockchains, Bitcoin, the world of ‘tokenomics’ economic models that create value into a closed loop system is being experimented with on a global scale. In these systems, value contributors are rewarded with an asset that’s closely associated with the system they’ve contributed value to. These rewards are often called network tokens and they exist to ensure the usefulness of the network, by incentivizing valuable contributions.
It’s worth noting that rewards are not always financial; status plus mission fulfillment can be enough to motivate contributors, like with Wikipedia. However, with tokens, systems can be “Better Than Free” because contributors receive rewards that are fungible.
Circular token economies and their “Better Than Free” applications have the potential to profoundly impact internet based businesses and the way they create scarcity. As Kevin Kelley would say, the internet is a copy machine and once something on the internet has been copied ad infinitum, it becomes financially valueless.internet-basednancial value, internet based businesses need to invent methods to create scarcity to give value to their products:
It’s worth noting that rewards are not always financial; status plus mission fulfillment can be enough to motivate contributors, like with Wikipedia. However, with tokens, systems can be “Better Than Free” because contributors receive rewards that are fungible.
Circular token economies and their “Better Than Free” applications have the potential to profoundly impact internet based businesses and the way they create scarcity. As Kevin Kelley would say, the internet is a copy machine and once something on the internet has been copied ad infinitum, it becomes financially valueless.internet-basednancial value, internet based businesses need to invent methods to create scarcity to give value to their products:
In circular token economies, there is often a fixed number of total tokens that will ever be created, thus creating some scarcity. With methods like staking and token curated registries, “Better Than Free” design architecture creates additional scarcity. These methods give token holders certain rights, access, or abilities, like participating in achieving consensus or curating lists.
We think about these economic models a lot at Deconet, where we’re building the economic layer to open and free digital infrastructure. We have implemented a fixed token supply and a token curated registry to create scarcity.
To bring our tool set for financially sustainable open source to market, we host distributed & open source product development contests where developers are rewarded for building technical solutions for businesses. You can think about is as Github where software engineers and contributions get paid if businesses commercialize their software. This is when we asked ourselves, “What does access for enterprises look like in circular token economies?”
From that question, “Enterprise Hodl” was born.
What’s Enterprise Hodl?
In the Enterprise Hodl model, companies buy and hold tokens for access to a product, service, or network. Contributors earn tokens for adding value, by moderating contest for example, and the platform that sells the tokens will accept tokens as fees for certain types of usage. This token capture and redistribution powers the circular aspect of the economy.
From the perspective of enterprise customers, this new model can feel a lot like subscription billing tiers, with levels of access based on annual fees. Enterprise Hodl has tiers based on the duration and volume of tokens held
On “Better Than Free” platforms, users and contributors earn tokens for their efforts. By layering on the Enterprise Hodl model, contributions are conceivability more valuable since companies have a stake in the success of the ecosystem. Designing an ecosystem this way serves to align the incentives of enterprises, users, and contributors.
To explore this, let’s imagine Salesforce.com as a “Better Than Free” application that has minted it’s SFDC token and implemented an Enterprise Hodl model.
For a bit of background, Salesforce is a CRM and also sells contact data, like phone numbers and email address. Salesforce customers are enterprise sales teams and use the CRM to stay organized and purchase contact data in order to do cold calls and emails.
Sales teams spend a lot of time curating the right people to reach out to and put significant resources into confirming contact information is correct, like understanding if a person still works at a certain company. Every sales team repeats this effort independently. This duplicated effort is wasteful.
In order to cut waste, Salesforce could implement a circular token economy. Their enterprise customers would buy and hold tokens for access to curated and accurate lead lists; we call this Enterprise Hodl. Independent value contributors would be able to earn tokens for the curation of lists and confirmation of data, so for them, contributing back to the platform would be “Better Than Free” because they could earn tokens for doing so. Finally, Salesforce would take a fee, in tokens, for the usage of the CRM product.
In this example, Salesforce’s enterprise customers would benefit by creating deeper incentives for independent value contributors to curate lists for them. Normally, getting this kind of benefit would require these enterprises to pay contractors or employees, which would be an expense for them.
In a circular token economy, enterprises get the benefits without having a pure expense because they are purchasing and receiving a cyptoassest. This notion that all parties involved get a better outcomes is at the heart of positive sum games, and circular token economies present the best opportunity to experiment with these new kinds of models.
Our mission is focused on having equitable and automated value flow back to contributors and maintainers of open source software. That’s why we’re implementing Enterprise Hodl for a global and distributed open source development contest we’re hosting in June. Enterprise and blockchain projects buy and hold the Deconet token in order to list challenges to an extended developer and product community of 10,000+ developers and contributors.
https://cdn-images-1.medium.com/max/1000/0*r2LB2LE4C2W7pWNz.
New technologies, like blockchains and smart contracts, provide a unique opportunity to experiment with incentives and value creation models. At Deconet, we’re focused on applying these models to the world of open source and blockchain ecosystem development, and would love to hear how you’re thinking about new models in the industry you’re focusing on!