Blockchain Ecosystems
It is getting more and more evident that the big web companies are locking their users into proprietary interfaces and information monopolies. Supposedly, the centralized information could have been beneficial for the users but has shown a lack of privacy, high-security risk, no data ownership among other aspects.
The premise from these companies has been that as the apps have been used for free, so they owned the data. The revenues generated from this data have been huge, as the private user data has been used to influence people, in commerce, politics, elections, behaviour, the least. One could expect that they could share the benefits, but there has been little wealth distribution.
At the same time, centralized payment systems are inaccessible and costly. They are provided more to compete than to collaborate.
The separation between rich and poor communities has increased in the past 40 years is the conclusion of a study made at Harvard University.
Financial inclusion is on the rise. The World Bank has estimated that globally, 515 million adults opened an account at a financial institution or through a mobile money service between 2014 and 2017. This represents a rise from 62% to 69% of the adult population owning an account. Despite this progress, 1.7 billion adults remain unbanked and inequalities persist. Women in developing countries remain 9 percentage points less likely than men to have an account.
Mobile money continues to grow in all regions, especially in West Africa. In low-income economies, there are twice as many mobile money accounts compared to bank accounts per 1,000 adults. (IMF Financial Access Survey)
The 2008 crash was the greatest jolt to the global financial system in almost a century – it pushed the world’s banking system towards the edge of collapse.
Just after these events, a decentralized approach was launched named Blockchain. Decentralization carries real benefits for a currency system and presents itself as an alternative to the dominant system that’s controlled by governments and run by banks. Going back to definitions, an economic system is one through which value is generated and distributed among its members. Although originally value was exchanged through barters between members, modern economies have enhanced this exchange system with an abstraction called money that makes the exchange of value much more efficient and adds a layer of financial services that is very difficult to achieve with bartering alone.
Blockchain Ecosystem and its participants(community)
BLOCKCHAIN enables trade value
The experience has shown these past years is much more powerful as a trade value. When there are multisided participants involved in value trade, an ecosystem emerges along with the use of Blockchain. The founders, the core development team, the investors that put financial capital into the token value, the multiple validators of the transactions that are processing them periodically are retributed with the minting of new tokens, that is why they are called miners that produce the platform functionality. If then, inside this ecosystem, useful applications can be created and users are willing to get and pay for them, raising a healthy user’s community. As more useful Third parties applications the Blockchain Ecosystem manages to attract, benefit all its participants and making it more powerful. The following illustration shows a Flywheel diagram originally presented by Ali Yahya, Crypto Busines Models a16z, extending the Stacks Blockchain Ecosystem (https://www.stacks.co).
A Blockchain Ecosystem and its Participants (community)
Some questions arise with the emergence of these Blockchain Ecosystems. Are there new investment mechanisms? Are all investors welcome? How can investors help? Are investors rewarded appropriately? Do we attract investors actively? How the platform functionality gets approved to be modified? Who and how that decision is made? Which are the values and codes of conduct in this Ecosystem? Are there any new useful applications developed? How the Third party’s developer gets rewarded? Are the end-users rewarded in any way? How do we foster an equitable ecosystem that does not perpetuate the problems presented above?
Probably, these questions could be in the mind of the participants of the community while its implementation and when developing the new applications.
The opportunity to implement cooperation and reciprocity
A principle that could help to inspire this development could be the following:
The supreme need of humanity is cooperation and reciprocity. The stronger the ties of fellowship and solidarity amongst men, the greater will be the power of constructiveness and accomplishment in all the planes of human activity. Without cooperation and reciprocal attitude, the individual member of human society remains self-centred, uninspired by altruistic purposes, limited and solitary in development like the animal and plant organisms of the lower kingdoms.
(‘Abdu’l-Bahá, The Promulgation of Universal Peace, 1912)
It is an open opportunity for the nascent Blockchain ecosystems a testbed of implementations of this principle of cooperation and reciprocity, it will depend on each one of us. The right use of this principle of cooperation and reciprocity will become clearer when the experience of the different initiatives is being applied and there is a learning culture making the right adjustments to it.
A possible way to evaluate an application is to see if the principle of cooperation and reciprocity is being applied, and if so, how it is applied. Probably, if this principle is not applied, it could derive from the same problems that were discussed at the beginning.
One way to implement it, at the core of a Blockchain Ecosystem, is using game theory, which is a theoretical framework to conceive social situations among competing players and produce optimal decision-making of independent and competing actors in a strategic setting.
Using game theory, real-world scenarios for such situations as pricing competition and product releases (and many more) can be laid out and their outcomes predicted.
The factors are knowledge or keep it secret, intellectual property, and proprietary control of resources.
The way to face these issues is by finding positive incentives. In this approach, money is used as the general incentive to achieve subgoals. Then to look for by-products the mechanism or work might produce. If the by-product is positive avoids the problem of selfish behaviour. The following illustration shows how the mechanism for positive incentives should work.
Blockchain ecosystems
These positive incentives can be implemented effectively with the use of tokens.
The Stacks Blockchain ecosystem provides a full stack of tools for the development of applications assuring decentralized user Ids, privacy, security, and data ownership.
New business models
Social network applications encounter a problem of bootstrapping as to be successful and attractive the value increase to the square of the number of users involved. At the actual level of competition in the space of social network applications, it requires a lot of resources to reach a position of leadership. In this case, the overall utility of an application will be the application utility for its users.
The good news when these applications are built-in Blockchain ecosystem and considering the mechanism of positive incentives can help to overcome the network effect with additional financial incentives using tokens. In this case, the overall utility of an application will be the financial utility plus the application utility. It will attract early users to use the application understanding that there is a financial utility and then discovering the benefits of the application utility.
The following illustration shows how the token or financial effects help to bootstrap the social applications.
Reducing the cost of networking
The cooperation and reciprocity could address aspects of assuring the principle of the oneness of humanity, universal participation, equal rights for men and women, elimination of any kind of discrimination, nationality, ethnicity, beliefs, geographic origin, economic situation, language among others. That effort or work could be a way to compensate the users while the network grows.
What if we do not use this principle of cooperation and reciprocity to expand the network?
The implication of not applying these essential principles in the development of the applications in a Blockchain will not help to develop a healthy Blockchain ecosystem and will lose the opportunity to improve the actual conditions of humanity, even it is a small contribution.
A way to fund the decentralized applications
The challenge to fund these new possible applications persists. So, the App Staking to bootstrap the social applications could help to fund it. This method is promoted by the Freehold initiative. It is based on a very essential action from the users, freely holding digital assets to use the applications, similar to what was done in the following part of history.
The actual modern financial as known today started in the United Kingdom in the decade of 1860. The internationalization of the banking system was initiated with the export of gold capital to start branches in different cities in the world where that country was holding businesses. The remote banks used this gold backup as a way to mint their local currency to offer financial services for local customers. Providing loans for liquidity to the local producers while still in the process of production, acting as payment service for their suppliers, and workers, and when the time of payment comes, offering interests to hold the income in the bank. The banks were successful or not depending on how they manage this ecosystem, avoiding customer runs and country economic crisis.
The experience of the initial Blockchain Ecosystem shows that holding the value of the token is essential for the health of it. As the decentralized application brings the utility of the Ecosystem to the users, requiring the users proof of holding a certain balance of a token could be a way to generate liquidity to bootstrap the development of a decentralized application. It means a user to fully use an application, has to show that holds sufficient tokens to be allowed to use it. The user that owns those tokens is free to use the token whenever she wants, constituting a base of digital assets. This concept was cleverly named FreeHold by Patrick Stanley and it is followed by a growing number of members (https://joinfreehold.com).
by Phillip Roe-Smithson @PhillipRoeS
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