Episode 282

Bonding Curves, Curation Markets, Token Curated Registries, and Art

Simon de la Rouviere

Human beings have a penchant for creating lists. We make lists for things like the top music artists at any given time, the best restaurants in the world, companies which people can trust, and the most wanted criminals. Lists take many forms. They can be maintained by a single authority, or curated by a crowd. But almost always, they remain in the custody of a central party. Token Curated Lists propose a model by which a) the content of lists are decentralized, and b) contributors are incentivized to curate their content according to social consensus.

We’re joined by Simon de la Rouviere, an independent researcher and blogger. Previously, Simon was one of the first employees at ConsenSys and founded Ujo Music. He also contributed to the ERC20 token specification and has written about blockchain and token economics since 2014. In recent months, Simon’s research has focused on Token Curated Registries (or TCRs), and the economics of curation markets.

Topics discussed in the episode

  • Simon’s background and interest in blockchain, music, and economics
  • Bonding curves as a mechanism for continuous token issuance
  • Curation markets and how they relate to bonding curves
  • Practical applications of curation markets
  • The connection between curation markets and cultural memes
  • Token Curated Registries and their applications
  • The role of TCRs as a crypto economic primitive
  • The economics and game theory of TCRs
  • Simon’s recent project “This Artwork is Always for Sale”

Sebastien Couture: So we’re here today with Simon de la Rouviere. Hi Simon.

Simon de la Rouviere: Hi there.

Sebastien: I don’t know if you usually pronounce your name so French.

Simon: That is honestly the first time someone’s pronounced it like that. Even though it is a very French name. I’m actually not French. All my ancestors 200 years ago, they spoke French, but it’s the first time I’ve actually heard it like that. That’s great.

Sebastien: I wouldn’t know how to pronounce it any other way, but thanks for joining us today. Yeah, please tell us a bit about your background and how you got involved in the blockchain space.

Simon: I’ve always been a programmer and interested in building interesting things, tinkering and so forth. I first got involved in the blockchain space in 2011. I found Bitcoin by just browsing the internet and thought this was really interesting. It’s held my interest for two weeks and then I thought I need to pay attention this is really interesting. But then I only stayed as a hobbyist. I was still studying and then in 2013 when this experiment still didn’t die it seemed to become more and more important back of my head. So I started checking in more fully and so back then I started actually working in a Bitcoin space building side projects. My first projects back then to actually starting to look at the code a Bitcoin itself. And then while I was finishing my Master’s Degree, I actually started building applications for it. And then in 2014 when I managed to save up some money to work full-time in the space. I didn’t know if it was too early, but I was just really excited to experiment and so I bought my own coins. I forked it. I commit some code back to Bitcoin. I just had a lot of fun playing around and experimenting with what was available back then. Seeing that things were really tough and considering that I was a programmer and it was tough for me, I was very excited when Ethereum came around and actually promised ideologically and technically to be more friendly to developers. I wanted to join us early as I can and so back then through luck and being online one of the first employers of have ConsenSys found me and then I joined in January 2015 as one of the first employees that ConsenSys working and building and developing Ethereum applications. Over the course of the four years I’ve worked in various projects from co-founding Ujo Music which created one of the first smart contract royalty payments in the music industry to inventing new kinds of economics, I helped co-design that your ERC-20 standard and started the first smart contract security based practices. And now today I am just back in tinkering mode after four years at ConsenSys and Ujo music just playing around and still reading, still writing, still kept trying to catch up with everything that’s happening in space. There’s a lot of stuff.

Sebastien: So you’ve done a lot in the space in the last four or five years. When did you start to see this intersection between blockchain technology and art and music and economics?

Simon: I guess it comes from my background. I was always interested in creating things. I’ve been a musician for a long while I’ve always enjoyed writing and being from South Africa I’ve experienced what it’s like being in the developing country and having to interact with the internet and not initially having access to certain services. So when those things converged, I was like this is a really interesting economics experiment. It is computer science and it actually provides access where people like me haven’t had that access before, this is exciting. I need to pay attention. My Master’s Degree for example, it was a completely unrelated field. I was studying information overload on social media which actually did inform some of my ideas later on but so it is always been a constellation of things that have interested me and you know, when I looked at the blockchain when I looked at Bitcoin, there was this promise of just empowerment and I could participate. I didn’t have to fly to Silicon Valley to participate, like I could be in my bedroom in South Africa and participate. So it was really exciting.

Meher Roy: Of course. You’ve been one of the earliest team members at ConsenSys. Is that right?

Simon: Yeah, I think was employee number six.

Meher: You were employee number six and of course you have recently left consensus two months back and how many people does consensus have now.

Simon: I think it’s still hovering around a thousand people, give or take.

Meher: So you’ve seen this company go from six people to a thousand people.

Simon: Yeah.

Meher: What was the journey like, how has consensus changed from the time it was so tiny into now this largest company in the Ethereum space.

Simon: It was, it is, a super fascinating journey. Just because as well, you know, I tried creating my own startups when I left university and it did it get off the ground, so in more ways than one this was my first like “job experience” and I put it in quotation marks because I don’t think it’s like it what people would equate to being a normal job experience having worked a consensus, and I put that in a good way. There was a lot of freedom that we could do many things, a lot of autonomy. So it was just a really great experience to going from university, trying to sort things into environment like that where I could just experiment and create things and I think that was also an intention early on is just to say like, we need a bolt this new market and actually have no idea what’s necessary, so do what you think is necessary. Do what you would do if you had an open weekend and you just wanted to tinker. That was really great initially but the way the company grew it grew very very quickly and for me it was just like, I was just trying to make sure I’m learning as much as possible why this is happening because this is my first like rodeo so to speak. I just wanted to learn how do you run a company? How do you manage people? Like how do you do finances? And then Joe Lubin just comes to start hiring so many people and I just got to learn from so many people, even at like 30 people. I started to learn from people to a thousand people there were still so many people I could learn from and me being someone is interested in many things it was just hard to eventually say no to stuff. It’s like I have to get out of these two thousand select channels, I’m not actually getting to my work. But it was just interesting to see a change over time and and how a company like that deals with certain organizational stresses as it grows, growing pain and so forth. that, you know ended up being valuable lessons, but it was definitely one of the best experiences. I’ve had so far in my life for sure to be a part of that.

Meher: So during this journey you co-founded Ujo Music. And of course you just started off as the project that sought to change the royalties are split up when an artist creates a piece of music and ultimately is distributed. So give us a sense of Ujo’s journey. What was the original plan what you ended up building and where that startup is at today?

Simon: Yeah, so early on a consensus again there was just this sense of explosion of possibility. It’s like there’s so much to explore, we have to try everything and so there’s a lot of the early projects were just because it was people initially interested in these things like Truffle was started by Tim Colter because you wanted to build Ethereum dap and he felt it sucked so he started Truffle. Same for me. I’m a musician. I always looked at the problems of musicians and back then there was another guy who also joined the team Phil Barry and we looked at the music industry and realized there’s opportunity here and Imogen Heap at that time started seeing the same promise and we got in touch with her and said, like look, let’s do something. Let’s create this experiment just to prove that it’s possible and so we got working both the prototype in two months and back then I think October 2015 this was one of the first daps that came out and so, you know, we even had to experiment with user experience. We had a light wallet, metal mask didn’t exist back then and we weren’t going to tell people to go use Mist or sync their own notes and whatever so we had to run our own nodes and keep everything running. It was one of the first articles because I had to put Ethereum US dollar price as well in there. So is a fun experiment. Later on she didn’t end up selling any of the Ethers she made because it’s like $1 was one Ether and she sold a bunch of songs at $1, which actually those funds went into actually supporting a recent tour which is great news for us because at least we have one artist make a living. And over time we went back to the drawing board researched the music industry and discovered it has so many problems and a blockchain can solve a lot of these problems in different manner. But we had to pick, what are we good at? What do we care about? What is the music industry need. And so we went different ways for a long time, just building technology, throwing technology away, asking many more questions and then eventually led itself to the building today. What is the Ujo portal where musicians can upload music, they own the rights, metadata is created that represents the music and they can be paid a hundred percent of the music. A hundred percent of the royalties goes to them and it split according to whomever is part of the collaboration that made the music. So that’s been the course of the past two years. I think the hardest thing just has been getting, so the music industry really likes the blockchain but it’s actually really hard in practice to get people on board and that’s been just the hardest thing. Also just bumping up into the legal issues of copyright intellectual property and how the blockchain works with that. It’s not easy problems.

Sebastien: So how did all of this lead you to become interested in things that we’re going to talk about today, which are continuous organizations, Token Created Registries etc.

Simon: I mean for me I saw Ujo Music and curation markets and all these new kind of crypto economic models as two ways to solve the same problem or two different ways to solve the same problem. And that is I was always focused on the creator. How do we ensure that people can continue creating the things they create and are there transaction costs we can reduce. Are there new ways to build new economic models to build more things to create more things and to create communities around these things. So Ujo Music wasn’t one way to do that in the music industry to say, how are we reducing the transaction costs for musicians to make a living, reduce the cost of licensing, reduce the cost of the metadata problem in the music industry. And then the other side is the curation markets, which is let’s create new economies. Let’s allow people to do things, new things in new ways. And that’s how it was always like a tennis match between the two for me, some days I would spend more time thinking about curation markets, some days spend more time about the real problems in the music industry so that it happened in parallel.

Meher: So, of course over the past three or four years I have I followed yourbonding blog and your blog pioneered a lot of ideas that ultimately many teams picked up on and they built their projects based on those ideas, right? The first idea was the idea of a bonding curve. The second was the idea of a curation market. And then very recently you’ve had ideas around how artists can create artworks and get paid for their artworks, but other people can own their artworks and unique models. So it would be interesting for us to go into your journey making all of these inventions and trying to get a sense of what these inventions solve and where you found practical success with these inventions. So maybe the first thing we could start with is the idea of the bonding curve and could you explain to us what a bonding curve is? And what kind of economic interaction is it seeks to be?

Simon: Yeah sure. I’ve tried this a few times before and it’s always an experiment to explain it new different ways. So let me give this a go. A bonding curve is essentially, it stems from the desire to create a continuous token model as opposed to an ICO, so if people want a token for a specific purpose, a smart contract is the automatic pricing and the provider of liquidity and so how it works is if you have one ether you bonded into the smart contract and based on the current price that smart contract sets in a hard-coded manner it would mint a new token. And this is why it’s called the bonding curve because it would generally change based on the supply of the tokens in circulation. That’s why it looks like a curve could either be linear, exponential or logarithmic/ And then over time once there is this pot is growing, there’s more tokens in circulation, anyone at any time can then sell their tokens back for a part of this reserve or deposit or pool that has been built up by people buying the token. So it’s this mental model of an ecosystem growing and shrinking based on demand for the specific token. And the price of the token will differ based on if there is demand for the token. If there is a lot of people wanted the price will be higher if fewer people want it the price will be lower and you can buy and sell to any point along this sort of curve.

Meher: So the idea here is, there’s a smart contract and that smart contract controls a pool of ether, we can think of ether first maybe maybe dai later, and there is a creator of that smart contract like the deploys the smart contract the smart contract starts with zero ether and the smart contract has the rights to mint a certain token. This token could be could be any token. So let’s say like these are like Simon’s token. So Simon goes and deploys a smart contract starts with 0 ether, but 0 Simon tokens issued.And then the smart contract has an open entry mechanism. So anyone can deposit ether into the smart contract and get a bunch of Simon tokens. Maybe in the beginning. So if I am the first person to deposit ether it might be the case that I deposit one ether and I get a hundred Simon tokens. And then the second person comes along and deposits one ether but he doesn’t get a hundred, he gets 90. He gets less than I did. So the smart contract in a sense incentivizes early deposits into the early deposits of ether into this contract and then as more ether gets accumulated it might mean lesser and lesser tokens in the future and this idea that the number of tokens minted per ether depends on the total number of ether inside that contract so you can plot these two things and that is a mathematical curve which is why you call this a bonding curve.

Simon: Yeah.

Meher: So essentially you can see that this is a smart contract that will end up accumulating ether. And then issuing a bunch of project tokens When I saw this model in the first time my fundamental question was as a person wanting to create a token I usually want access to the ether that got collected. Normally if you look at an ICO, Cosmos project did an ICO, so they collected a bunch of ether they gave out tokens, but then they want to use this ether in order to build some system but like this bonding curve design that you came up with didn’t have this other mechanism. There wasn’t a central team that was collecting the ether and channeling it towards the development of some system. Why remove that aspect.

Simon: Initially, especially the early designs was around just finding a way for people to commit to some cost in this case the opportunity cost to lock up your ether for minting some token that represents a community of value and it depends what the token will be used for. The initial example that I had was people would take this token and then stake this token into information and does create a curation market as in like it you would be able to create topic tokens. Like, you know, Ethereum is a topic or football is a topic or gardening is a topic and whatever. But it was just the way to price how valuable the information was and so it wasn’t necessary to develop anything. You know, it wasn’t necessary that the funds would need to be used for investing in infrastructure or investing in people or be used on any other manner besides just a commitment scheme. Like I’m undergoing opportunity cost in that has a signal to the rest of community that I want to put some value where I want it to be and it’s a pricing mechanism to do that. So initially, is that the pool would be just that, that the money would never flow out for additional purposes, but there has been people that have been building alternative designs where the ether doesn’t just stay in the in there. It can be become fungible outside of that pool.

Meher: In some sense, when you look at many societies like societies, cults, religions, there are many times that these societies have entry costs, so you might have a cult, you can enter anyone can enter but in order to enter they have to undergo this ceremony and like this ceremony is maybe it’s expensive in some way. Maybe it’s painful in some way like different, you know, like these societies are also ways to coordinate people, but they create an entry cost and the entry cost is not necessarily in order to create a pool of capital that the organization will use. It is in a sense to have some kind of signaling cost that whoever came into the organization paid a price to come in and therefore they are committed to the cause. So in a sense this is like the blockchain equivalent of that system where anyone can enter but in order to enter you will have to part with your ether, and when you part with your user you get your project token, those ether will stay in the contract. They are not going anywhere. And you can see that on the blockchain that the ether are not right there you have you have certainty over for that. So this is sort of an entry mechanism. Then what’s the exit mechanism? How do I exit this group of people?

Simon: It depends again, in the sort of most simplest version of token bonding curve is you can exit at any time because there’s always a pool of collateral in the smart contract and if the price is zero there is zero collateral, but when the price is a hundred they might be, you know, a 100 ether in there or 20or 30, depends on the obviously the supply curve. So people can exit at any time. And the reason why they would exit is depending on the use cases the token and whether its full value valuable for them or whether it the price has increased to such an extent that it becomes too profitable for them to not exit. So let’s say we put tokens together and it’s for this community and this token means you can have access to certain services. Now suddenly, there’s so much demand that you bought it because you just want to get access to services but now the demand is so much that you bought a hundred tokens early on and now it’s suddenly worth a few cars and you got like well, I don’t I don’t need this much anymore for access to these services, I will sell a bit to get back some of my return and maybe even make a profit or an additional reward for having participated in some form but alternatively if you get in while the community is thriving and it starts to decay for whatever reason then it might be that when you saw your token you might get less back then you put in. But that’s like the normal sort of growing and shrinking of value that you find in various forms from company stocks to currencies and whatever, so the first and foremost thing is do I want to participate because this is valuable for me, then you would enter. If you would then leave with no value then you would have still gained something because you were there first and foremost for getting access to something or participating in a community or just having the token for whatever reason you want to.

Sebastien: How does that lead us to the next topic, which is creation markets. Maybe by starting with describing what is a curation market.

Simon: Sure. So for me a curation market is a way of using us like a subset of crypto economics that is specifically about the curation of information and whether that is for hey, like look at this new funny meme or we need to figure out what is important for this dao, we need to curate a list of topics and issues that we need to discuss in the next monthly call. So it’s a very broad description of various information that needs to be curated and so curation market is always been like okay, how do we use crypto economics to make it easier for people  to make decisions and/or share information with each other that is novel, whether it’s a new book or a meme or whatever. And so curation markets to me currently contains many of these cryptic economic primitives, like one of them being token bonding curves and I primarily put these crypto economic primitives into two buckets, especially in curation markets, into continuous staking games and that is token bonding curves where you would have a liquid price based on something or a ranking, like many token bonding curves would result in some ranking system based on different weights or value that’s being staked. Then on the other hand. This is a tongue twister, but I like to call it as staked slashing shelling games, but it’s essentially saying people put up some money towards something and they’re willing to be proved wrong or right and then in return the other lose their stake or they gain additional funds and that is what it TCR is or a Token Curated Registry. People are saying I want to be a part of this list. I’m willing to put up some money to say that I’m a reputable participant and you guys need to now vote whether that is the case or not. So it’s like two different forms in that sense and people started mixing this in various different ways currently and so it is still a topic that is being explored in many ways.

Meher: Is it right to say that first you came up with the idea of the bonding curve, so when I visited DevCon in London, this was in 2015, this was when you were working on the ERC-20 standard. So you had a presentation on tokens tokens tokens. And then shortly after that presentation came the ERC-20 standard. So the natural question is of course, so you are gonna have a traditional token which is oh I created this token and then I sold this token and I raised a bunch of money and I did this so that’s the normal ICO, but of course this technology is really general so you don’t need to subscribe to that model. So you came up with this model that hey we can create a bunch of token holders by this novel mechanism of depositing ether and allowing these token role is to withdraw the ether and then we can have this tokens and these these communities. So that was the first idea. Now comes a second question, which is, what can these communities do once they have this token? And then curation markets are sort of your proposal on what these communities can do, that these communities can curate information.

Simon: Yeah. It’s saying in order for us to work together across the globe in curating information that also adds economic signals to it or at least new signals a proof of something that this is valuable information. Then curation marks is a way for people to agree that whatever economic game is being played here and the resulting information is valuable to us or meaningful and what you currently see in the web is that we know the web today is an abundant web. There’s a lot of information out there and a lot of misinformation out there. If we start saying we want to know what we see has been built up and shared by these sort of economic principles, like who is being incentivized to share us this information? That’s the kind of questions. We want to know it’s like we want like organic free-range information. We want transparency in how the information got to us. And if there is a transparent economic game that produced some information, we at least  know the participants involved in their motives to give us that information. So that’s sort of how these kind of crypto economic games would hopefully result in these kind of outcomes. It’s at least like more transparent information with more clear incentives involved.

Sebastien: Can you describe maybe an example of a curation market in its simplest form or one that some people might be able to relate to?

Simon: Yeah. Sure. So the simplest one is maybe the original design that I had which is you have this bonding curve, which is there’s a community of people they’re excited about football. Okay, so they want to share memes around football and relevant information whatever is novel to them. And so people say okay, but we also want to participate in sharing the value in the job that we’ve been doing in curating this information. So what people do is and say okay, I’m going to put up some ether, I’m going to buy some football tokens and now it’s like great, we need to now curate this information. I have some football tokens, then you can take those football tokens and stake it to an item, a link to you know, look at this great goal that happened this weekend by this Premier League match. If more people stake to that link the higher it is in this list and thus it is a novel information that you think is relevant to that community. And if the information is curated well, it will attract more participants who want to participate because you’re also creating a community at the same time. Where when you have football token it is a signal to say I care about this topic and it’s like if you go to a music concert, if the cost to buy ticket is already a way for you to start having conversations with people there because you know what the topic will be about. Hey, man, have you listen to the new album? So that’s the kind of process that is put online in a way for a community to interact with each other. So over time this list will change up and down. It’s like if you were able to add economic incentives to Reddit, you know, that’s some of the earliest designs.

Sebastien: Okay, I was just gonna say that that kind of looks a little bit like Reddit and the way that popular content kind of rises to the top. So I guess this is sort of related but you’ve talked about curation markets and its relevance to memes quite a bit in your writing. Can you elaborate on why you think these two concepts are somehow intertwined?

Simon: Just to preface when I used the word memes originally it was to reference it to the original definition of the word which is to just represent a cultural unit of information. So it is basically all encapsulated information like just words and ideas and things but obviously memes as we know them became to be known as like dank internet memes like the funny dogs and whatnot. So speaking to that it is when we look at the way people are sharing information now today there is this feeling of there being this, you know, “a curation market for meme” or a meme market, there would be memes that are suddenly popular and then go away. It’s like in essence, people are trading memes so to speak. But it would be interesting if there was just a way in which people can actually make a return on actually contributing to this comments. We’re all sharing these memes and if you make funny meme, yes, you might get a few retweets on Twitter, but that’s about it. But if you actually contributed some good to people’s lives by making a viral internet meme. So one of the earlier goals was to say this can actually be used for people to become “meme traders” and that was like one of the earlier ideas that I had, and coincidentally this was extremely serendipitous. But exactly that there is a blog post that came out which I made that first ideas, like look we can have meme markets people can trade internet memes. Literally on the same day was the day that Reddit meme economy subReddit was created and in Reddit’s meme economy subReddit, they’re jokingly doing this now still and there’s hundreds of thousands of people that are jokingly trading means, they’re saying hot new format, buy, buy, buy. It’s like hot new Ilan memes coming out. This is going to be the stock of the summer, you know and so everyone’s going Oh no, sell the Joe Biden memes. It’s not cool anymore. So people are jokingly doing this anyway, and I feel like there’s such an interesting market where people are actually participating in this for just having fun. But if they can actually make money then… I imagine this weird future where my kids one day would be meme traders just having fun with themselves and making money on the side, but that’s part of that vision, something like that. And there was a team that actually built a version of it called Meme Lords, and people have been trading memes on they’re having fun. I’m not sure how much it’s used now, but I’ve been poking the team to put it live to mainnet so we can actually see what the economics looks like in practice.

Meher: Don’t you worry that a mechanism like that will in the end become game because when you created the football tokens, maybe initially the people that enter they will be the people that are actually interested in football tokens because right now the community doesn’t exist and maybe initially the curation is really valuable. But once there is this financial incentive, Hey, I can enter and I can curate and then one day more people will enter, and then because more people will enter the price will rise, the price of a football token will rise and I’ll have a bunch of football tokens and I can burn them and I can exit and I can make a few ether. Doesn’t this start to attract the kind of person that you don’t want, like the person that’s there in order to make a bunch of ether, not really curate really good information on football.

Simon: Yeah, absolutely. I think there’s a lot of possibility for participants to get involved that aren’t necessarily aligned with the goals of the experiment or the community. You can have lie rampant speculation just ruining the community and its value that it’s created amongst each other. People will absolutely be be fleeced out of money if just those simple versions exist, especially if people don’t necessarily understand what they’re getting themselves into, it’s definitely possible for people to be exploited in various ways. And I think a lot of the research and since these original ideas were published where okay, how do we mitigate some of this? Like, how do we avoid rampant speculation, but still having the value of buying in participating. For example the ocean protocol team recently published stuff and how to do short selling on bonding curves, which would allow just the price volatility to be mitigated somewhat, so that that’s one solution. So there’s different ways people have come forth to combat this. In general though, the primary purpose is a way for people to empower themselves by creating these new communities, but then having this new way of distributing trust among themselves that is also valuable and it is possible though that this could be exploited in many ways in the future including the fact that what if this is so successful that that is what we do with our daily lives. Like this is so important and so valuable wealth generation that we all become meme traders and I don’t think that’s necessarily the world that we want either. I do also think though that yes, although some of these ideas are exploitable in some sense, I think it’s important to understand the scale of what’s necessary or what should be involved. Vitalik recently published actually a blog post on collusion and bribing in these kind of curation market games, which I absolutely exists. He made a very good blog post. But I think what’s important to consider is to what extent are we going to scale these things? If you’re going to have an economy of football tokens that is worth billions, you’re absolutely going to attract people that’s going to exploit the economics. But if it’s a bunch of people like 2,000 people across the world that is working together to create this community of value amongst themselves, the economics doesn’t have to be so foolproof and we’ve seen that that’s the case in blockchain in general. There’s a lot of cryptocurrency projects out there that don’t need the security of Bitcoin mining, but they still provide value for themselves. So it doesn’t have to be foolproof. It just has to be good enough and as the community grows, then perhaps the economics could scale, you know that the economics could scale to protect people over time because you don’t also don’t want to put up too many barriers to entry when people start, so that it is a very interesting topic and I think people will experiment. I think at the end of day also user experience will just be so important as well people need to understand what they’re doing. They need to feel like they’re in control, they’re empowered and that is still an open blank canvas people need to work on. So, yeah.

Meher: So essentially I am able to visualize how this would look like. So to me, the ultimate end user product is something like Reddit. So right now we have all of these Reddits on these different topics and Reddit doesn’t have an economic mechanism. If I am a Reddit user I can go and afford stuff in any sub-reddit and ultimately people upvote in the subreddits and it uses these upvotes in order to have a list of interesting content items, other people go and see these content items. So the difference here would be if there’s a particular curation market. So the curation market is like a subreddit. It’s a football curation market.  If I actually want my upvote to matter then I must deposit ether, get these football tokens and then upvote and somehow the strength of my upvote is linked to a number of football tokens I have and then there are other people with these football tokens and all of their upvotes with these differing strengths are used to populate the Reddit. And so you can have football tokens. You have basketball tokens. You can have like thousands of these tokens and you can power a decentralized Reddit that way. So if I am a user, like let’s say I’m interested in football, there are a couple of different utilities for me. The first utility would be I can get football tokens right now. And if the community of football tokens grows I can exit at a later point in time and I can make money. That’s one utility. The second kind of utility is the belongingness to our community. We all have these football tokens and we are curating this football Reddit together. The third of course is if I am also producing content related to football, I would want my content to be prominent in this football Reddit. So therefore if I’m a content producer, I want some football token so I am able to effectively advertise my content into this subreddit. So effectively this interaction of depositing football token satisfies these desires of mine, and if there are many people that have these desires then actually a design like that could run. The design has been around for two years yet we don’t have a Reddit like product that works that way. What do you think is the chasm? Why does it not happen?

Simon: Well, I mean is the closest one would be to say like, let’s look at Steemit, because it also has this economy where you’re putting up this curation game with token economics involved but it is not community specific and I think that’s the difference. I think the biggest thing is that for example, I haven’t personally tried it it’s just there’s just a lot of variation of the ideas and currently I just enjoy exploring what’s possible and then writing and researching still. I think user experience is hard. It’s going to be hard for people to understand what’s going on and and whether it’s meaningful to use the blockchain and in this manner, so there’s a lot of open ended questions. I think the closest one is Slava’s Relevant, this is an application which is similar to this where you have this prediction game using bonding curves on posts, but they have one thing which mitigates somewhat speculation which is there is a concept of reputation. So if you have been an active participant then as far as I understand it your reputation would also affect the ranking of the posts along with its sort of economic waiting or at least it would support each other. So I think it’s just early days currently for people to experiment with this. When these ideas were first created the interesting response was that seeing that actually a lot of people were more focused on just these concepts being used at the protocol level rather than a user facing level at the stage. That’s why it’s like a core part of say ocean protocol or other projects using this. In essence it might be some form of economics that just disappears from the user, as in you would just be interacting on Reddit. You wouldn’t know what’s happening. But you put up some funds and it has been buying and selling stuff for you. And if you’ve been producing value for people, then you would just find that your wallet has increased, you’ve made some money. So it will depend I think, we’ll see what artworks in the future.

Sebastien: Earlier you mentioned Token Curated Registries. Let’s dive into that a little bit. So I think it’s a better term than a stake slashing shelling game. It’s actually much easier to say so let’s focus on the TCR’S for a little bit and and describe it, because that kind of describes it, like the stake slashing selling game, of course, like, you know, you obviously understand what’s happening here, but let’s let’s dive in a little deeper.

Simon: So I mean Token Curated Registries, when I first read the paper from Ameen, Mike and James it was very interesting to me because me working on my own set of ideas around curation marks at a time, so I realized whoa, hang on I think the space is much broader than what I’ve just been thinking on, like we can a lot of different games and permutations to produce valuable or novel information for whomever is interested. But you know for those who don’t know a Token Curate Registry is primarily a sort of binary information game, which is you apply to be part of a list and if the current list participants, it’s token holders would then either vote for you to be in or out and in order for you to be in and remain in you have to put up a deposit in that lists tokens and the participants that are doing the voting would be rewarded for voting correctly or correctly meaning which way the vote will go. So it’s a simple curation game that ideally incentivizes people to accept valuable participants for the specific list because there will be consumers of this list who would want to look at it and get some value from it, like the top restaurants in the city or the list of reputable publishers like an ad chain or in civil rights cases like a list of ethical newsrooms. So it differs but I think it’s a very broad topic as well because a lot of people have been writing about it researching and producing code for it from like talking about subjective TCR’S, which is the information that needs to be allowed in is not necessarily clear. The objective TCR is where it’s easy to evaluate two different ranking and layer systems. And so it’s a very broad topic. I think there are definitely a few that are in production currently so it’s interesting to see what’s being used and how it’s being used currently. I think it’s just you have now this open economy that’s happening and just seeing how people are using it is very interesting.

Sebastien: So could you describe then the different forms that Token Curated Registries can take and the way that people are using them in applications?

Simon: There are different forms it can take, primarily people have experimented in ways and how the voting happens. It’s like if you want to be an applicant how are people going to decide whether you should be allowed in or not. To also how the information is ranked once you’re inside. There’s different variations of that but I don’t think any of these complicated versions haven’t been implemented yet. I think only the sort of simpler versions have been which is just you apply to being in and you’re either in or you’re out there’s no additional variation of it. So in FOAM, they have TCR points of interest on the global map. So people say like hey, I think you know, look here’s the Brooklyn Bridge or hey, look, it’s Table Mountain. So it’s a way to annotate a map and produce a valuable list as a result. And what’s interesting about that was just seeing how people are using it because a TCR thrives on the fact that there needs to be disputed content because that’s what produces value for the token because the curators will come in and then vote either in or out this application. It’s like the question of are we going to classify what is green? It’s like it’s going to be a simple problem thus well I’m saying simple problem would be a lot more complex that I know but that is an example where one is like you don’t necessarily need a TCR to classify which objects are green. So in the case of FOAM there’s been interesting examples where there have been territorial disputes. So there was an island between South Korea and Japan where there’s been different FOAM users, which have said no, this is actually territory of Japan and the other one says no it’s actually territory of South Korea and then they dispute. And then the FOAM token holders needed to vote which one is which, so it’s quite interesting in that sense where it’s been used.

Sebastien: That’s interesting. And so I wanted to get to actual applications of TCR’S and it’s true we had FOAM on I guess probably about a year ago that it constitutes this registry of points of interest that were curated by people. I never really thought of it that way until now but so with regards to that Japan and South Korea example that of course, that counts as I guess a signal but that doesn’t actually solve the dispute over who owns the land and marine tankers will solve that dispute if it comes down to it, but I want to bring it back to an example that’s kind of near to me. And so I use TripAdvisor quite a bit to figure out where I’m going to eat out right like so when I’m in a new city or when I’m in any city pretty much and I want to decide what restaurant I want to go to, I trust TripAdvisor pretty much not with my life, but I’m really picky about restaurants. And I definitely go to TripAdvisor to make sure that my day doesn’t end badly with regards to like my satisfaction towards a meal. So when I go there and I see like Jade Magic Wok in Frankfurt, I know that like that’s going to be the best Chinese restaurant in Frankfurt for instance, and I recommend that restaurant by the way to anyone who’s in Frankfurt, so but there’s a whole other set of mechanisms that go into play into creating a highly successful list like TripAdvisor. So obviously there’s the incentive mechanism for people to curate that list and in the case of a centralized list, I think people shouldn’t assume that there are no incentives, the incentive is the list itself. So if lists like TripAdvisor and you know, Google Maps and other such communities that have amassed a large amount of people that are continuously improving the list exists, it’s not because there are no incentives like monetarily, the people want these things to assist and they also want to participate. I think there’s this desire to participate in things and to sort of create this thing that people have I’m sure we could come up with other examples, but there’s also the amount of money that has gone into marketing this list as all the Venture Capital that TripAdvisor has raised and invested in marketing and invested and outreach to restaurants and all these different things so looking at FOAM it seems to be a similar type of example than to TripAdvisor, but I don’t know how many users they have but I doubt it that would scale to that extent without that sort of like jolt of capital to bootstrap this network effect. Are token created lists relevant to this type of use case in the end. Is this sort of like where we should think that things will go or are they more relevant for use cases that don’t require such massive network effects, and maybe we just need sort of signaling mechanisms and maybe perhaps in the aggregates they form like a some larger higher level signal.

Simon: You know on the surface, I think what could say it that it makes sense. But I think there’s a few things here that makes it a bit different I think and I think Token Curated Registries are a fit for a different class of list so to speak and so in the case of something like TripAdvisor like we can see it exists. Right? There didn’t need to be additional incentives. Like you said. The list itself is the reason why people are willing to contribute their time and effort to do reviews. They get benefit from it and we participate in sharing our reviews about certain places. So there is an existing set of benefits that make this work already in the same way that Wikipedia also works. I think in the context of list for reviews like restaurants or places or travel related things, I think the value where a decentralized list could be meaningful is that there’s not necessarily confidence that this list would always remain reputable. So in the case of TripAdvisor and other rating systems, we know that there are people that have built bots to submit reviews that does sort of poison the list in some sense. So we do know that we could see these things and relatively trusted good enough that it’s okay, but we’re not a hundred percent sure whether we should trust it fully and so for now it’s just good enough. It’s good enough, but the problem is when it could potentially start deteriorating and then there is no other lists, we have to go then reinvent and it’s like a large social cost involved because this list was maintained by centralized entity. So I think it’s valuable there but I think for me personally Token Curated Registries are more interesting moreso when asked the question, what are ways in which we are coordinating now which is difficult to do and could decentralized lists be a way to achieve that. So I think TCR’s in a new set of applications is what’s going to be more interesting because the way I see it is building list for something is a form of self regulation. Like we are curating list for value for us and us we are saying these are better than others. So we’re saying these restaurants are good, these are not. We’re kind of like self regulating our worldview. But self-regulation works we know that is the case but it stops working when the economy is too big. It’s like the economy for that list is becomes too big and that’s where we end this weird chasm where it’s like we can’t properly solve regulate under certain things. Thus we kind of like ask the government or nation states to help us regulate those class of problems, which is harder for people to self regulate on, just because it becomes easier for capture, easier to bribe, because the economy is different. So it’s like it’s a set of problems which exists between self regulation and the nation state, everywhere in between I think TCR’s could be valuable because the one thing is while TCR’s work in anonymity like you don’t have to say who the token holders are. So whatever those types of problems are I think is interesting and the jury’s out for me whether there are actually those kind of problems or not. And I think that to me is some more interesting space to explore like what are the ways in which it’s difficult to coordinate now to create lists, that we think would be valuable here. And it’s still an open-ended question.

Meher: Simon could you give an example of a TCR that would be valuable, like a concrete example.

Simon: I mean this gets into weirder territory. So I came up with one a while back. And this was based on, so Cape Town had a very very bad drought and we were basically going to run out of water and what happened as a result is the way Cape Town itself managed to save itself from drought was a lot of it was social pressure, you know, there was this joke going around at the time, which was you don’t go home someone if they flush their toilet more than once a day. It was a joke, right? So it’s like there was a social pressure people would point out restaurants that were using too much water and people would avoid them for example. But there were additional metrics or additional measures that were put into also mitigate it which is the City of Cape Town started to do some much higher water tariffs. So became more costly just to consume water. So there were different things that were done to ensure that it didn’t get there. So one way to do this was like what if there wasn’t any sort of self-regulation happening and there wasn’t any government that started increasing rates and tariffs, and/or water rationing, then what would we have done. And one way to do this is to say you start making it profitable for people to behave in a way that is beneficial for that people, that is hard to coordinate on and it’s like tragedy of the commons type problems. Like you’re saying to people, look don’t overuse the commons that we all use for our cows to graze on and so the concept of something like water supply being scarce is you tell people look, if you are in a TCR you can get this label that tells you that you are a valuable person in the community that saves water, but the community needs to validate that, they need to go Simon is using water fine. We believe that is the case. But if it’s tied to a bonding curve, it means that if there’s more incentive for people to protect the scarce resource, the price will go up. So this price of the label will go up more and more as the more valuable it becomes to protect the scarce resource. So there would be this interplay where people would say we’re using the commons now because it’s cheap to use the commons, but now that the supply of the commons have decreased such that it’s expensive, we need to not protect the commons and so you have this counterweight which is a reputational label which becomes more valuable which classifies people as good commons users. And so there’s always this markets interplay between people saying I need to be a part of this TCR that labels me as a valuable participant and if I actually do this in a manner that is an early adopter of environmental measures to protect the environment, then I will actually make a profit. I can make a profit from being good to the commons. And so I don’t have to give up my profits from using the commons, I could actually get a profit from becoming a part of a game that makes it profitable to be a part of the people that is protecting the commons. And so that is the class of problems where it’s not self regulation because self regulation doesn’t stop the person from going and just getting some water, but you’re making it profitable for people to protect the commons. So it makes self-interested behavior to go and actually protect the commons but it’s not the government forcing you to do. So it’s this chasm of class of problems where it’s hard to coordinate, it’s a tragedy of the commons type thing, but you’re making it profitable for people to attain a certain reputational label. But obviously there are still so many questions about an idea like that like whether it’s actually doable in practice or not. But that is the sort of direction of thinking that when I think about those cause of problems, like what are things that are hard to coordinate on that is not self regulation and it’s not the government doing it and that is where economic coordination can become useful when you’re building these new kind of cryptic economic coordination tools.

Meher: That’s a very interesting example. So, essentially there is this TCR. There are the curators of the TCR. So what is the registry here? The registry is a list of people that consume water wisely or something like that, that’s the list. There’s a group of people that are making the list. And entry to that group of people is determined by this bonding curve, the idea we covered previously.

Simon: Yeah, so you have to buy some water-wise tokens to be able to apply to be a part of this TCR. And so if you’re going to be late to be regarded as someone that’s water-wise, it’s going to be very costly for you as well. So if you’re an early adopter of being water-wise, you think this could be really is valuable. You would apply early on to show the reputation of label to others. And so that’s why you can make a profitable action when it’s necessary to have that label.What you’re doing is you’re creating basically very strong selling points for people that is out of a local maximum or local minimum where people are caught in, you know, it’s like saying look you don’t have to coordinate around these things, there’s actually a new sort of way for us to coordinate that improves everyone’s outcomes.

Meher: So I care about being in that list being water-wise because there’s a social pay off. So when I’m interacting with my friends and all I can say that I am part of this list.

Simon: Self-regulation work there in the community small enough such that everyone knows everyone, then you don’t need this game but in a context like a city, if I go to a restaurant and the restaurant says, we only want water-wise patrons, right? I wouldn’t be able to prove to them that unless someone has graded me as a water-wise person. And so that’s why this economic game is useful for ways beyond self-regulation.

Meher: Which of these implementations of TCR are you bullish about?

Simon: Because of the fact that there are still sort of uncertainty about how this value is communicated like once you have a list that’s produced you actually have to go to people and say hey this is usable list because if you have the list of the best restaurants in the world, but now it’s going to see it, it’s not going to be valuable. So that’s why it’s hard sometimes to have a list of reputable publishers in the context of ad chain because you actually need the advertisers to come look at this list and say this is a great list of publishers, they won’t defraud me. So it’s hard to measure the economic loop between the people consuming the list. So TCR is to me that actually have that economic loop in there in measurable ways I think is more interesting, but those kind of TCR’S happen more at the protocol level implementations, but I mean Ocean originally had that as part of their white paper like a very base level TCR but I think they pulled it out. But otherwise, it’s hard to know. I still think TCR is for like interesting community member management is a good way because people would use the token to Signal being a part of it. And I think that’s one of the reasons why FOAM is succeeding in their TCR because it attracts the comedian of cartographers and if you’re a cartographer who has a FOAM token and you meet another cartographer who has a FOAM token, you’re like, wow, let’s be friends.

Sebastien: Before we wrap up I wanted to talk about this experiment that you conducted recently called ‘This artwork is always for sale’, can you tell us why you did this? What was the goal here? What did you hope to achieve or learn with this experiment?

Simon: Yeah. So as you might have heard during the whole show so far, I’ve always been interested in creative arts and new economics and few months back I read the book from Eric Posner and Glen Weyl on radical markets and one of the proposals in there was around a novel way to look at property rights and that is harberger tax, which is essentially once you own an asset, you have to always specify a sale price and on that specified sale price that you put you have to pay some tax on it. So that means if you own the asset, you can’t put it up as a value of five bajillion dollars or whatever because then you have to pay tax on five bajillion dollars. So that incentivizes people to price their assets in a more reasonable manner, but obviously the trade-off is anyone can buy it from you at any point in time. So that was like the a very simple concept to me that was very interesting which I thought could be used in new ways. So I wrote a long blog post on the usage of radical markets in the arts which took some of these ideas and said what if we could do this? What if we could do that? And one of them was this artwork is always on sale,and it became this artwork is always on sale. So the premise for me was to say here is an NFT collectible,it represents an artwork and this artwork will always be on sale. And so the goal is just to say hey look no one has experimented with this kind of property rights before on the blockchain and the art market is notorious for being interesting and different but it’s also a very insular market like the art market is very sort of self-referential book about themselves. You know the idea of the art auction is very specific, you know, and in this case there is an always-on auction. There’s no sort of Christie’s that’s going to put an auction for this artwork because it’s always on sale. So that was one of the first ideas I had like, let me just put it out there and the artwork itself will be self-referential to the fact that it’s always on sale just to prove a point. To just put this idea out there and say let’s see what people think. So I launched it about 20 days ago and it’s been interesting to see the response. The sale price started at zero so I didn’t put up some initial value. Someone set the price for $40 someone bought it for $40 and it set the price at $16,000 and someone bought it for $16,000 and then put up the price at $100. It’s now still the same person valued at $130,000, so this artwork is always on sale and it’s currently valued at $130,000. Now what the interesting thing about this is, is I have now been earning in perpetuity the past 20 days on this value that has been specified. So I’ve earned about two ether, so a few hundred dollars, just by the fact that this artwork is always on sale. So it’s just an interesting way to think about collectibles artwork using blockchain and noble property rights and in seeing what the world thinks about it including the blockchain world, the art world. I’ve had art curators come to me and say this is super interesting, people in the blockchain spaces say it’s quite interesting and it’s been a lot of discussion, good feedback and critique as well. I mean this is not going to be for everyone but it’s just a new way to explore.

Sebastien: What types of critiques have you used, I’m curious about that.

Simon: I mean it goes into general critique about this property model in general which is like you’re not technically an owner, you’re basically renting the artwork and keeping it and then anyone can just take it from you at any point in time at your specified sale price. So it brings into question whether this is a good model for art or not. Especially digital art, it’s not going to work for traditional art.

Sebastien: Right it only work for something digital were the were the ownership of the asset could be transferred

Simon: Exactly. And so that’s why I was very explicit in the language that I used. I try to not use the word owner. I just use word patron and it’s supposed to represent a patronage model, which is while I’m holding the digital artwork I’m actually supporting artists at the same time. And this case it’s me. So it is supposed to represent sort of stewardship or patronage and it would then allow the artist to also earn in perpetuity for the art that I have created in the past. And where did I asked a lot of questions like, you know, would this change the behavior between the collector and artist, does it change various things that we think about art essentially. Yeah the critiques have mainly been about like look like I don’t want to own art that someone can take away from me. So I don’t want to participate.

Sebastien: Have you thought about ways in which one could use this for I don’t know funding content creation for instance like a podcast.

Simon: Absolutely. Absolutely. I totally think that it’s possible. Here’s another way to think about it. I was thinking about in the context of Crypto Kitties. A lot of people played Crypto Kitties, and now they just have a bunch of digital catch collecting dust somewhere. Like they they’re not necessarily participating actively anymore. But if there’s someone else from in the world going like damn, I really want that cat but you’re not selling it and there’s no way for me to actually get it anymore, then they can take it off your hands for a small price. You just have to say the sale price, right? So it seems to me in certain asset classes on the blockchain it could be more meaningful for people to say like look if you opt into this model, this is the way we can we can do this, then the revenue that’s generated from people paying this price to keep the assets could go towards various people that exit ecosystem that I’ve created value like the artists, the developers, you know what if axioms then actually makes money from this kind of model instead of charging for the exchange fees. So there’s a different bunch of ways in different participants can earn revenue from it and it is possible model for a podcast as well, you know, create collectibles that people want to create it’s related to Epicenter. Like let me buy and sell Sebastien Bubblehead on the blockchain and I can just say well I hold it on bank patronage towards the podcast.

Sebastien: Well I’ll have to consider that.

Meher: And given that I’ve built the Cosmos validator it could be used in validator slots because like there’s only 100 of them, so if we put a sale price on,somebody can come and replace us on that slot, right?

Sebastien: Yeah, that’s actually really interesting as well.

Meher: Yeah. I mean, like this model seems to be that people who value that position or that thing the highest will end up owning the thing.

Simon: Yeah, it is. I mean the original premise was that this kind of property model works best for things as it said in the book or to be owned in the commons, right? So it is things that aren’t supposed to be held and then kept off the market. It’s not supposed to create monopolies. And I think that’s where it’s kind of interesting and whether that relates to art or not I’m not sure and that’s what we will still see. But there’s different interesting places where this could be useful. I mean it’s not going to be used for something like ENS for example because you’re building a value under a brand and someone just takes you brand, it’s pointless, you lose all value in doing it like that.

Sebastien: Well with that Simon I want to thank you for coming on the show today. It’s been really fascinating to dive into bonding curves and TCR’S. I was calling it to token created lists for most of the episode, but yeah registries. So thanks again for coming on the show.

Simon: Thank you very much.

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