Introduction

Tokens offer an opportunity to define new relationships and interaction primitives for those collaborating together. When tokens are leveraged properly, they create virtuous economic loops that are able to create incredibly novel positive-sum games between those that participate. We move past the delineations of the owner, the worker, and the customer and realize that each is part of the same whole, occupying overlapping space, and providing unique value to the collective.

Creating the most positive-sum games between each participant is key to an ecosystem becoming a sponge that attracts the best talent working on a problem. The best talent wants to play in the best games. Such dynamics are often studied in the developing field of tokenomics.

In the title of this essay, we are very intentional about using the word “ecosystem”. We purposefully avoid using words like protocols or DAOs. This is because the dynamics we describe can only be realized by looking at collections of people [companies, DAOs, nonprofits, clubs] as integrated ecosystems, as opposed to input-output factories. Such is the evolution in organizational understanding.

Status Quo

Much has been written about the present-day problems with Web2. We’ll touch on these briefly in case you are unfamiliar with them.

Much of it can be summed up in this famous graphic:

In essence, companies building platforms leverage VC dollars to incentivize users to embed the company’s technology within their lives. With the goal of eventually making you dependent on them [in tech parlance, “sticky”]. After which, they have the total economic freedom to sell your data, add 3rd party restrictions, vertically integrate, and engage in other extractive behaviors in order to generate massive cash flows.

Not only are the participants in these platforms not given ownership of the value they helped generate, but the employees that work in these companies are largely jaded, unchallenged, and dissatisfied. Really only the founders, early employees, and investors get the symmetric economic upside and feel satisfied by the system as it exists today. At the macro level, we see this as the economic, social, and political gulf between Silicon Valley and the rest of the world.

When we begin thinking about organizations as ecosystems, the key change in thinking is understanding how integrated the different members of the organization are with each other. With that understanding, one realizes how dependent the health of the whole is dependent on the health of each of its constituents. Whereas, in a factory analogy, we think of each worker as replaceable and modular.

In ecological ecosystems, when one species dies, the balance is thrown off, and everyone feels that pain. Symmetrically, when there is health and balance, the ecosystem can thrive and each participant experiences prosperity.

The relationship idealized in a graph can be summarized as:

Token Ecosystems

Token ecosystems allow us to create such localized economic systems that can access the virtuous loops which leverage the integrated nature between the individual and the ecosystem. To be really specific about the relationship the graph alludes to - not only can virtuous loops be used to produce more value with the ecosystem, but that value generation can also be directly cycled back to the individual. A deeply bilateral relationship.

Let’s understand what this means with an example. Consider a DAO that exists to create a worker-owned, decentralized UpWork. A token, call it $GIG, exists as the governance token of that ecosystem. Such a token may be used to pay for the education of the workers on the platform such that the value of service the workers can provide to their customers is of higher quality. Workers then can actually get paid to get educated and upskilled. The token used to fund that public good, like education, is ultimately able to capture the value the public good provides.

This is magical! And it should also look familiar. Human society’s biggest institutions: governments, states, and cities, have been precisely able to function in this capacity because they can access the same virtuous loops. Instead of paying for and capturing that value with a token, governments do it through taxes.

The model the government runs on approximates this model. Providing certain services at free or reduced costs to its citizens by charging them a % rate of their income for access to that service. It hopes that access to the service increases the wealth of its citizenry and therefore covers the cost of providing that service. It can provide healthcare for free because healthier people produce more tax dollars. It can provide education for free since better-educated individuals produce more tax dollars. It can provide legal and financial services for free for the same exact reason — people with access to the service will be richer in the future. So the government makes money by making its citizens richer and taking a percentage of that newly increased amount.

However, taxes certainly don’t feel this way. Because they are enforced by violence, they can be easily abused and end up feeling more extractive. Certainly, private individuals and companies cannot utilize the same mechanism to fund the goods that they think are valuable and important.

That is at the core of why token ecosystems are so beautiful. Tokens let protocols pay customers with equity to use them if the developers believe their protocol will make people’s lives better. As that thesis plays out, the token ends up being worth more. A similar relationship with the people that contribute, and not just use, to the development of the protocol.

When protocols are able to create such economic relationships, they are able to attract an incredible amount of talent. As such, they become “sponges” that are able to attract and coordinate the most effective amount of people wishing to tackle a certain problem. It becomes a near-impenetrable moat.

This is an unprecedented economic model that was previously gated to governments but can now be accessed by individuals. Imagine colleges actually paying people to get educated because them getting educated properly is such a massive net benefit to the society and economic system we all participate in. That’s the future relationship we are all building towards.

Existing Usage - MetaFactory

We talk about MetaFactory a lot in these essays about Web3 and Value Physics as they are really defining this frontier.

MetaFactory:

1. MetaFactory airdrops $ROBOT tokens to all contractors, designers, and artists that they work with.
2. Artists are totally shaken by this as they are not used to a relationship that isn’t purely transactional by nature.
3. Their art is turned into a product of whatever form and distributed by MetaFactory.
4. When their art is recognized, valued, and bought by people, the value of $ROBOT increases.
5. The artist is making money from the sale and from the appreciation of the governance token.
6. The artist can use that extra capital and do more to contribute to the MetaFactory ecosystem, driving more value to the $ROBOT token!
7. MetaFactory is also able to pay people to purchase their gear because they know when people own their merchandise, they are supporting sustainable fashion done by artists that are directly able to share in the value that they created.

MetaFacroty ultimately becomes a sponge where all artists wishing to create products and services go because they are able to create the best economic games. Web3 must exist to perpetuate this model further.

We’re in a world of ecosystems, not companies. Of emergent organisms, not factories.

We’re not trying to destroy old institutions, we’re just throwing a better party!

METADREAMER NOTE:

💯💯💯 gigabrain shit

I think that’s exactly how it will be, the thing we need to get there is a way to measure and quantify the long term value created by certain actions and then retroactively reward those things. Right now the only time Value is distributed is at the intersection of monetary transactions, but if we have a cryptographic record of everything that happened leading to that transaction then we can “back propagate” resources to the chain of events and people that led to that value creation.

At that point people won’t just optimize to do actions that result in their immediate personal monetary gain, but actions that long term benefit the most number of people. Climate change is a perfect example of this, e.g. we have no way to quantify the long term value that a tree has, but someone can cut that tree and sell it for immediate monetary gain so that’s what they do, even though that tree would likely create 100x more net value for the world than the value of cutting and selling it. From the individuals perspective leaving the tree along benefits them 0.001x but cutting it benefits them 1x, so that’s what they choose. If instead they had a way to capture the 100x value they would instead turn to planting more trees and taking care of them since they would become a part of the “causal chain” of value creation by that tree.