Theories on Incentives, Scaling & An Evolved Economy Pt 3

So far this series has explored how our increasingly digital world is both affecting and being affected by the progressingly global economy. Though this exploration, we can discover more scalable and sustainable foundations for building tools which better integrate these systems and help us in communicating these tools and their purpose for wider adoption. The history of money and trade can show us some possible outcomes of scaling economic systems and the influx of intellectual property on the Internet has stressed the need for progress. Thankfully, more recent experiments and innovations have provided stepping stones towards increasingly sustainable global economic models. Looking at the structures and incentives from various networks and analysing their effects has paved a path for the improvements built into the foundations of the SAFE Network and continuing to push these boundaries through SAFE and other projects will allow for more realistic and sustainable rewards for the labor behind intellectual property and subsequently the global economy.  (Disclaimer: Some references in this post assume having read the content from the first two parts of this series.)

Pushing the Boundaries and Building the Bridges

So it’s clear that scaling a system globally without spiraling downward into a cycle of centralization leading to control, power and increasing self interest is a really difficult task. One of the reasons I’m optimistic about the SAFE Network is the approach to reach a global scale by mimicking how nature scales itself while still attempting to work within the existing economy as an evolutionary step. Many global systems are already headed in the right direction by thinking about maintaining autonomy such that not any one party has control. Bitcoin, Bittorrent and Tor are all examples of systems which strive for autonomy through decentralisation as a form of security. With regards to economics, both Tor and Bittorrent networks are run purely on a volunteer basis and do not depend on a currency or credits within their systems. Users are incentivised to provide resources as nodes with the expectation that they receive value in return by others who also participate in the network, very similar to the previously explored gift economy model. Though, in bittorrent each node is additionally shown an upload to download ratio which allows users to gauge how many peer nodes have accessed content from them versus how much they’ve accessed from others. The visibility of this ratio offers a slight psychological effect on increasing incentives for nodes to stay connected and to continue providing their resources to the network, but show similar vulnerabilities in scaling globally as gift economies. Even without an explicitly integrated credit or currency, Tor and Bittorrent have found success in pushing the boundaries of our online economy to evolve away from business models based on tracking and forcing scarcity on content, a critical part in this evolution.

Alternatively, Bitcoin builds a bridge for the online economy as a currency which facilitates value transfer and storage outside of centralised third-parties. Unfortunately, the distribution of Bitcoin has driven the network to become more and more centralised in part by the force of economies of scale. The main benefit that Tor and Bittorrent gain from a lack of currency incentives is avoiding tendency towards centralisation based on participants attraction to accelerating wealth. The common and open ownership designs of each of these systems allow them to initially scale as global networks while the variance in incentive structures  provides models for sustaining their structures. Maintaining its diverse peer-to-peer structure is Bitcoin’s key separation from any other global payment network and whether it ultimately succeeds or fails, it is more clear that implementation of currency-based incentives brings different kinds of scaling problems to decentralised systems. Regardless, each of these networks provide a stepping stone towards future designs which can more desirably bridge this gap, and in particular the foundations we’re building in SAFE.

A Foundation for Ideas, Art and Code within An Evolved Economy

The SAFE Network is designed to both push the boundaries of IP ownership and tracking while still integrating a bridge to the current economy. The network is built on a foundation of anonymous and autonomous management of data storage, routing and integrity. It allows for any data such as a network token to be stored, transferred and confirmed in “localised” closed groups of nodes which access the minimal amount of data to do their jobs. When peers go offline or come online, the network reconfigures based on their positions in the ID space of the DHT. The network nodes are assigned IDs and thus position in a group at random to avoid predetermination of roles assigned to it. If the node successfully stores data and supplies it when requested, the “farming” incentive scheme will award it with a network created and managed token. It’s important to note that this incentive distribution allows for much more granular measurements of resource capability than block rewards in bitcoin and other blockchain cryptocurrencies. This more dispersed distribution scheme was designed to  prevent some of the natural centralization that is occurring with Bitcoin. With further understanding that economies of scale are still a strong force in our economy, SAFE additionally employs a sigmoid distribution rate which rewards network average resource supplies in order that nodes with drastically more resources don’t centralize storage of content. With this focus on granular incentives and rewarding average network resources in token distribution, we can improve on the system’s ability to integrate with the global economy while avoiding some of the key centralisation effects of economies of scale.

Further, the network is prepared to include incentives for application developers, core developers and content creators. By allowing individuals to opt into embedding payment addresses into applications and content, the establishment of a “creator” can be made for a baseline revenue in tokens from the same pool which rewards resource providers. It is the belief that these participants in the network bring value to the ecosystem and should be included in the distribution structure. The inclusion of diverse incentives are important experiments in finding the ideal bridge to a better economic model for developers, journalists, artist and researchers sharing their intellectual property.

To complete the basic ecosystem in SAFE, there is a replenishing method for the pool of safecoin which is distributed to these key participants. Payments back into this pool are linked to storing new data to the network. At its best, this recycling mechanism can allow for a perpetual supply of safecoin for these incentives and at the very least provide a way to extend the ability to autonomously pay members of the ecosystem. The token requirement from users uploading new content will help to prevent abuse by parties storing significant amounts of content who are not giving back by providing network resources themselves. This concept of balancing out consumption to providing a service is similar in theory to the ratio displayed in bittorrent clients but is enforced by the network through the token mechanism. So long as the network incentives align properly, the SAFE Network economy will establish a very basic common credit system that though it’s autonomous nature, should scale to support public intellectual property and offer alternatives to privatising software and content through physical or legal restrictions.

Extending the Foundation

The SAFE Network will not only integrate a basic infrastructure for sustaining a global economy but also relies on experimentation on top of it. While it would be great if SAFE could sustain itself with this economic foundation, we cannot assume that it will be enough. The essence of experimentation is an important factor to evolving systems (as nature shows us) but the historical control and extreme centralization of the economy has hampered these processes until very recently. New schemes being tested on today’s Internet will find a comfortable and more suitable home on top of SAFE’s economic foundation. Expect to see business models like pay-what-you-want and crowdfunding take on whole new capabilities with the support of safecoin and the autonomous, cryptographically secured network. Additionally granular approaches to digital consumption are ripe for better integration into the economy as well as methods for working with existing private intellectual property whose use may contain certain licensing restrictions. In particular, I envision methods similar to git’s distributed revisioning, but with integrated payments options adapted to include content like research and art. So much intellectual property is based on previous discoveries, thoughts or works and integrating that flow into a functional platform would be a worthwhile experiment to extend the SAFE economy into a more scalable network that sustains itself and supports inherent scarceless characteristics of intellectual property.

The impact of intellectual property is no doubt expediting our way to an economical evolution, but there’s still a long way to go before we can stop forcing digital content and general intellectual property to be artificially scarce as a solution for supporting the labor went in creating and maintaining it. By learning lessons from how our current economy has adapted to scaling (whether successful or not), it will be much easier to build experiments which fit the world of intellectual property and successfully support that labor in a global manner. Creating the proper incentives to allow for more free software development and open access to knowledge through implementing new solutions is the quickest way to build a more sustainable economy and show others the value in publicly owned, decentralized networks.

3 comments

  1. The RFCs were recently modified to use a status field instead of a directory structure: https://github.com/maidsafe/rfcs/pull/121.

    > This PR adds a new “status” field on every RFCs to indicate the state (“proposed”, “agreed”, “active”, “implemented”, “rejected”) of the RFC within the process. This allows us to remove the directory structure and instead put all RFCs at one place, which never changes, allowing us and others to link to them forever.

    This article contains a link to RFC 0004, but because of the recent change described above, it’s broken. The new link is https://github.com/maidsafe/rfcs/blob/master/text/0004-Farm-attempt/0004-Farm-attempt.md.

    Excellent article btw 🙂

  2. Excellency series Paige, thank you.

    I’d like to add another factor that I think is crucial to ensuring SAFEnetwork farming does not become centralised, as well as making it energy and resource efficient. That is, the ease of farming by any individual: just download and install a simple app. And in turn that large numbers of individuals will be able to farm useful amounts of Safecoin with their existing, paid for, already in everyday use, PCs, tablets and even smartphones.

    The impact of this will be to create a downward pull on farming rewards because ordinary users do not have any significant costs to cover. For them *any* Safecoin earned will feel like profit, which means they can happily run the software and earn Safecoin whenever their machine is connected to the internet. This makes small scale incidental farming a “no brainer” and should ensure that lots of individuals will join in farming and provide resources to the network.

    Whereas pro farmers must cover their capital and energy costs in order to be sustainable. How many resources are provided by pro farmers will in effect be capped – restricted only to the number who can remain profitable while competing both with each other, and with those ordinary people who farm but have effectively zero costs to cover.

    The impact of this will I think be enormous. It will make it impossible for pro farmers to corner the rewards by just running large numbers of vaults. So long as the number of ordinary people farming on their existing devices is significant in terms of network size, it puts a break on the ability of “money” to corner the market.

    The consequences are that farming rewards will be more widely distributed amongst a larger number of farmers and the network average storage will be reduced because of the numbers farming on small commodity devices (such as home PCs, tablets and phones – not to mention the office computer 😉 ). This in turn reduces the amount of Safecoin that any one farmer can hope to earn with a given number of vaults.

    This will make it far harder to profit from centralised storage (even large numbers of vaults ate controlled by one operator), and so ensures: a decentralised network in terms of control, and widespread distribution of Safecoin amongst the everyday populous, making the network currency easy to obtain even as it graduates from being a niche product to a widely used network with demand for Safecoin growing in order to purchase network services. This in turn incentivises and drives further farming by individuals, and helps the network sustain itself as demand grows.

    And since so much of the network resources will be provided by individuals on equipment that is already purchased, and already switched on to do other work, the network will also be very energy efficient.

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