TED: DESIGNING NEW POSSIBILITIES OF TRUST
April 2023I was fortunate to be invited to give a talk at TED 2023 in Toronton. However, due to some personal issues, the talk ended up getting cancelled. But now the transcript can be shared openly.
“Do not trust strangers on the Internet.” This is what my parents told me when I was young. I ignored them.
At 9, I was already converting my fiat pocket money to digital currencies. Instead of buying snacks or going to the movies, I would use in-game currencies to unlock new features, cosmetics, and rare items to level up my stature and trade with others. I could earn and spend in these games, just like I could in the real world. I made friends, had adventures, laughed, hung out. I realized the money I earn and spend in these games is not so different from the money I could spend on getting after-school milkshakes with friends. Both experiences brought me immense joy.
I grew up on the Internet, and I developed meaning, a sense of belonging, and friendships with those strangers.
So it’s no surprise that my life and career are built around understanding and constructing the inner workings of my digital homeland. The now gigantic Internet platforms like Facebook or Twitter can no longer be understood just as businesses — though they are still managed and governed as so….but their power and reach extend beyond that boundary.
The next version of the Internet that we are building now will function more like cities, with their own cultures and norms, economies, policies, and citizens. In these emerging cities, we earn income by exchanging goods and services. We build our reputation and identity by contributing meaningful work and building meaningful relationships. We expand the GDP of an economy by creating new technology and products. We will be able to do this while owning our data and owning a piece of what we help build.
I’m dedicating my career to designing and experimenting with new networks that look to self-govern and grow their local economies. By developing infrastructure to flexibly distribute ownership and governance power to incentivize members of networks, we create a sandbox for new social and economic possibilities.
And at the center of these economies sit tokens. You might envision a dollar bill or a poker chip, but digital tokens are much more expansive. Tokens power the engine of group incentives and define the shapes of new networks.
With the right token design, they can play a part in building a more equitable and habitable Internet. One where the credit, value, and power get attributed to the citizens and creators, not just to a handful of monopolizing players.
How?
Let’s imagine a censorship-resistant, self-sustaining, and global secret society. We’ll call this group “Truth Seekers at the Edge of the World.” As distinct from the Truth App by our former president. It will be like a secret society protecting the world's truths. The community has a token called $TRUTH.
To become a member, you must bring truths — like the Earth isn’t flat, or triangles have three sides — and pledge some initial capital to a smart contract. Upon acceptance, you receive a membership ID. If a member is found to violate the truth — reported by their peers — the staked funds in the contract will be slashed. The more truths you contribute, the more tokens you earn, which grants you more governance power to signal in more truths and bring new members to the network.
“Truth Seekers at the Edge of the World” is sustained by external sponsors and clients that demand trust-seeking services. The income generated is shared across members, pro-rated based on contribution, and the profit gets reinvested into community initiatives that make truth-seeking more effective. As the demand for truths increases, the tokens increase in value, thereby increasing the shared wealth of the network.
As you can see, a token design can be multi-faceted, and so is the role of a token designer.
A token designer is an economist, lawyer, engineer, and artist.
An economist because they study the production, consumption, and distribution of desired resources.
A lawyer because they design guardrails to protect against collusion and abuse in the absence of a 3rd-party.
An engineer because it is through the code that the system's design gets manifested.
An artist because code can also be manifested as pixels for self-expression.
Tokens can be network currencies like Ethereum. They can legitimize non-fungibility and eternalize digital art like Beeple’s “The First 5000 Days” NFT. They can serve as a user’s identity, a universal representation of one’s affiliation like CryptoPunk.
A token represents a unit of value universally recognized and enforced by smart contracts and the system that issues the token. If the participants believe that a token has value, then it does.
Faith, belief, and trust are at the heart of all transactions in the modern world. In the past, we’ve relied on the state, institutions, and financial systems to create this trust. People are now looking for it elsewhere. Just like I became friends with strangers on the Internet as a kid, when joined by a shared cause, a group of strangers can now build value systems of their own.
We’re already seeing digital-native networks traversing into the real world.
This is Friends with Benefits. The collective’s goal is to create experiences connecting artists and creatives. By holding the native tokens, members can access gated experiences created by other members. When the project launched, it was just a group chat in Discord. Now the community is made up of thousands of members worldwide. The treasury has facilitated events in over 40 cities, emerging startups, a three-day festival in California, and recently launched its own social media app. Members are rewarded with tokens for building software or attending parties, which can be redeemed for future experiences and showcased as honorary badges on the membership card.
And here we have Nouns. The goal of the Nouns community is to increase the value of shared Intellectual Property — the 32-by-32 pixels art stored on the Ethereum blockchain that gets auctioned off daily. Owning a Noun gives the owner governance power over allocating the shared treasury.
Creating a proposal to the Nouns network is “permissionless,” meaning it’s open to anyone with good ideas, no matter who you are or where you are. A permissionless contribution environment, like open-source software, can attract the best minds from deeply technical research to consumer brands. For example, a team with a background in the global coffee industry requested more than ~$150k worth of Ethereum to create the first-ever consumable brand and place it in cafes and grocery stores. Another team with a background in cryptography requested ~$100k worth of Ethereum to protect Nouns voters’ privacy with zero-knowledge proof technologies.
FWB and Nouns are early experiments of networks owned and governed by the members and with tokens. Strangers came together with shared niche interests and became friends and collaborators, cohabitating in the same digital cities and in real ones.
I understand that currently, much of what we hear about crypto and Web3 is bad and scary. Bad actors and poor token design can lead to disastrous results.
Some networks issue tokens to foster a vibrant local economy, only later in practice treat tokens as equities in a company, where early founders and investors are disproportionally rewarded. To make the problem worse, the tokens are designed such that local currencies' ownership equates to governance power in the network. Imagine a city where your voting power equates to your net worth. This will quite obviously lead to unjust and corrupted outcomes.
And imagine if an economy takes out massive loans denominated in a foreign currency. When the local economy isn’t doing well, it has to over-inflate its currency until a point of complete collapse. Just like Sri Lanka, and recently Turkey. The Luna/Tether crash — one of the largest scale collapses of a digital stablecoin — showed us the potential velocity for monetary expansion when everyone aligns on the speculative value of a new currency and how the forces are just as powerful working in reverse.
When the network loses faith in its value, everything can crumble overnight. This is true not just in digital economies but in real-world economies.
Fortunately, new token designs are being created to protect against these vulnerabilities. For example, we can ensure that governance power is distributed not just based on capital contribution, but labor contribution, with power effective within a limited timeframe. Another design focuses on creating an inflationary schedule that ensures that the allocation of ownership reflects more accurately in real-time the value contribution. Early founders and investors will get diluted away if they stop contributing.
Good token design can unlock new possibilities for a more equitable and habitable Internet. However, no clever mechanism replaces true innovations and authentic cultures. Just like any prosperous real-world economy.
Digital frontiers, by the end of the day, are still governed by a similar set of economic and behavioral principles, with experiments taking place much faster and at a larger scale. We’re speedrunning through the lessons learned from history. While it’s easy to dismiss the entire space as a scam, it’s equally tempting for this emerging frontier to be oblivious to historical wisdom.
From the bank as a place to the bank in your hand, from singular ownership to collective ownership, from working for a singular entity to working for multiple networks, it’s only when the past and the future start understanding and learning from each other, we become more equipped to embrace this profound opportunity to reimagine the Internet, collectively.
Thank you.