Why a Community Token Economy?

September 2017

This post addresses the primary concerns, values, processes and functions of a CTE (Community Token Economy) framework approach as proposed in our recent similarity  titled whitepaper:

  1. Token Macroeconomics

  2. Dynamic Governance (people + code)

  3. Developer Community Depth & Diversity

  4. Accountable & Effective Capital Management

  5. Shared Intelligence


1. Token Macroeconomics


The primary function of a CTE is to set the macroeconomic policy, including the monetary and fiscal policy of the crypto-economic system to align stakeholder incentives and drive desired behaviours. To achieve this we want to enable communities and industries to exchange value in a seamless – ideally invisible  – experience, in a multi-token and multi-chain environment.This is critical because we assume a CTE must allow for new participants who may before or alongside wish to issue their own specific token.

This would require various building blocks to create and exchange tokens, including token exchange protocols (that can convert tokens based on automatic market pricing and exchange rate mechanisms), as well as cross-chain interoperability. Alternatively, price discovery could be built into tokens by accessing a fixed reserve balance. This would increase liquidity, eliminate market spread and limit transaction fees. As these types of building blocks grow more mature, the fluidity of tokens within the CTE can reach to increasing levels of fruition.

We believe, this type of token customization would make the CTE Community Token a more effective and stable reserve currency for a domain-specific economy in place of fiat or Bitcoin. Furthermore, by allowing this token to become more dynamic, monetary policy can become more granular and flexible, while being hard-coded and enforced through its consensus mechanisms.


2. Dynamic Governance


Token Macroeconomics feeds into the governance of the system through a mixture of stewards and democratic and inclusive participation of its users. Ultimately its end users, the people it is supposed to benefit and serve, should have ultimate say in its direction and the ability to remove stewards they do not feel represent their interests.

The European Union, for better or worse, is the best known example of a practical detachment between those who govern and the governed without the ability for recourse that we want to avoid.

Furthermore it is our belief the systems must be, where possible, entirely open source to allow the community both in part or as a whole to fork its governance whilst preserving the distribution of wealth ensuring those who have previously contributed value are perpetually rewarded.  


3. Developer Community Depth & Diversity


Generally as decentralised open source communities CTEs must help compete for and train scarce talent in highly liquid labour markets to contribute both to the core protocols development roadmap but also to encourage continuous innovation on top to help it integrate into other markets and realise a healthy application ecosystem. The foundation should actively look to create depth of community by running official developer conferences and supporting more grass roots meetups, as well as establishing key relationships with technical universities and other related developer communities.

It would assume responsibility to establish the development of how to’s, FAQs and reward bottom up community support to make it’s technology as accessible as possible and as diverse and inclusive as possible to ensure everyone can participate in its value creation and it can represent as wider developer base as possible.


4. Accountable & Effective Capital Management


One of the most important reasons to prescribe to the CTE approach is because in theory it allows for a more efficient allocation of capital both by the market as a whole and then within the system itself.

It is proposed capital raised through token sales should only be deployed against clear budgets and successful delivery of works, via scheduled payments that may be handled by a dedicated team, smart contracts or hybrid thereof in a fully auditable and transparent way.

Surplus capital raise via the token sale, beyond the capped requirement for seeding participants or for the reimbursement of donated IP, will be invested on behalf of the foundation for the benefit of the community as a whole. Every investment should have a clear rational and social or business case made to an investment committee of elected and fully accountable professional investment managers.

A dedicated team or person would also be responsible for transparent treasury management with quarterly community reporting.


5. Shared Intelligence


As artificial intelligence applications and machine learning models demand more and more data; blockchains will act as large repository of open-source validated records. The principle of open data for all within an CTE, should allow anybody to see what is happening in the system whilst preserving degrees of anonymity for both users and commercial participants.

As data is generated through the systems usage it should allow for emergent intelligence which when combined with machine learning can allow for high degrees of automation and opportunities for innovations in AI. The principle of a CTE is the general intelligence created by any AI should be communally owned and its value equally distributed for the benefit of all in the system. However equally there should be opportunity for commercial entities to realise value through specialist narrow intelligence to better optimise the system bottom-up. This means no one party can benefit from an overall AI advantage that controls the system but they will all still have a commercial incentive to innovate.