Tuesday, 15 March 2022
Mixed feelings about today… I’m really happy about the fact that the folks over at Coinmonks Team asked me to publish IkarisDaily #2 on their publication. I also had a bit more fun at my internship in the morning. On the other hand, the work was still really uninspiring. Not to mention, I was toiling on the same, non-urgent piece of work during the afternoon for 3–4 hours, which made that time really boring. It is what it is, I guess…
At the very least, I can work on what I really enjoy now. Without wasting too much time, let’s delve straight into today’s content.
I read ‘The Most Important Scarce Resource is Legitimacy’ by Vitalik Buterin. I’ll be honest, I haven’t quite grasped the entirety of his message in the piece, but I am confident that with time, I will be able to learn as I see the idea applied in the real world. For this reason, I hope you will forgive and correct any aspects of my understanding that are incorrect. Really appreciate it!
1) Legitimacy
The Bitcoin & Ethereum ecosystems are able to come up with massive amounts of capital but have strange & tough to grasp restrictions of using that capital. For example, Ethereum pays 19.5M/day in block fees & 18M/day in transaction fees (At least at the time Vitalik Buterin wrote his piece) while the Ethereum Foundation’s expenditure, including R&D, grants, etc ends up at $30M per year. The reason for these restrictions is legitimacy
Legitimacy is a pattern of higher-order acceptance. In a social context, if people accept and do their part in enacting an outcome, the outcome is legitimate. In addition, each person would accept and play their part because they expect everyone else to do the same.
Legitimacy arises naturally in coordination games. Mechanisms emerge to decide which decision to take, powered by the culture that everyone heeds these mechanisms and does what they say. Each person follows the mechanism because they figure that everyone else will, and if they don’t follow the herb, they will face suffering.
“Full disclosure, this part is where I am extremely, extremely blurry on the message”
2) Proposition to use Legitimacy for Public Goods Funding
Public goods are key for a blockchain ecosystem and the survival of capital within the ecosystem. However, as mentioned earlier, the funding situation for such goods is poor.
Vitalik suggests that there are 2 ways to respond. First, the community can be proud of these limitations and the efforts to work around them. However, while this organisation of human effort is impressive, it is not the future. Instead, the focus should be on building better social technologies to fun public goods as a systemic part of the ecosystem, rather than one-off philanthropic actions.
Blockchain ecosystems value decentralisation and freedom. However, the public goods development ecology is driven by centralized entities. A couple of entities far outspend everyone else. Of course, this is not their fault as they are simply trying to improve the ecosystem. Rather, the ecosystem is doing these entities wrong as the standard of complete decentralisation is much too high.
This is why it is important to create a diversified way to fund public goods without depending on a single entity. In fact, the roots of such a system do exist in Ethereum’s application layer, from companies such as Gnosis.
Vitalik proposes a model to make this system even stronger with the Bitshares idea from 2013 as a foundation. This model requires the ecosystem’s participants to support projects that contribute a portion of their treasuries to improve the ecosystem that they depend on AND deny benefits to projects that fork an existing product and do not give back to the broader ecosystem. This entire model is based on legitimacy derived from the ecosystem’s participants’ collective agreement to support projects that make the contribution. If projects do not contribute, they are not recognised & supported by the ecosystem.
There are plenty of ways to do this, with a basic approach being to decide the minimum contribution and rely on good faith regarding where the funding is allocated. There are definitely limits to the model depending on the strength of the community’s leverage, but Vitalik believes there is enough leverage to encourage at least a few % of their budgets to public goods funding.
NFTs can be used for the purpose of public goods funding. Legitimacy is utilised here as well. If everyone agrees on which NFT should be given value, people will prefer buying that NFT — For bragging rights, personal pride & future resale value.
“Just as my day has been, I have mixed feelings about this proposition as well. While I agree that public goods funding is essential and the decentralised form of blockchain ecosystem inhibit traditional systems for public goods funding (Government initiatives), I cannot find it in myself to agree with this model.
To me, in essence, what is being suggested is the real-life equivalent of taxing businesses for the development of public infrastructure. Exactly what the centralised organisation known as the Government does. The Government uses a combination of its control over money, law and law enforcement, to enforce this. Due to the nature of blockchain ecosystems, this model can be enforced with the acceptance of the majority. Yet, at its core, this model is identical to what the Government does. Organisations follow it in the real world because if they don’t, the Government will use law and eventually law enforcement to compel them to follow. In the blockchain ecosystem, projects will follow it because the ecosystem won’t recognise or support them if they don’t. They will still be compelled. It is merely dressed up as charity, while it is actually the cost of entry.
Vitalik put in the effort to develop such a model for public goods funding. It’s really easy for me to sit here and shoot it down. Especially with my limited understanding. I admit that I am not making any contribution to solving this problem. I can only hope to reach a level of expertise at which I can make that contribution. I do have my worries about the model suggested, but I won’t go so far as to say it won’t work. What I can say is, I will look at this suggestion over time as my knowledge increases, and continue to evaluate its merits. Hopefully, I can one day understand why it should be implemented, or instead, come up with my own model to solve this problem”
With that, we have just completed the ‘Creator DAOs, Creator Economies; Funding Innovation’ portion of the NFT Canon. Tomorrow we will start on ‘NFT Ecosystem, Markets, and FAQs’. Just as a precursor, I looked through the remaining articles and saw that some are actually from previous sections, which means they were already covered. In addition, some articles do not actually have much content. From what I am seeing, there are maybe only 3 to 4 more articles with actual educational content. I’ll be sticking to these articles and maybe only briefly scrolling through the others. Just wanted to inform ahead of time, in case there is curiosity as to why I am not covering everything.
I’ll be honest, I may not have been able to put in my 100% today. I am really tired and slightly frustrated with how things have been. Maybe that’s why my analysis and opinions were negative. Some days are like that though, we have to keep going. I am happy that I am continuing this streak and researching even when exhausted. This consistency is crucial to ensure my commitment to the Ikaris Project. What I’m going to do now is post this piece and go off to sleep. Thanks for your time & see you tomorrow!
