Tokenizing Public Infrastructure Pt 2: Standing the Test of Time
Innovation Through Creative Cryptoeconomic Recombination
|Steven McKie||Dec 26, 2019|
I’m continually thinking a lot about America and how we can improve our country while things socially and politically continue to trudge forward in a state of apparent dysfunction. This is the same statement I made when I published Part 1; months later, that doubt has not receded from my mind, it has worsened. So, I share my thoughts in hopes of an epiphany, an answer. I think as a nation we are close to something truly breath-taking innovation wise. Below I expound my thoughts further, in hopes to spur a similar mindset in others.
The tokenization of public infrastructure is a relatively new thought; one bearing vast implications on the mobilization of society as cryptoeconomic primitives (more on this, here) and mechanism design finally approach center stage.. Something that I am proud to continue to expound on more thoroughly following part 1 of this series.
Since that post was published, things have gotten pretty exciting. The city of Berkeley in California is considering issuing token-assets backed by city bonds to fund new housing development; even the country of Venezuela has attempted to launch its own token, the “Petro”, which they state is “backed” by the countries’ oil reserves (and they were even sanctioned by the Trump administration further for their digital currency launch, a world-first). I was even personally contacted by a small city in Louisiana, and a major city in California to discuss these ideas further after my first post — cities are looking for sustainable solutions
It’s becoming increasingly clear that we’ve reached an inflection point as a species. We know that we are inherently bound by the political and financial interests of those with more power than ourselves. Whether you’re the city of Berkeley, CA trying to fund further improvements in its city by leveraging new tech as the political climate clamps down on sanctuary cities; or whether you’re an impoverished nation with a volatile power struggle and exponential inflation like Venezuela, it’s clear these technologies offer new avenues of acquiring wealth for various, or nefarious purposes.
The creation of tokenized assets for cities, countries, has many benefits. But, the most important of all is their ability to allow States and Cities the chance to experiment with new economic and social models, ones that could eventually find their way to being implemented by the U.S. Federal government (if we can work the kinks out). This ability to remix order, incentives, and structure is a very special component unique to cryptoeconomics — I like to call it creative cryptoeconomic recombination.
Creative Cryptoeconomic Recombination
With the implementation of tokenized assets with embedded micro and macro rewards, you can create economically unique solutions to gamify and create sustainable ecosystems that reward positive social order and behavior. These unique individual systems then become puzzle pieces, that when placed in the right unique combination, creates a picture worth saving. Or said in other terms: With the right economic modeling and incentives, your systems become fixture assets in a local economy, beholden to and empowered by the unique needs of the skilled individuals residing in that particular area.
As this point, tokenized city and state assets begin deriving their value monetarily, socially, and politically, based on the contributions of that localized economy (learn more on blockchain-based governance, here). That value is then further compounded and speculated upon when viewed from a national, or international lens depending on the type of economic outputs they enable regionally.
The greatest impact of tokenized publicly accessible goods and infrastructure is that they enable swift shifts in the political and economic influence of incumbents; thereby creating power where there exists inequity, or citizens financially uninspired and disenfranchised. This is in essence a grapple with authority, wrestling it firmly into the hands of those best suited to manage it economically.
By creatively recombining cryptoeconomic primitives, public utilities, services, local business, and community development, we can condition the state to be reinvigorated for the 21st century. These would be enlightened, technical systems that have no obligations to ill-authority, only the stability and support of the people.
The great thing about systems like these are their forward-extendability. If the redundant state of them is fairness and equity, then the propensity of future modular improvements and replacements of these systems are more apt to be continuously more efficient, stable and fair.
Just in the last year we’ve seen the evolution and proliferation of Token Curated Registries, Non-Fungible Tokens, ERC-20 assets…the list goes on (check out my recap on ETHDenver for more). The best part of these creations, aside from showcasing just how creative and flexible platforms like Ethereum are, is ideating around how to remix them accordingly for your particular use case.
When designing tokens for cities and states, it’s important you construct city incentive mechanisms that maintain a new or existing urban sprawl, and lessen the potential for abandonment, while simultaneously incentivizing new growth. I’ll now explore some of the fundamental tools we’ll need to get there.
Geo-Fencing to Incentivize Commerce:
If you’re not familiar, geo-fencing is when you enable certain actions and services within a pre-determined geo-locational area. There are some very impressive projects seeking to enable this efficiently by rethinking location attestation (proving you are where you claim) with the assistance Proof of Location focused protocols.
By enabling self-sovereign, verifiable locational data, you can create a slew of various applications by utilizing geofencing (more from the FOAM project on these topics, here).
One of my favorite personal applications of this would be the invigoration of dilapidated downtown sprawl.
Typical look of many U.S. downtowns. A sparse graveyard of uninspiring architecture and middle-class wage dreams.
Uninspiring, and often occupied by small-business owners, downtown areas in most of modern America look similar to the above scene. Shopfronts empty, retail spaces with no foot-traffic. And to make these sections of town viable for business again as the world moves to internet specific retail, we need to rethink how we maintain businesses as we go through technological booms and busts. Cities that have their own token-based systems could subsidize tax payments to areas that experience low traffic and usage to certain geo-areas, and make spending that particular asset or sub-assets more powerful by increasing their purchasing power there (i.e. most areas of town pay full price for goods, but cities could offer a 1–5% discount for citizens that shop from those geofenced retailers).
Dynamic Monetary Spending Mechanisms:
If we assign ourselves to the idea that overtime cities will charge fixed transactional fees on their tokenized systems in lieu of taxes (easier accounting, greater economic efficiency), then we can get really creative.
If all data is being aggregated and shared (perhaps using zero-knowledge proofs to protect privacy) we could easily determine, in real-time, where to create more incentives or reduce costs to spur commerce. By tokenizing a formulaic approach like Cost-Volume and Profit Analysis, as a business I could reference historical data and make informed decision on where and how I can reduce costs to incentivize my customers. Or, in times of high demand, increase prices to ensure maximum profitability by strategically competing for best-value against your competitors (can’t avoid it, greed is an inherent human function, embrace it).
Token Curated Registries for City Planning:
Another difficult aspect of maintaining a cities’ future progress and growth is planning. Electing officials to appropriately follow the will and vision of the people to improve conditions is the norm (or rather, that is the intended point of democracy). However, obeying the whims of the majority can be difficult, especially for larger cities.
If you’ve not heard of Token Curated Registries (TCRs, we love acronyms in crypto) yet, you can learn more, here. But, put simply, they are a way for stakeholders in a tokenized ecosystem to seamlessly vote and come to a quorum on additions to, or removal of, items in a registry (think yearly budgets, infrastructure initiatives, etc).
Trying to decide whether the city budgets for a new park, filling pot-holes, or investing in new books and laptops for a school district? This can be done more easily with a TCR. By allowing the stakeholders (citizens) or elected officials access to the TCR, they are forced to vote on the needs of the people and have it be transparent, or private (depending on the type of accountability necessary). Voting can be done in a matter of hours on key issues, allowing the public to mobilize wealth and time more efficiently, and not let city improvements get lost in the bureaucratic machine.
Staking Bounties for City Initiatives:
Do you live in a town encumbered with youthful college students and teenagers? Why not put the younger generation to work with real-time incentives? As a citizen, a general purpose digital bulletin board for road adoption, park clean-ups, local event volunteering and more could allow citizens to stake assets or tokens as a reward for the completion of, or continued participation in, activities that support and sustain your local economy.
Tools like these could enable a local network of individuals to continuously help each other in real-time. This increase in odd-job economic activity helps build character and skills for the younger individuals, and creates an avenue for the working-class adults to put the money where their mouth is to improve order, and improve their community.
Location Attestation and News Coverage:
The last example I will provide you all is likely one of the most simple and most important. The news world has changed. If you can prove you are where you are with the assistance of Proof of Location specific protocols, you could ensure that news coverage is locationally accurate, reported by individuals with a monetary incentive to prove they were where they claim they were when reporting facts.
This data could be stored historically (pictures & videos) in this cities’ blockchain to be referenced by businesses like insurance companies to allow for the realtime estimation of rates that are fair and frequently updated based on current conditions (with respect to people’s privacy).
There is no right or wrong way to build the tokenized cities of the future. We are bound and limited by only our imagination. But, improved efficiency, privacy, security, and the interoperability of these systems is the key for their long-term sustainability.
Help us build a future humanity can be proud of, by first reshaping a nation our country can be proud of, together.
“Never doubt that a small group of thoughtful, committed citizens can change the world: indeed, it’s the only thing that ever has.” -Margaret Mead, anthropologist, recipient of the Planetary Citizen of the Year Award in 1978.
Resources and References
Starships and Tokens:
Towards a Practice of Token Engineering:
Are Gamers Poised to Shape the Blockchain World: https://medium.com/blockchannel/are-gamers-poised-to-shape-the-blockchain-tech-world-cdd82f37834d
A Major California City Could Become the First to Create its Own Bitcoin-Inspired Currency:
Countries Are So Last Century. Enter the Net State:
The Emergence of Cryptoeconomic Primitives:
Introduction to Proof of Location:
Cryptoeconomic Theory: Basis of Social Order:
Blockchains are Governance: