The Blockchain Mechanisms That Will Prevent Dystopia | Mike Natanzon - Abundance Protocol/MakerDAO

[Music] all right hi everyone I'm Mike naanson with abundance protocol and today I want to talk about how blockchain technology can prevent dystopia and create an economy of abundance so we have a lot of Crisis that we're dealing with today and we can think of these um the reason we have these crisis and while they're getting worse as a problem with feedback loops and exponential technology so if we think about what makes an effective feedback loop uh we can think of markets for example and what makes uh Market markets effective feedback loops is that if you're doing something beneficial uh there's an incentive that rewards you to keep doing it or improving on it and if you're doing something harmful there is an incentive for you not to do it there's a cause to it so if you're producing something in the market um people you have customers if they buy it from you obviously you get the money back and then you can reinvest it in whatever you're doing you can improve it you obviously want to create more of it to produce more uh if you're producing something that harms people they're not going to buy it and if they don't buy it then you don't get the money for it and then you cannot you know reinvest it in anything so you don't want to do it we don't have the same feedback loops for either uh negative externalities which is things that are harmful to uh outside the market or for public goods which means if you're creating um a product and that product harms others whether it's through pollution or if you're a social media company and you're creating um you know toxic a toxic social environment um there's nothing really there that would put it as a cost on you instead you're making the money but there's no cost and the same thing for public goods which is basically um there is no economic incentive for you to create more uh public goods because you don't get rewarded for it so you're not going to make more of it I mean you might but you're not getting the benefit from it and if we put it together if we put the externalities the market and public goods all together we understand how this whole system works that basically you have an effective feedback loop in the market um and you have an an incentive to offset some of those costs through externalities but you don't have an incentive to produce the public goods you still might do it but you don't have the economic incentive if we add the exponential technology to it then we can see why there's more externalities because now every little change you make it can have an exponential effect which means you're making more money in the market but it produces more externalities um and that's where we are but what we actually want is we want to have effective feedback loops and to reverse this process we want to have an incentive to produce the public goods and we want to have a disincentive to produce the negative externalities so the question is how can blockchain technology help in this process how can it um help create those effective feedback loops so this kind of goes back to um the four different quadrants of goods so if we have private goods and Club Goods there is effective feedback clops for them um because they're excludable which means you can uh create a market for them you can sell something and then you get money in return so there's effective fic cloops for common goods or public goods you don't have the same process um you produce something but there's no way for you to capture that value and if we think about it in terms of uh let's say a book if you're creating a book and you're selling it in the market um then you know you can create create a physical book and then it could be a private uh good or if you take the same content of the book and then you uh sell it online then it can be a club Goods B which basically means that you can people can either subscribe to you and then get the book or you know uh the idea is that it's non-excludable in the sense that uh the content many people can just view the same content it's not restricted um and then you can take the physical book and donate it to let's say to a library and then it becomes a common good because people can still uh only take it one at a time um but and it also degrades over time because you know the more people use it theg grades so that becomes a common good and you can take digital content and then make it available for everyone and then it's a public good now if we think about that book in those different quadrants we can see how uh if it's a public good it has the most impact because the most people uh you need the least resources and then the most people can access it uh but you make almost no money or no money from it versus if it's a physical book you need to produce more of it you need to um kind of consume more resources uh but that's how you can make a lot more money and you can see so in terms of impact in terms of efficiency you obviously want public goods but we have a conflict now with um how much profit you can make and therefore you know your own self-interest so how do we change it do we change the profit to go into the impact how do we uh make them in the same quadrant so we can look at the different funding mechanisms we already have we can look at the traditional ones and uh the crypto mechanisms and in traditional terms we have government we have uh philanthropy crowdfunding and then um all these they still don't create these effective feedback loops that we're looking for for it's still you take money from the leftand quadrants um if it's government you basically uh tax people and then you take that money and you put it toward public goods or common goods uh but there's no the more you create the public goods you're not going to have more money going toward that um in crypto we have uh new mechanisms that enhance existing systems um so for example quadratic funding um it's a much more effective way to distribute uh funds based on the interest of the community but you still need this external source of funding for it so it's still you don't have the effective feedback loops uh retroactive funding is also it's a new mechanism where the idea is that once um a public good or common good already created the impact then it's easier to assess the value of that impact and then reward it uh but currently we still don't have systems um that funded in an efficient um not an efficient way but in a self self- sustainable uh there's no feedback loop there you still have like optimism you still uh use uh sequencers fees which are in a sense uh like a um a private good and then we have consensus mechanisms and consensus mechanisms there's different ones of course but that's the first mechanism that we see um a sustain a self- sustainable Loop created we have a feedback Loop where uh we have one common good which is network security and you can self- sustainably fund it in the sense that you don't have you don't need external funding from it it comes from um basically coin issuance through the protocol itself and the reason you make it sustainable is if either you take the money back uh in a way like you reduce the supply uh so either the supply is uh fixed or or reduced when when you is when you know when you use the uh blockchain or if there's growth uh in the demand for uh the blockchain and then you can make it sustainable uh but this only works for one specific common good which is network security um but what we want is we want it to be uh effective for every common good or every public good so if we look at the mechanisms we have right now in terms of their scale we can see that uh the traditional mechanisms if it's government it's in the trillions and then you have uh philanthropy or crowdfunding that's in the billions now uh but crypto it's still uh for both quadratic funding and retroactive funding it's still in the T hundreds of millions but it's nowhere near where we need it to be consensus mechanisms on the other hand is over over a trillion dollars right now because if we look just at uh Bitcoin and ethereum those two already manag to generate um for those providing the common good of network security about a trillion dollars in uh you know issued to them so what we need is how do we you know taking what we have now how do we uh make a system that is works like the market which is it's efficient and it's you have effective feedback loops um but is that works for something that's a public good and for that we introduced something called value consensus and the idea is to take a similar process like consensus mechanisms but instead of um the way consensus mechanisms work is basically you have um you have one uh decision that nodes in the network have to make based on uh what a what a block proposer does so block proposer that produces new produces new block and then the nodes and the network basically have to decide did it follow the rules of the protocol yes or no and if they it did then you issue uh reward from the uh from the protocol to that uh producer but what we want is we want a mechanism that works like the market which means that um you have a contributor who creates a public good and then an ecosystem rewards the contributor for that public goods based on the impact on the ecosystem so we want to create a market around that but how do you create a market for something that is a public good like the you know you produce it but there's no need for uh for you to pay for it because it's already created so what you the way it would work is uh because of repeated games and the idea is that you reward the public good uh because you want more of it produced you want more public goods produced not exactly the same same one but any other type of public good and if if you produce it in a way that you rewarded then you're going to have more public goods created for your uh ecosystem and you want to maximize that because that creates the most impact uh in your ecosystem which means you have the most uh Economic Opportunity when you're in that ecosystem but you want to um balance that with maintaining your currency value so you don't want to overpay uh for the public good and if you have both then you can have an alignment of interests and that's one of the key things you need to be able to reward public goods in a way that's credible and efficient you want both you need both data uh because if you don't know the impact then you cannot uh you don't know how to reward it so you need the data but you also need an alignment of interest within the ecosystem because doesn't matter how much data you have have if the network if the ecosystem cannot agree on what value uh this product has for the ecosystem then you cannot agree on how much uh it's worth and how much you reward it but if you have both if you have the alignment of Interest which is what we describe now and data then you can have uh impact equals profits and then you can create an effective feedback loop around it and another way to look at it is if you under reward the public good then you're going to have less of It produced which means the value of your currency is going to be not as High versus if you overvalue it then you're going to have users leaving the ecosystem and if users leave the ecosystem then also you're going to have uh less value uh for the token but there is a shelling point where you reward it accurately based on how much uh the ecosystem values this public good and if you can do that then impact equals profit for this ecosystem and then you can have a mechanism that works uh but that's just a toomics there's still a lot of challenges of how do you actually do it um so you need to design a mechanism that's self- sustainable which we already described what you would need for that uh but how do you make it self sustainable well you need the currency value uh to be stable and for that to happen you need to credibly review the impact um and you need the system to be scalable and but for to credibly review the impact you need to have civil resistance and you need to have collusion resistance which means that you cannot have a system where someone proposes a project and then the people who review it collude with them to just reward them because then you know there's no uh credibility to the evaluation process and you need scalability uh which means that if you have maybe five project projects in a system everyone in the ecosystem can review it that's not a big deal what if you have a 100 projects a thousand projects a million projects how do you make uh this ecosystem work in a way that uh you can scale it you if you have everyone in the ecosystem reviewing every project you cannot do it so I'm not going to go through every single problem uh for the mechanism how to solve it I can assure you that you know uh we have a solution it's in a white paper but I'll go through the major uh ones which is uh the scalability and the cred uh credibility so for this the issue of credibility we want retroactive funding because that's uh when you go with retroactive funding then you can basically reward a Project based on the impact that's already created uh but the way you do it is you want people rewarding it um that are domain experts and you also want ecosystem wide people uh looking at the project because every domain expert thinks that their domain is the most important one um but you don't want you don't need everyone in the ecosystem reviewing every project all you need is uh the impact that the project is likely to create you need expertise that's um sufficient to review it so if the project is only likely to create a little bit of of impact you don't need a lot of expertise you can have like a little bit of expertise and if it's likely to create a lot of impact obviously you want a lot more expertise going toward reviewing it and you want the the the people reviewing it uh to be randomly selected so then you cannot you wouldn't have collusion uh between uh the proposers and the people who are viewing it so but to have this uh efficient allocation of uh validators of reviewers for that you need predictor prediction markets uh which means you need um you need an incentive for just like you have in a market incentive for people to look for uh the projects or the you know the stocks that are likely to make the most money uh for them you need uh a incentives for people to look for projects uh in this system that are likely to have the most impact that's number one and also to review them accurately and if you have an incentive to do that and we describe it in the white paper then you can have resources in a system going uh towards reviewing every Project based on their expected uh impact and then the whole system works and that pretty much a way is a way to solve every of every one of the challenges uh for this ecosystem and for uh this mechanism to work and then and again I didn't describe all all the issues but it is uh in the white paper and uh we can go from there but once we have that then you can have effective feedback loops for public goods because then you can uh incentivize projects to contributors to create uh public goods and common goods in a way that uh uh you know you you want them to maximize their impact on an ecosystem and if there is an economic incentive that would uh create this effective feedback loop and at the same time um you would penal you have a this this incentive to create negative externalities uh so essentially you solve both problems there's actually more mechanisms within this protocol uh that allow you to disincentivize the negative externalities but I'm not going to go into all that uh so taking a step back uh kind of how do you make this whole system uh seamless and intuitive for people to use uh so you can really take um a decentralized social media platform and you can overlay it with the ability for people to review projects and also with the ability to um to create uh data uh data forms that allow easier um review of the projects um and you incentivize that because that's also a public good that you're creating and so you can have a system that's intuitive that's seamless because that's kind of you know part of how we interact with uh the world and also with people around us you know through social media at least online uh and that's how we can uh have a system that's seamless that's intuitive and also uh has these effective feedback loops for public goods and negative externalities um and and obviously I didn't go through everything but uh sorry about that but we are releasing um the abundance economy book today and you can uh get it either through the QR code or in the link below and that goes a lot deeper into um how we can create the system uh what kind of effects it has and you know its benefits and so on and how we can make it all work thank you everyone I'm and with the abundance protocol and you can talk to me if you have any questions or if you want to help out later thank