Does Octant want to be an Ecosystem or a Project/DAO?

Since Octant is moving toward greater community participation in its governance, and thinking about how to define its mission, I wanted to bring up this topic for the Octant community to discuss:

The question is whether Octant wants to be an Ecosystem onto itself or a DAO/project. The main difference between the two is that an ecosystem acts more like an economy, while a DAO acts like a decentralized corporation (with a more focused mission). This has major implications for how the tokenomics of Octant would be structured (and obviously for the community that it is likely to attract and the type of governance that it would need).

I wrote this article few days ago regarding a broader issue in crypto, but thought its also relevant to the governance discussion we’re having in Octant:


TL;DR: Economies are not companies and currencies are not stocks. The dynamics for these are completely different. If we want to create truly thriving onchain economies we need to understand that the “number go up” economic model is holding us back. Crypto economies need stable native currencies instead.

“Do you want to sell sugar water for the rest of your life or come with me and change the world?”

These were the words Steve Jobs famously used to recruit then PepsiCo CEO John Sculley to Apple in 1983.

In the spirit of those words we need to ask ourselves: “do we want to keep recreating Wall Street onchain for the rest of our lives, anons, or do we want to change the world?”

What are we talking about? Nearly all crypto ecosystems these days — no matter what’s their purpose or what benevolent causes they pursue — have tokenomics based on the same underlying model: “number go up.” They are based on the notion that the currency should be increasing in value over time. “Number go up” makes a lot of sense for stock prices of companies on Wall Street, it makes no sense for the currencies of economies.

Why not? Because economies are not companies and currencies are not stocks. Currencies need to facilitate economic activity, not attract investment.

A thriving company has products in high demand that generate a lot of returns. Growth expectations then boost the company’s stock price. The stock price then sends a positive signal that allows the company to finance expanding operations and creating more returns for shareholders.

A thriving economy, on the other hand, has innovation, value creation, efficient markets, productive workers, robust public infrastructure, and a high standard of living. What makes such economies attractive is the economic opportunity they create, not their currency value. And what makes much of this economic opportunity possible is a stable currency, not “number go up.”

That’s why companies don’t sell goods denominated in the company’s stock. If they did they would likely quickly go out of business.

Just imagine this scenario: a company is producing cars and planning to sell them denominated in its own stock. Investors like the new car but see a major problem with the pricing; if the stock price goes up fewer cars are likely to be sold since the car will become less affordable (unless target customers have 100% of their net worth invested in the company). On the other hand, if the stock price drops, the company will sell a lot more cars but likely at an operating loss. The most logical step then is to short the stock (and maybe use the proceeds to buy the car). Selling products denominated in the stock price is clearly a silly idea. You want price stability and you want to maximize your return through the laws of supply and demand.

So why are we creating economies on the blockchain based on the model of stocks on Wall Street? This only makes sense if the whole purpose of the “economy” is degenerate currency speculation. But it’s a terrible model if the purpose is creating thriving crypto economies. Of course we can still have projects, DAOs and communities in the ecosystem with tokenomics that resemble stocks, but please let’s not do that for the ecosystem’s underlying native currency.

Blockchain tech allows us to program dynamics into currencies that are simply not possible with fiat. This superpower means that we can build blockchain-based ecosystems that are superior to anything we’re used to in the fiat world - we can build economies that truly follow the cypherpunk ethos. But to get there we need to abandon the defunct hypothesis of “number go up.” We can either have crypto economies based on degenerate currency speculation that cannot becoming thriving economies, or we can have thriving economies where degenerate speculation doesn’t work. We can’t have both.

So we need to stop perpetually recreating Wall Street onchain and instead create crypto ecosystems with stable native currencies. That is how we change the world.

The question then is, do you want to change the world, anon?

Originally posted here: Abundance | "Do You Want to Change the World, Anon?"

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Hey @Abundance Thanks for sharing!

As you mentioned, this discussion isn’t just about Octant; it fits in with the broader crypto ecosystem. Do we want to replicate Wall Street in digital form, or do we aim to build something truly transformative, rooted in the cypherpunk principles of empowering public goods?

There are good points the article you created on Paragraph makes! I’m with you on moving beyond the “number go up” mentality. For Octant to truly champion public goods, fostering a stable, utility-driven token economy is super important.

Do you have any thoughts on the balance between stability and growth within Octant’s ecosystem, and what role do you see the $GLM token playing around that balance?

Another question I have is, are there specific examples or case studies from other projects that are good to look into, which successfully balance the ‘economy vs. DAO/project’ dynamic?

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Echoing @mat7ias comments here as well. Its a really good thought exercise you bring up @Abundance !! With the mission of empowering both the public goods funding ecosystem, and our users, I feel the mission is defined, although it may be broad in terms of interpreting what it actually means.

Given the constraint though in that, anything we do with the ETH treasury has to be designed around the GLM token, how could Octant pivot to the direction you are alluding to with the GLM token constraint in mind?

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Hey @mat7ias , so as @james mentioned, since the ETH treasury is tied to the GLM token, I don’t think it would make sense to take a token that’s supposed to accrue value and turn it into one that isn’t. I don’t think these can be balanced out in a single token, since such a token essentially would not accrue as much value and also wouldn’t be stable.

I think it would make more sense to instead have a separate token that maintains stability as the base layer for an ecosystem, and the GLM token can be used within a DAO/Foundation framework (maybe similar to the EF) that operates on top of the ecosystem and helps bootstrap it. The ecosystem can then be a novel experiment in self-sustainable public goods funding.

Just for complete transparency, the ecosystem model (for public goods funding) is what we’re championing with the Abundance Protocol. I’m not aware of other communities that use something like it so it’s very experimental in the crypto space.

MakerDAO, for example, has an over-collateralized stablecoin, but they use it as their product, not as the base of their ecosystem (and not necessarily as a way to fund public goods).

The idea in the ecosystem model though is not to have a currency that is pegged to any other currency. Rather it’s to have a pseudo-stablecoin that maintains value due to a dynamic equilibrium between participants wanting to maintain the value of their currency while maximizing their economic opportunities within the ecosystem (facilitated by funding common and public goods through currency inflation).

Participants don’t want to undervalue public goods, because that attracts fewer public goods contributors to the ecosystem (and hence slower economic growth), and they don’t want to overvalue public goods because that devalues the currency (participants exit the ecosystem). The result is that public goods can be fairly valued based on their impact on the ecosystem (impact = profit) while the value of the currency remains stable.

So this model can be an experiment in self-sustainable public goods funding. It can attract users both for the economic opportunity that such an ecosystem can create and for the novelty of the mechanism itself (which can lead to active research and collaboration with the wider regenerative economics community, and more interest in Octant/GLM).

Thanks for diving into this more @Abundance . I suppose my other question then is related to our mission. If we are trying to both financially empower the public goods funding ecosystem but also the Octant userbase, does this base layer only apply to the public goods side? Or can it be mutually beneficial for its users as well that are more focused on personal capital / returns from Octant?

I see this ecosystem benefiting the Octant userbase in two important ways. The first is bringing attention to Octant as a hub for innovation and growth in the crypto space. That should bring more interest to participating in Octant and demand for GLM.

The second aspect is from the ecosystem. Since Octant’s userbase is part of the ecosystem, whatever these users’ interests are is also what would get the most return in terms of public goods. So if most participants in the ecosystems are really interested in financial tools, these are also the kinds of public goods that are more likely to be built in the ecosystem (of course such public goods would also benefit others outside the ecosystem, but the focus of contributors would be to benefit users in the ecosystem first).

So the userbase would benefit both from increased demand for GLM due to interest from outside, and from more tooling being built (as public goods) around the GLM token from within the ecosystem.

Octant is currently designing itself around being a hub for how you fund public goods in a sustainable way. This is why I asked you on your thougths about ETH, because my understanding is Octant can function with the GLM token as this hub in the same with ETH does for its ecosystem.

If Octant is able to achieve being this hub as I described, would this not be possible as well? I suppose I wonder if what you describe is only possible if a separate token is introduced for the functions you describe.

Could you clarify what you mean by “sustainable” funding of public goods?

Maybe this is relevant to something I casted earlier today:

“Sustainable” PGF is when you have a reliable source of external funding (like cookie sales) for public goods.
“Self-sustainable” PGF is when the public goods create effective feedback loops, so that impact = profit.
These are not the same.

Ethereum achieves (somewhat) self-sustainable funding only for the common good of network security (this is also based on currency inflation). Other public goods are funded through the EF (and various other projects/DAOs built on top of Ethereum, including Octant), but EF’s public goods funding is not a self-sustainable process.
The tokenomics are also designed for ETH to appreciate in value, not to be a stable currency.

The ecosystem approach I described is a way to achieve self-sustainable public goods funding - what ETH does for network security but applied to common and public goods in general.
Is it possible to achieve this in other ways? Maybe. I’m just not familiar with those.

We aim to achieve that our sources of funding are sustainable. Our staking rewards are one way to achieve this, but we have some other ambitious ideas about how we can add other sources that are also sustainable into the mix.

Definitely see your point, but is the former not included in the latter?

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Got it. And this is also what we discussed on the call earlier this week…

I would say it shouldn’t. The sustainable funding can help support work on the self-sustainable mechanism, but if the mechanism is up and running it should be self-sufficient. Just like there was initial grants and funding going into building Ethereum, but the consensus mechanism works and self-sustainably funds network security without the need for external funding sources.

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I would say that the project

Yep, exactly.

After thinking about it, I’m not sure the idea suggested here would work out. I’m always happy to chat more about it though. Additionally, we do have a major announcement coming up in the coming month or 2 which will explain how Octant might be the ecosystem you are inferring.

Once this info is released (we’re under an NDA at the moment) I would love to explore if you still feel the idea is applicable!

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Looking forward to the announcement.

Just to be clear, I’m not really pushing Octant to go in the direction of an ecosystem. I think both projects & ecosystems have their own strengths, so whichever direction Octant chooses it should strive to create the organizational (and governance) structure that maximizes those strengths.

The article I posted is about communities who want to be an ecosystem but still use the tokenomics of Wall Street. I criticize that approach because that’s not how you get to a thriving ecosystem.

It is perfectly fine in my view to build a strong and effective project/DAO. But since Octant is in the earlier stages of shaping its identity, I wanted some clarity (both from the team and the community) on which direction Octant wants to go in.

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