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 weāre 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 ānumber go upā economic model is holding us back. Crypto economies need stable native currencies instead.
āDo you want to sell sugar water for the rest of your life or come with me and change the world?ā
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: ādo we want to keep recreating Wall Street onchain for the rest of our lives, anons, or do we want to change the world?ā
What are we talking about? Nearly all crypto ecosystems these days ā no matter whatās their purpose or what benevolent causes they pursue ā have tokenomics based on the same underlying model: ānumber go up.ā They are based on the notion that the currency should be increasing in value over time. āNumber go upā 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 companyās 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 ānumber go up.ā
Thatās why companies donāt sell goods denominated in the companyās 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 āeconomyā is degenerate currency speculation. But itās 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 letās not do that for the ecosystemās 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 weāre 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 ānumber go up.ā 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 doesnāt work. We canāt 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?"