Tokenomics: Creating Real Value in the Virtual Metaverse
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Tokenomics: Creating Real Value in the Virtual Metaverse

Speakers
ReeFi, GoodDollar
AMA Date
June 29, 2022
Status
✔️Past

Introduction

Blockchain technology introduced a world of possibilities for finance & decentralised economies (such as DeFi, crypto & tokens), creating new ways for us to earn, transact, or even interact with others.

However, this exciting new space also created a lot of hype, speculation and short-term get-rich-quick schemes.

The recession that is happening now is a good time to figure out sustainable business models for Web3 – not based on speculation, but on creating real, long-term value.

We chatted with 2 speakers who are working on projects using blockchain technology to improve the world, to find out what that looks like:

  • David Kettle, CEO at ReeFi, is a lifelong marine biologist who is building the digital twin metaverse of the Great Barrier Reef, so that users can interact with it and propose, vote & track reef conservation projects.
  • Hadar Rottenberg, CTO at GoodDollar, is utilising the blockchain to create an economy with the goal of reducing financial inequality by giving universal basic income.
  • Evy Lee, Product Growth at CryptoJobs, is working to build the talent platform for Web3 at CryptoJobs, to connect talented individuals to the best blockchain projects.

Listen to the recording, or read what we chatted about below!👇

What can the “Metaverse” / Web3’s idea of a Virtual World do, that we cannot do today?

David, Reefi

In a practical sense, ReeFi is a digital twin of the Great Barrier Reef. It’s not a representative of a creative environment. Every piece of coral that you see in our virtual world is there in the real world, in that location, looks like that, with those fish swimming around.

We think the Metaverse is about creating access and bringing people’s hearts to the reef. For example, right now, it’s 6pm in Queensland, Australia. There will not really be people diving right now at this time of the night with the sun having gone down.

In our digital twin, people all over world can do that virtually at any time of the day. They can put on a headset, do a night dive. Or, they can switch the time dial and see how the Great Barrier Reef looks like in day time.

Besides being accessible any time, the virtual metaverse creates access for people who don’t ordinarily have access.

For example, people who can’t afford it, people who are too young – the limit of time and money is removed. You can explore the Great Barrier Reef at your leisure, check out different spots, not just one.

And while exploring, we hope to get people inspired to help conserve it.

Besides entertainment & education, the digital twin also helps with scientific research in ways we can’t do at the actual reef, such as running experiments, dissecting and breaking down what it is like at the reef.

Besides entertainment & education, the digital twin also helps with scientific research.

For example, if I want to look at a volume of a particular coral, one of the methods that’s used at the moment is to remove the coral, break it down chemically, cut it into pieces, and we take moulds and measure the volume.

With the digital twin, we can automatically calculate what the volume is, calculate the percentage that coral covers in an area, how much of it is healthy, or even how many fish are in a particular area – without necessarily impacting the reef at all.

Hadar, GoodDollar

I agree, the future virtual world gives you front row access that otherwise would not be able to experience.

I think there’s a lot of hype around the Metaverse, it’s being advocated as the place we’re going to work, socialise and shop. I think people still want to do those experiences in real life.

There’s also a lot of hype around virtual land, which I think doesn’t make sense. Why replicate an existing system based on scarcity and create limited virtual land when there’s no reason for that in the digital world?

The hype around virtual reality is basically trying to replicate the same economic systems that we have, just into the digital world. Where those who are the first to buy that land are going to be the landlords of the future. So that’s a warning sign that we’ve to take note.

Evy, CryptoJobs

I agree about the hype around the Metaverse with sales of virtual land parcels and “jpeg” NFTs. Why duplicate something that already exists? What’s different between what we can already do today?

I find that the difference is that you can contribute directly to things that is not immediately accessible to you.

So, what ReeFi is doing, seems to be quite an interesting application of the Metaverse. If I’m not going to travel to Australia to see the Great Barrier Reef in person, and I really want to contribute to environment conservation, it seems to be a good way to do something and experience what that looks like.

I think this ties in to our next question related to tokenomics. For example, in ReeFi, I know you have a token to get people to propose and vote for things to conserve on. How does that look like?

How can we use tokens to create real value?

Evy, CryptoJobs

But before we further explore how tokens can create real value, let me quickly compare between today’s economy and the Web3 economy.

Traditional economic model:

  • Companies create great products that users pay for.
  • The money earned from customers is then paid out to employees as salaries, who then deposit into banks.
  • Central Banks & governments take that money to give out to borrowers, and they also decide and adjust interest rates.
  • This can increase or lower prices etc, starting another cycle.

Web3’s economic model:

  • It seems to be driven by tokens that have certain utility, or to be clear – different tokens have different purposes in your platform or ecosystem.
  • For example, initial sale ICOs are used to incentivise people to use your platform, to be your advocate.
  • The goal is to get them to be sticky to the ecosystem.
  • However, instead of using the tokens as a digital currency, people buy the tokens, then sell it to convert into cash.
  • This becomes more speculative – resulting in the booms and busts happening today.

How can tokens in a Web3 economy or virtual world, be used to create real value?

David, ReeFi

There are a few ways in ReeFi.

Firstly, we divide reef into patches of reef which people can take ownership of, and access a range of experiences from the the metaverse to mobile apps to learn about the reef.

The way we tokenise the reef is focused on functionality; giving something that is tangible.

It’s different from what has been done today. In a lot of cases, people buy tokens like NFTs from BAYC or DAOs, to get exclusive access and merchandise.

There’s usually nothing tangible. What’s being sold is really the promise in the future, which is not really solid. That’s why there’s a lot of hype that tends to crash and disappoint.

What we’re proposing is that with each token you get, besides getting a fun, educational & entertaining virtual experience, you’re giving real value by helping to fund conservation and survey work to continually update data of the reef.

There’s a symbiotic relationship between what you put in and what you get out of it.

We’re trying to avoid what Haddar mentioned, where the early adopters who buy become the landlords of the future. Instead, we’re hoping to keep it accessible for everyone by intentionally keeping the price down. It’s possible because the Great Barrier Reef is big, so there’s going to be a huge portion of tokens that people can get.

Hadar, GoodDollar

Value is created when we affect something in the real world. In ReeFi’s case, you can make the environment and reef better, or even educate people. It can be tangible or intangible, but it has to happen in the real world.

The virtual world can be a proxy for that. Reef hectares is probably going to be larger than most virtual lands out there. But as long as people who are buying virtual reef land are actually supporting and making change to real world and creating real value, then it’s not speculative.

Then there’s no problem problem if they buy an NFT and the value rises, because they created real-world value for everyone to enjoy. The whole human society is now “wealthier” or better, as a result.

When you talk about speculation, it’s because people are just buying and selling tokens in the virtual world, and none of that value from the project translates to real world.

For example, Bitcoin’s value may keep rising because many people buy it, but there’s not much direct improvement that bitcoin has done to our society. It’s not sustainable.

If we are to design a sustainable economy that’s not susceptible to speculation, we have to take that value and invest back into real products and services.

The project can act as the central bank to print more tokens to fund building better things for that project. It’s less susceptible to speculation because the project has grown in reality, not just in the virtual economy.

If we are to design a sustainable economy that’s not susceptible to speculation, whatever you do in the virtual world, should ideally create real value in the real world, to back into real goods and services. Otherwise it’s just unsustainable speculation.

What are governing mechanisms to make sure that there are no bad players gaming the system?

Fair voting mechanisms not based on how much you pay

Hadar, GoodDollar

Every project still needs some kind of governance. The question is who decides what the government does, what’s the mechanism behind behind the governance. If decision making is decentralised, then it should be fine.

Just because a project is on the blockchain doesn’t mean that it’s decentralised. It depends on who owns the tokens and who controls the governance of that project.

For example, a decentralised project that people can vote for using tokens they’ve bought.

It’s important to think about how it’s going to be governed, when designing the token economy.

Ideally, governance should not be based on what people can buy, because this can be susceptible to corruption since people with more money can simply buy more tokens and make most of the decisions.

Evy, CryptoJobs

So in a sense, we still need some form of centralisation – or better, some convergence of decisions – so every individual in the ecosystem has a say in decision making.

And we need governance mechanisms where no one single player should control an imbalanced amount of decision making power.

David, do you have anything to add about how that looks like for ReeFi?

David, Reefi

Sure. I think, to avoid bad actors, it comes back to utility. True utility, not just a speculative token – so it has natural value, and you won’t see excessive jumps of swings and jumps. We may see a gradual increase or even a decrease, but I don’t think we’ll see huge jumps. This will naturally avoid bad actors.

We don’t plan to put them as an open auction where someone can pay $100, and someone is willing to pay $150. It’ll just get out of control, because of limited supply.

Instead, there will be a large number of tokens and they’ll be released initially at a set price, so that everyone has the ability to get in.

The value in terms of your voting rights and ability to be part of of the community, there’s no real value of holding more than 1. 1 patch = 1 vote, 1000 patches = 1 vote. There should be no incentive to buy out a majority say.

Utilise blockchain’s fungibility for Good

David, Reefi

There’s no patch of reef in the world that looks the same or identical to any other patch of reef in the world.

So, one way we are using the blockchain, or specifically, non-fungible tokens, commonly known as NFTs, is to tokenise 25 million acres of coral reef in the world into individual patches.

Another way we’re using the blockchain, is to create our own fungible tokens – primarily for DeFi, rewarding and incentivising our community.

For example, citizen science where people can check out an unexplored section of the reef in our virtual digital twin, and find as many clownfish as they can.

Once validated, they can be rewarded a proportion of tokens for the work they’ve done. And those token will have real world utility to purchase real world services.

For example, having someone to plant new corals in and around your patch of reef, fixing some coral which is damaged, or even removing something that is killing the reef. It could even be as simple as a 3D model of my patch of reef printed using recycled trash, that I can put on my shelf and show my friends.

I think, as long as there is utility behind what you’re doing in a space, and you are thoughtful and mindful of how you set up systems in place (such as decentralised voting), we can avoid crazy inflations, speculative use of tokens, and bad actors.

How can blockchain’s fungibility & tokens be used to improve financial inequality?

Evy, CryptoJobs

Makes a lot of sense! It seems to be about creating utility in tokens, so it’s not speculative. You do something, and it translates to real world good.

How does GoodDollar apply blockchain’s fungibility/tokens to improve financial inequality?

Hadar, GoodDollar

Our ideology is to give everyone basic income as a stepping stone to achieve his/her personal goals and be productive in society. We think that the disadvantaged poor are less productive because they are pre-occupied with survival.

The way that we use tokens to help, is that everyone can buy Good Dollars. When you buy Good Dollars, they are minted and created out of thin air. But, whatever you buy them with the digital currency, DAI, a stable token, it stays in the reserve, which is a smart contract driven automatic market maker.

The more people buy Good Dollars, the higher the value of Good Dollar. The more they sell, the price will then go lower. You can always redeem them back to their reserve. Good Dollar is not a stable token, and the value can change.

There’s also a reserve ratio. This means that Good Dollar is not backed one-to-one, which allows us to print more Good Dollars. So, everyday, the reserve ratio will be a little bit lower.

We distribute the Good Dollars that we mint, to everyone who registers. And they can use those Good Dollars.

If the value of token rises, it is usually speculative. But now that we print more Good Dollars and give them away to people in need, they will use it to buy real goods and services in the world.

Our end goal is to create real demand for the Good Dollar token, with more people interested in supporting this kind of economy. Once you own Good Dollars, it’s a way for people to earn since more people enter system and the value will be higher. And more people willing to accept Good Dollar in return for goods and services.

Is GoodDollar like a central bank printing Good Dollar tokens and giving it out to people in need?

Hadar, GoodDollar

Yes, we’re sort of like a central bank. Like in the 70s, the dollar in the US was backed by gold. Upi can always redeem your dollars to gold at the Federal Reserve. It’s the same concept where Good Dollar is backed by people that buy with DAI, and Good Dollar is minted, and DAI stays in the reserve.

To earn more Good Dollars, you can do different bounties, participate in the community. Part of the money that’s bring printed will go to the Good DAO, and the DAO will decide how to use those funds to build the system.

For example, today there’s a proposal now is that some of the money that is printed will go to people that save Good Dollar. In the near future, we are going to have grants to build businesses that accept Good Dollar as form of payment.

David, ReeFi

I think you should check out Proof-of-Good DAO. One of the things I really like about what they’re doing – and we intend to be an oracle with them shortly – is that they’re mapping good deeds.

For example, you might be working at a local soup kitchen. There could be a value assigned to this activity, such as how much time, energy, expertise you’ve contributed. This ties in to the whole utility concept, where you’re trading your time, energy and skills for a good reason.

When you’re doing good deeds, it’s not all about getting recognition for what you’re doing, it’s more about helping an organisation you’ve helped to recognise the good things you’ve done. It’s a way to recognise the members in an automated way through Proof-of-Good DAO.

In our case, we might award tokens to people who are participating in the decentralised science projects that we’re running. But we might also have a relationship with Proof-of-Good DAO that says when someone completes X number of hours, or identified X number of clownfishes, they automatically they earn a Proof-of-Good token.

So again, that utility is really valuable. And we see that as an opportunity for people not to be able to buy in and trade dollars for some kind of future value. To make it accessible by keeping the price of the NFT down, and not rewarding people because they’re super skilled or been to the best university or have a huge bank account. Literally giving them the tools and resources to identify different kinds of fish and marine life. And all they need to do is to invest their time either solo or with their family, and that investment of time is then recognised.

Should there be One coin to rule them all, Multi-coin, or None at all?

If money is the root of all evil, won’t attaching a financial value to altruistic deeds attract non-altruistic behaviour? And if so, do we need really need tokens/coins?

Evy, CryptoJobs

My thoughts about the types of tokenomics:

  • One coin: Bitcoin maximalists like Jack Dorsey will say we only need one digital currency, which is Bitcoin.
  • Multi-coin: Means there could be more one coin, where there are different tokens with different utilities. The cons is that we needs synergy between these different tokens, and that’s happening today with bridges. However, bridges are prone to hacks as well (for example, recently crypto bridge Horizon was hacked for US$100m).
  • No coin: If money is the root of all evil, won’t attaching a financial value to good deeds create selfishness? Do we need really need tokens/coins? Adding value to it will make people greedy, and speculation happens?

Tied to “No Coin”, my question is that we do good and give because we want to, out of goodwill. Won’t adding rewards and a financial value make people greedy?

I know that the good thing about tokenomics or the blockchain, is that it helps us to keep track of what people have done, but it might invite bad players who might game the system.

Possibly, people could be rewarded not specifically for what they do, but in other ways?

What are your thoughts on the future of coins/tokens?

David, Reefi.

If we are looking at the future of one coin, many, or none. I think ultimately, the marketplace will decide.

I think it still comes back to the idea of utility. In fact, we’re looking at it now. There’s a huge correction, with high volatility over the last few weeks.

Now, we’re all questioning, where is the utility? Why am I holding 10 ETH? What can I actually buy or do with it? What’s the long term future of holding it?

I believe a few years from now, we’ll see a different landscape. A lot of coins may disappear. There may be some new ones.

I don’t think there is one coin to rule them all; I personally don’t think it’s Bitcoin or Ethereum. My hope is that it’s something a hell of a lot more environmentally friendly. And I definitely think there’s a lot of value in blockchain, and having things clear and transparent on the ledger where everyone can see that. So, players like Algorand and XRP, where the environmental impact is low but the utility is still quite high. There’s a large enough community around to support what’s going on so there seems to be a long term future there, and potentially having our own token which ties into that system.

Hadar, GoodDollar

Something you mentioned about people being greedy if they are rewarded. I don’t think people greedy by nature.

Psychological literature and research show that’s not what people are pursuing. People do enjoy helping others.

I think it all depends on how you design the system, because people play by the rules.

If you change the rules, people will behave differently. How people behave depends on the rules of the system. It doesn’t mean that’s what people like to do.

If these are the rules of the game, then I’m going play it. Otherwise, I’m going to be left out.

David, ReeFi

I would respectfully disagree. I think that humans are fairly selfish by nature. And I think there’s plenty of psychology behind that.

A well known one is the marshmallow experiment. If you offer a 3 year old a marshmallow and tell them that you’re going to be back in 5 minutes with 2 marshmallows if you can wait. Most of them will not wait.

Another example are business boards. They continually look for every opportunity stretch the limit of what they can do legally, and even step slightly into the grey area where it’s illegal, where the risks are low.

Hadar, GoodDollar

Yes, that’s because it’s the design of the system, that’s why many businesses are focused on pursuing profit. If you look at NGOs and cooperatives, they do not act as selfish because the rules there are different.

Evy, CryptoJobs

I actually agree to both of your points. What I think is that there are different types of people. Some people are more empathetic and less greedy, but some are not.

But I agree with what Hadar mentioned, that it’s really the design of the systems. For example, how do we make sure that tokens can encourage people to do the right thing?

Hadar shared with us in another past AMA about DeFi, that blockchain is really an opportunity for us to create new systems that’s very different from what’s happening today.

So today, greedy corporations are the ones who are winning and even destroying the environment, such as the Great Barrier Reef.

And I feel that with blockchain, we can create better worlds where people are driven by the right incentives, to do the right thing.

And I think that what ReeFi is doing to make this happen, is really a great step in this direction.

Any last shoutout or tips you’d like to share?

Hadar, GoodDollar

Everyone should go and research into projects like ReeFi that are doing regenerative finance (ReFi).

Hopefully ReFi will be something that will replace DeFi, based on what we need to do now, towards the environment and sustainability.

David, ReeFi

I agree, there are a lot of things in the ReFi space. Do your homework, have a questioning mindset.

Some stuff might sound great on the outset, but try to probe and ask questions to try and understand the net impact of what you’re investing your time and money.

For example, there may be some projects that sound really great, you’ve taken plastics out of the ocean.

Try to check how how much money was spent doing that, how much as a percentage of the plastics in the oceans actually came out, how much benefit did that have to the ocean really?

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