Comparing. Forces Analysis

Next: Invariables and summary.

Forces that Govern Goods

Let’s see how the principles of decentralized world align with forces that govern goods discussed here.

Remember that model is not a perfect list, as it is originally though for commons, and there are five other classes of goods. But for the lack of better or more fine-grained list, we’ll use it.

Decentralised model

• Reward for violation. Decentralisation distributes large honeypots that are the norm in current centralised world into a multitude of smaller lots. Consistent avoidance of monocultures and insisting that parallel solutions for the same technical need are (well, *should be* ) employed prevents large rewards as there is no common technology whose security fault would open such opportunities. On the other hand successful global projects can have much bigger rewards than is possible on national level.

• Cost of violation. The fact that rules are programmable and each project can have their own smart contracts allows for fast experimentation to find the right incentives and disincentives. The general rule for communities is that negative feedback should be graduated, starting with small consequences first, thus allowing people to change their behaviour and be accepted back into the community. Smart contracts are rigid and do not easily yield to such nuanced approach but on the other hand most of preparatory work in web3 happens on discussion boards where the people most invested into it set the tone and culture.

• Effectiveness of monitoring. Monitoring should be much easier because blockchains are public and immutable (cannot change later). Stuff is out in the public by default.

• Reward for monitoring. Bugs’ bounties and other such mechanisms crowdsource monitoring with clear benefits to participants, *if* they are implemented.

• Skin in the game. It’s easy to join and leave projects as such, but contributors are rewarded with project tokens. All participants in a project hold its token. This means that if someone attacks it and the token value goes down, everyone loses. This means all participants have interest in defending the project (unless an external party pays more for a group of small-skin members).

• Similarity of interest. Projects are by definition opt-in. You join the projects that you match your interests and become a contributor. In any given area there will be multiple alternatives with different governance models and slightly different approaches. People join the team where match with their interests is biggest and where they feel the reward is fairest.

• Number of participants is large diluting the skin-in-the-game effect. This is the nature of common initiatives by definition.

• Shared norms. As members are from all ove the world, the norms will differ. Projects code their norms into the smart contracts at least to some degree and well-functioning projects will develop also informal norms. As there will be multiple alternatives, people are free to join the ones that feel best for them.

Centralised Model

Using same framework against the current model you get the following picture:

• Reward for violation can be smaller when compared to big global web3 projects as most nations by definition are smaller than global projects but when there are many competing decentralised projects naturally limit this. There is however a special case. In modern societies large share of the gross domestic product goes through the state as taxes. That’s an enormous treasure trove worth going for. Diverting increasing amount of these financial flows to political friends and own voters is called “state capture” and if done intelligently, quite legal. In the latter case there is no cost of violation.

• Effectiveness of monitoring is usually fairly good, but growing and increasingly complex legal frameworks are open to interpretation and easily contain loopholes.

• Reward for monitoring is in place as permanent organisations are hired to do it.

• Skin in the game. As in a nation state everyone shares the same physical country, there is strong skin-in-the-game compared with anonymised, global crypto-communities. However, trend is towards larger units where many nation states join supranational organisations and jointly create legislation or sign complex trading contracts with long term effects. In the latter case the shared interests are diminished or no longer present.

• Shared norms are also true largely, except in larger international arrangements that are becoming more common.

• Similarity of interests holds except the social media has during past decade greatly increased tribalism.