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Executive Summary

Token Curated Registries (TCRs) are an idea that gained a fair amount of traction within the cryptocurrency community throughout late 2017 and early 2018. While the idea has yet to be implemented at any meaningful scale, there are a few TCRs live on the Ethereum mainnet and over a dozen projects are considering building TCRs in some form.

TCR Design

In its most basic form, a TCR is a list whose items are decided upon by a set of token holders who have staked deposits in a one-token-one-vote system. In many TCR designs, a user’s tokens can be slashed—aka programmatically and automatically confiscated—under some set of (presumably bad) circumstances. Users who propose that an item be included in, excluded from, or removed from a list must stake a deposit, or in other words, put their money where their mouth is.

Most TCRs have three types of participants: consumers, candidates, and token holders.

Consumers are those who utilize the lists for information discovery

Candidates are those who wish to be included on the list

Token holders are those who participate in list curation

In addition to the three major categories of participants, each TCR has a native token. The native token of the TCR represents ownership in the curation rights of the list being generated. Token holders can vote on many things: what is included in the registry, who can be added and removed and when, who wins in the case of disputes, what the system parameters are, and more.

Advantages of TCRs:

Decentralized Curation — The primary proposed benefit of TCRs is that the curation process becomes decentralized. Instead of having a single company, individual, or organization that controls the list, TCRs empower a decentralized group of actors to do so. Censorship Resistance — TCRs, by their very nature, offer a form of censorship resistance that centralized services cannot. Transparency — TCRs record all actions and decisions on a blockchain, so there is a clear audit trail of every decision that was made. The entire history of the list, with its various additions and removals, is recorded. Up-to-date Information — TCRs offer incentives to keep curators engaged such that the information in the list is curated on an ongoing basis. Rather than creating a single list that is then published in its final form, TCRs are ongoing lists that can change as new information is incorporated. Rewarding Moderators — In other models (Yelp, for example), any user can participate, but these users aren’t rewarded for their work. Only a small set of users actually participate, and their inputs are often subjective and unreliable. Because participation doesn’t have a cost, the system can easily be gamed. Economic Incentives and Penalties — Existing curation models don’t always give participants economic incentives. In some cases, list providers are motivated to increase page views in order to earn more from advertisers. These incentives don’t always directly result in high-quality curation.

Disadvantages of TCRs:

The foundational assumption of TCRs is that token holders will be incentivized to honestly curate a high-quality list because doing so will cause the value of their tokens to increase. However, in many instances this fundamental assumption fails in the real world. The dynamics of TCRs do not necessarily incentivize high-quality curation. Rather, they incentivize token holders to act in a way that maximizes the value of their holdings and earnings. Further, there are many scenarios in which TCRs are objectively worse than centralized list-making services.

Open Market Competition — One can reasonably argue that decentralized list curation offers almost no tangible benefit over centralized list curation given open market competition among centralized list providers. Addressing Subjectivity and Unobservable Truths — Another major issue with TCRs is that they can only function when the information being voted on is publicly observable, objective, and easy to verify. For token holders, the rational strategy is not to vote on the candidates that they personally find to be of the highest quality, but rather the candidates that they think other voters will perceive to be of the highest quality. Token Pricing and Customer Acquisition One major issue with TCRs is that the price of entry must be high enough to discourage bad candidates, while also being low enough to not price out honest entrants entirely. Utility of Public Reputations When consumers seek lists, one of the primary attributes they assess is the public reputation of the entity providing the list. This is one of the main reasons why centralized list providers are able to attract consumers—they build a public reputation for providing high-quality signals over an extended period of time.

Conclusion

TCRs are nascent and experimental. The few existing implementations are in their earliest stages, and leave critical questions unanswered. With a dozen or more TCR implementations slated to debut within the next year, we’ll soon see market stress test core TCR mechanics. We expect that most TCRs will be unable to compete with centralized alternatives. We also expect to see some TCRs successfully attacked by malicious actors. However, we believe it is possible that we will see some successful niche TCR implementations that function as intended and provide robust information signals.

In this analysis, we’ll examine Token Curated Registries in-depth, looking at the features, tradeoffs, attack vectors, and use cases.

*Disclosure:

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