Why Community Development is the new Technology Development for Tokenized-Networks

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The blockchain ecosystem has a problem...

Blockchains have created a great use-case for fundraising, allowing early-stage projects to gain the backing of early adopters who get to have a direct say in which projects should be built. This has created a fruitful environment for blockchain developers, whose incentives are now aligned with launching products and protocols that will operate on top of these tokens and hopefully appreciate in value.

The problem is, that after the token sale, incentives start to diverge between the various token stakeholders.

Day-1 liquidity — can be a double-edged sword which brings with it a new set of challenges where project stakeholders can trade in and out of a project’s token at the drop of a hat, causing less long-term loyalty or ‘skin in the game’. It’s hard to imagine a company like Facebook or Amazon in the early days being able to think long term with hundreds or thousands of investors hungry for 10–100x returns bugging them on Telegram. Token pre-sales — are quickly moving towards replacing public crowd-sales. These rise of these discounted private ‘pre-sales’ means that a smaller and smaller number of investors are getting access to early tokens, causing the total amount of stakeholders to steadily decrease as a result. This can be a problem, even for the early pre-sale investors. Incentive mis-alignment — Outside of miners, who incentives are designed to maintain the validity of the chain on an on-going basis, incentives for most other stakeholders are not aligned behind project maintenance and improvement. This is likely why we see increasing forking of existing projects, leading to fragmentation of core protocol developer talent and in-fighting and fracturing of existing communities.

How did we get here?

In the beginning cypher punks and libertarians first became interested in the technology because of a passion for privacy enabled by cryptography and the impact that it can have towards building a more decentralized internet following the crash of the financial system in 2008. The run up in prices in turn in turn attracted new waves of participants including technology entrepreneurs, speculators, wall street arbitrageurs and main-street investors looking to make a quick buck.

From 2009 all the way to sometime around 2014 when Ethereum launched it’s own ICO, technology development was the primary activity of a new blockchain project, and for good reason. Building a robust blockchain-based protocol is technically challenging and there were only a small number of engineers in the world who possessed the required skill set to create one.

Great Technology alone is not enough…

Fast forward to present day: For technology entrepreneurs and protocol developers, it can be tempting to get sucked into the trap of focusing too much on building the core technology itself. This is true of technology-driven startups in general and not just blockchain-based ones.

The harsh reality is that technology alone is not enough…what it really takes to sustain a project is a thriving community which will be able to evangelize and carry the project forward without the involvement of the core team.

Bitcoin itself is the canonical example of a project started by a single pseudonymous individual, which has been carried on by it’s community based on the power of it’s original design and incentive mechanism.

Some have even gone as far to state that:

Cryptocurrencies are gauged by the size of their market cap. It’s a crude reckoner, but it’s good enough for most purposes. But what about projects that have yet to issue their coins or host their token sale? Increasingly, investors are turning to one metric that’s hard to fake and indicative of widespread support — Telegram followers. — source

Community Development is not enough…

How-ever: Today, as more and more projects flood the space, it’s becoming clear that great technology alone isn’t enough to support a breakthrough project to continue to grow and sustain.

The key lesson of cryptonomics comes from aligning incentives between all levels of project stakeholders in order to allow the overall system to flourish.

Simply put, a community must have skin in the game to in order to participate and make meaningful contributions to a project’s success. Projects that miss this point entirely, either by Airdropping tokens (the opposite of skin in the game) on new participants shouldn’t be surprised when these short-term hacks don’t cause long-term engagement.

Some interesting recent examples of projects who have aimed to widely distribute their token, beyond an initial set of financial backers, include:

Nano (formerly RaiBlocks) —a relatively fairly distributed token, which because of it’s approach to mining was able to get a broad distribution of token holders early on. Eco — which seeks to create a verified network of universities to help build an evenly distributed and ‘cooperative financial infrastructure that is easy-to-use and energy efficient’.

A shift in mindset

Customer < Investor < Contributor

We are now entering the 3rd inning of blockchain development. For the next generation of protocols to be successful, project creators and developers need to shift their view from looking at token holders as customers or even as investors, but as skilled contributors to their projects. Simply put:

Your community must have skin in the game to in order to participate and make meaningful contributions.

It’s the opinion of the author that going forward we’ll start seeing a flourishing of new incentive mechanisms to engage new project stakeholders to contributing in whichever way they are best suited to, either through their professional skills, network & connections, opinions & feedback and more.

As a result of this shift, we’ll see an explosion in the broadening of the definition of what a project ‘contributer’ means and a flourishing of new projects that are able to best leverage the power of their communities to help them build and grow their projects.

About the Author

Adam Breckler is the Founder of Prism Labs, makers of Prism.IO, a Community Development Platform built for Tokenized Networks.

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