Economic Model Overview

A new way of providing information goods

The Olas economic model design is based on five assumptions:

  1. Information in the digital age is one of the rare types of good not particularly well served by fully private markets. This is why the media industry has been struggling for over a decade.

  2. Even if private markets could adequately supply it, it's much more preferable for it to be subsidised as a public good because unlike most other goods the payoff from widespread access to information vastly exceeds the cost of complete subsidisation.

  3. Information platforms should not be governed by human hierarchies because those hierarchies will inevitably introduce truth-destroying politics and biases even if the platform is non-profit.

  4. Charity will be a viable economic model in the coming decentralised internet with native payments infrastructure that will enable single click micropayments.

  5. Public good subsidies are much more effective when subjected to market forces.

Information is a Natural Public Good

Information is easy to propagate and consequently difficult to suppress. This is especially the case in the modern digital world when reproducing information is a trivial task that involves little skill and know-how. Consequently information is best viewed as a natural public good. Private business models have responded to this reality by either offering information for free and monetising it with advertising or increasingly by using subscriptions to gate access to it.

Advertising has known deleterious effects on the quality of information output in the internet age. It is the click rather than the content that generates revenue and newspapers optimise accordingly.

Subscriptions attempt to create artificial scarcity in digital information by gating access to their content. However the subscriber base of these news and science platforms tends to be a narrow section of society. To best cater to this market, the suppliers of information are selected from this section of society too. A situation - best described as audience capture - has been created where groupthink is endemic and there is often ignorance of the perspective of large parts of the rest of society. These too greatly affects the quality of information output if not as severely as advertising does.

Even if undesirable, we don't view subscriptions as a viable model in the impending decentralised internet (web 3). There are already archive websites the younger more tech savvy generation use to circumvent paywalls and coordinating to share subscriptions, articles and podcasts will become even more trivial in web 3. Combatting copyright infringments will become near impossible given the difficulties in censoring decentralised networks.

Natural Public Goods are best Subsidised and Offered for Free

It is very well-documented that access to information powers economic growth. Constraining its supply is therefore unsurprisingly damaging to growth. Since it is comparatively cheap to subsidise and trivial to do so in a way that increases competition, it is an ideal candidate to supply as a public rather than private good. Subsidies of naturally private goods tend to reduce quality as it is near impossible to subsidise them without destroying the competitive forces that increase quality and reduce cost. On the other hand, subsidising information and offering it for free is almost certain to be value additive given how it is essentially free to share and reproduce and how society benefits from this knowledge transfer.

Truly Ownerless Platforms are now Possible

When information is supplied by for-profit entities, there is an unavoidable conflict of interest between making money and supplying accurate and high quality information. Another issue is that owners often have other economic interests that are furthered using the platform at the expense of the accuracy of the output.

Even absent economic interests, ideology is ever present in human groups. When there are hierarchical structures it is inevitable people will use them to further their ideas at the expense of competing ones. This is damaging to the marketplace of ideas that brings us incrementally better information.

What is needed is a truly ownerless non-hierarchical platform to avoid these issues. Fortunately, the advent of blockchain technology enables such a thing. Developers can build applications and release them on censorship-resistant decentralised computing networks. The decentralised applications (dApps) persist beyond the control of any single administrator, including if designed correctly, their creators. This paradigm brings enormous challenges in software and mechanism design but the possibility now exists none-the-less.

Another way blockchains have changed the game is via tokenisation. In order for dApps to be trusted their code must be open source and examinable by all given their is nobody at the helm and consequently no recourse if anything goes wrong. Since open source code is a public good free for anyone to replicate, there has rarely been economic incentive to create this type of software. For that reason the internet is dominate by proprietary platforms with open source relegated to the domain of hobbyists and ideologues.

Tokenisation has completely turned this situation on its head by attaching native tokens to open source decentralised applications. If a dApp proves popular, the value of the token, if designed on sound economics, can appreciate much like the stock of a successful business does. This final piece of the jigsaw means that not only makes ownerless platforms possible, they are now viable competitors to proprietary platforms. In fact they possess economic incentives advantages that proprietary platforms don't.

Donations are Becoming a Viable Economic Model

On account of blockchain techonolgy subsidies are becoming a viable alternative to advertising. The primary reason for this is that blockchain protocols have heralded the arrival of native payments infrastructure for the internet. This means people can make payments to each other without having to go through payments intermediaries. Peer-to-peer payments on blockchains more resemble cash payments than they do current intermediated digital payments systems. Since these intermediaries are removed from the equation, the costs associated with using them do too. It is these costs that have rendered low value payments (micropayments) on the internet uneconomical. However, they become possible once blockchains can be scaled to meet the throughput demands of internet-scale usage. These scaling improvements have been in the pipeline for some years with some now in production with others almost upon us. Consequently, the possibilty of internet micropayments is on the horizon.

Another benefit of blockchain technology in this regard is that it also enables people to fundraise without intermediaries. These intermediaries, for good reason, are heavily regulated to prevent fraud or abuse of trust with donor money. This regulation, in turn, creates a lot of cost and friction that can be removed from the equation in a peer-to-peer system with decentralised fraud prevention systems. The result is that money can flow to those creating public goods far more easily and efficiently.

Charity Benefits from Competition

In their efforts to maintain oversight of the charity industry, governments tend to only allow a single entity for each sector. This maximises their ability to oversee that sector because if there were numerous charities in each sector, it'd be much more difficult to keep tabs on them all. Again, this is an entirely rational strategy that no doubt reduces fraud in the charities sector. However it comes with a great cost too. It deprives each sector of the phenomenon that is by far the best mechanism for achieving higher quality output and value for money: Market competition.

On an ownerless platform, where quality control and fraud prevention must necessarily come from the crowd, it's no greater burden monitoring thousands of people than it is one person. Anyone seeking to raise money must submit to mechanisms designed to reward good behaviours while punishing bad ones. Detailed information on these mechanisms can be found throughout these docs.

The beauty of this reality is that public goods funding on a system like Olas can be subject to market forces even if a purely private market is ill-suited to providing public goods. Competitions can be established so people can compete for donations and past performance on the system can be tracked so that donors can use this information to donate to those that provide the best products.

Economic Model Summary

  1. Development of the decentralised platform will be funded by tokenisation. It will have a native currency called Olas. A small percentage of each transaction on the platform will be burned to reduce supply, making Olas an attractive investment if the platform is popular.

  2. The supply of information will also be initially subsidised by currency issuance but then via donations after a few years. Donations can be made through specially designed funding competitions to pre-fund the work of contributors and can also come after work has been published in the form of tips. There will be no paywall or advertising. The information is free to all and donation is a choice.

  3. All information will be subject to market forces that will provide a score on its quality/accuracy. Market designs are specifically tailored to the type of information they're adjuticating on. Payouts are entirely dependent on performance in these markets.

  4. A reputation score will keep track of a contributor's past performance in the markets. This score will in turn inform donors participating in future fundraising rounds.

  5. Money returned to the system by below par work will be re-used in future funding competitions.

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