# Realigning Incentives for Nonprofits with Ethereum by Griff Green (Devcon5)

- Speakers: [Griff Green](https://streameth.org/speakers/griff-green)
- Channel: [Devcon](https://streameth.org/devcon)
- Date: 2020-10-09
- Duration: 26:09
- Topics: blockchain, smart contracts, distributed ledger, ethereum
- Watch: https://streameth.org/watch/yt-UzzE87bESFY
- YouTube: https://www.youtube.com/watch?v=UzzE87bESFY

## Description

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https://archive.devcon.org/archive/watch/5/realigning-incentives-for-nonprofits-with-ethereum

The Nonprofit space is a victim of our incomplete economic model. Our current economy does a great job at assigning value to individual wants and needs, but shared resources (infrastructure, the environment, public goods, etc) and taking care of the less fortunate members in our society are not assigned any value at all. Instead, when entrepreneurs do value calculations (profit projections) they are incentivized to extract everything they can from "externalities" because that improves the numbers on their spreadsheet. This is an impossible battle to win for the nonprofit world. Nonprofits will not out-compete for-profit companies when the economic model is working against them. We need to build new economic models around causes, so that we can actually attribute value to these "externalities" appropriately. I will introduce the various tools we have in the Ethereum space: Harberger Tax, Token Bonding Curves, DAO Governance Models, Escrows, Traceable donations, etc and how they can be used to build parallel economic models to fill the gaps in the current system. We have the tools to design, simulate, test and iterate solutions that can level the playing field for nonprofits! Let's get to work!

Speaker(s): Griff Green
Skill level: Beginner
Track: Society and Systems
Keywords: incentives, nonprofits, general

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Devcon is the Ethereum conference for developers, researchers, thinkers, and makers. 
Devcon 5 was held in Osaka, Japan on Oct 8 - 11, 2019.
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## Transcript

how's it going guys konnichiwa it's really nice to be here in Japan thank you for coming I'm gonna talk about aligning ascent incentives around funding open source I have been committed by the way my name is Griff green and I've been committed to the etherium Commons for about three years I focused almost all of my efforts on contributing to the shared resources of this economy and it's really fun but it's also really difficult it's really hard to find sustainable funding for open source projects in general and that's why I'm kind of putting all these projects on hold of I got too much on my plate and I'm really trying to put it on pause so I can focus on the common stack because the mission behind the common stack I think can help all of us on our open-source endeavors the goal is to bring continuous funding to open source projects we want to build a foundation of tooling and documentation so that everyone can build decentralized alternatives to solve their own unique situations because open source is actually the same as nonprofits they have the same issues there it's a tragedy that comments everyone is working really hard to find a reason for people to give them money so they can produce value and it's it's almost impossible because there's no incentives for people to give you money and it's sad right like you have to beg for grants find donors who are acting out their own best against their own best interest to fund the common good contributors are overworked and underpaid and in the end if you actually want to create a business model you usually have to sacrifice your ideals and sellout you know create some piece of closed-source software that you can sell to an individual or provide a service for someone and this is the same situation that happens in the nonprofit space because well you know open source is a non-profit and what's interesting is what is the difference between a non-profit and the for-profit anyway they all like a large nonprofit House employees it has assets it has an organizational structure has a bunch of people who are committed to working together to produce value for everyone right and that's where it's a little bit different nonprofits are producing value for shared resources they're producing value for a community whereas for profits can find a way to satisfy an individual want or need and this is a problem with our current economic models the default economic model as it stands today only values people who satisfy individual wants and needs and that means that if you are providing something for the common good or just writing open source code that anyone can fork in a permission this way you suffer from free-rider problems people can get the value without contributing and that sucks you know and what's even worse though is that for profits have an incentive to exploit the externalities of our economic models as in for profits have a huge incentive to take your code and run with it and make a bunch of money and not even contribute upstream changes like they don't even like add any value to the underlying good they just keep a closed source and this is also present it's really easy to see in the for-profit space where it's like if you have a factory on a river everyone wants the river to be clean even the people that own the factory they want a clean River no one wants a polluted river but the factory has to look at their spreadsheet and their spreadsheet says that if they pay money to get rid of their pollution ethically they'll it'll hurt their bottom line so they actually have a fiduciary duty to pollute that river and that's just [ __ ] douchey oh and then to not drop the f-bomb oh well well and this is the case with everything it's whether it's a community well or a water bottling facility if you're developing Linux or you're working for Apple if you're providing a common good you you are going to probably be exploited by a for-profit company if it can work for their business model and Bakhtin's have actually solved this I know Elinor Ostrom would kind of roll her eyes at me because you know the tragedy Commons isn't that big of a deal there's ways to get around it without blockchains but man the incentive alignment of blockchain technology helps a lot and if you look at Bitcoin just right you can actually see it's providing a common good for all of humanity almost all block chains are they've created their own economy to incentivize contributions to the public good in Bitcoin it's a global payment system and curecoin they're the proof of work is folding proteins for cancer research right this that there's there's ways that we can start using the incentive models that blockchain technology provides basically creating micro economies that can incentivize properly providing value through shared resources and that's what we're trying to do with the common stack we're trying to create a continuous funding stream for open source and we can use blockchain incentives alignment tools to actually incentivize contributions to physical world open source applications we're calling this the cyber physical Commons because it's bridging that gap between the blockchain space and actual real world applications now it's a little complicated I'm not gonna lie we have a lot of work to do and let me go extreme in that black box okay we have a lot of work to do and it's not really that easy to just slap a bonding curve on a dhow and then say hey we're done we actually need to do a lot of simulation work because these are complex systems they're complex pieces of infrastructure that need to be well designed think of building a bridge if you build a bridge you need to do a lot of math upfront you need to simulate that bridge you need to take all the best practices and learnings that have come to you actually formalize the designs and math simulate and then implement feedback into the simulations when your implementation tation details change and then build the bridge right you can't just build the bridge and then make a pull request and expect everything's gonna work out right and that's that's how we often fall into designing and working with blockchain systems we write a white paper and we just go for it and that works when you're building websites and and things that you can just make a pull request for but it doesn't work for a public infrastructure and so we're really excited about using CAD cad to design our system and use use the open source nature of CAD cad simulation tool so that everyone can take our designs tweak them and see if they'll work for their application I wish I had more time to talk about CAD cad it's a really powerful tool really if you have any desires to simulate your systems and actually allow other people to use your simulations and design their own systems CAD CAD is the answer so check out block science and all their work there but what we're using it for is to build a four layer system that will solve the continuous funding issues that open-source projects often have and I'm gonna I'm a little behind so I need to just speed through this but in the end we're taking these different tools and we're we're going to take one at a time and implement and design them but we want to build the community around having lots of different options on the shelf because there's not one size fits all governance solution there's you know between conviction voting which is designed specifically for a proposal framework or quadratic voting or future are key depending on your system you may want to use one thing or another so the comments tax hopes to module module lies all these different components so you can kind of plug and play we are really loving what's going on with mullick and meta cartel they're trying to address the same problems that we are they want to bring they want to solve the issues of funding for open source development into the theorem space the problem is that they're not sustainable they still suffer from the same incentive alignment issue they require donors to be self-sacrificing and lose money to support the common good and that but there's there we're heading in the right direction especially culturally I have to give it to Amin and Peter and the other of McDowell leaders they have really nailed the way that you bring a community together there's a lot of a lot of us we're building revolutionary tech we don't know the right way to do it we really have to reinvent some things for boxing tech but we probably don't need to reinvent the wheel for how we order organize ourselves this is a quote I used to hear vacuum the chemical engineering days a couple of months in the laboratory can frequently save a couple hours in the library and that's pretty much how we organize ourselves in the blocking space and we can do better there's so many there's so many opportunities to learn from other people's research and insider outside our organizations or outside our normal community just a few like things that you guys can look up and then of course inside our community we really need to also especially look at the fails the failures the Dowell argon co-op and other ways that these communities have like collapsed on themselves the common stack is excited to kind of lead the community around putting all this information in one place creating an open-source weekly of how to Dowe and really nail down the cultural needs of these communities there's a lot of issues that need to be addressed and need to be explicitly told to community leaders but I'm going to focus on one that's that I think is sadly mmm not really on the forefront of our minds called the trust see every decentralized network that has succeeded has actually started with a trusted seed and that may be like surprising because you think oh it's a decentralized network right well these decentralized economies don't will not work without the initial the people who are starting them carry more about the value that the network is producing then short term profits if if all they care about is making money they'll just dump their coin obviously right like if Satoshi wasn't a benevolent trusted whale bitcoin would have failed in 2011 he would have cashed out made a million dollars and it would have been done we wouldn't be here today the etherium foundation same thing right they we know they have a mandate to actually provide value to the theorem community and the countless failed [ __ ] coins they're the exact opposite you know they don't care about the underlying value of the community that's why you don't buy them because you can see they're just trying to make money and so if you if they don't care about the value the network is producing their economy isn't going to thrive but the trusted seed doesn't have to last forever if you once you get to the point like if Satoshi sold all his bitcoins now Bitcoin would it would it would go on yeah the price of tank or whatever but they've they've had they have a clear direction Bitcoin is a store of value but a few years ago they didn't really have a well-defined mission in scope there were some people that said it was a medium of exchange some people that said it was a store of value and when it came down to it they had to fork because that wasn't clearly defined for the community and that's that's a huge problem but so if but if Satoshi was around he would have just said won and everyone would have went with it and so you have to for the trusted seed to exit and for the community to continue on you just have to define these certain things I don't have enough time to really dive into it because I do want some questions but that's the cultural side if we want to do this there's also the technical side and we're a hair at DEFCON that's probably people want to hear about the cool like incentive alignment tools that we have at our disposal today so camp you have to remember incentive alignment doesn't solve the tragedy of the Commons it doesn't fix anything that's an interface for people to connect to your network with and to not burn out there's also the work layer this is where people actually do work in in Bitcoin it's a proof-of-work right they're actually sharing their computing power in in the common stack because we're doing real-world applications it's more about proposals and escrows and accountability so that you know the work is going to get done and then of course there's the decision layer the governance layer where you have to actually decide which proposals are we going to choose and the monitoring layer which is where you actually can understand the health of the system where people can be informed about what's going on you know is this is this thing working do we need to change something we need constant monitoring for these Commons to work but I'm going to focus on the incentive layer that's the whole point of this talk I see four main solutions for incentivizing the Commons within the blockchain space the one that most people can think of is initial allocation right the the pre mine the the founders reward this is actually it's a great solution it works as long as you add vesting or some kind of long-term sustainable incentivization if you just give them tokens at the beginning you'll see huge problems because they will they'll be in the same situation where they don't have this constant incentive and constant reward for doing good they they'll burn out it's like hey I got all this money why am I not enjoying myself in Hawaii or something inflation is the first one that's the one Bitcoin uses and the one most blockchains use including aetherium and and it's it's solid but it doesn't have that initial seed fund if you do a what they call a fair a fair release of like a blockchain like a aetherium really nailed it had a seed funding round and then they had continuous funding through inflation and that's what we want to do with token bonding curves it can provide that same kind of scenario but before I get there let's talk about harberger tax harbor attacks is a really interesting solution for incentivizing the Commons how many people have actually heard of this good hand race okay so Harbor attack and not many people let me just say that for the cameras however attacks is pretty interesting instead of owning something and hatta lean right you actually if you want to buy this artwork is always on sale which was the first implementation of this on etherium you have to buy it from someone else who set the price and then you set the price yourself whatever price you set you're gonna pay a constant tax every block a small amount of whatever the deposit is what ether or dye will end up being allocated to the underlying Commons for this artwork is always on sale it just goes to Simon who is that who's the artist that created it but he now has a constant stream of funding that can incentivize him to create more art and death is implementing it so that you can actually be the the person who sells the crypto in a certain area and then if someone else comes in and buys it from you then they're the the main producer or the main person to go to to buy and sell crypto with and that's and and wild cards is doing it in the way that we're really excited about where they're funding a support for endangered species by little tradable collector cards so you buy a collector card it's maybe it's a gorilla named Vitalik and then you set the price and you have a constant stream of funds going to support saving the gorillas I wish I had I really wish I had more time but harberger tax is an amazing tool and I really I give it justice in the one minute I had to do so go check it out there's a lot of research on it that it's very promising but what most people are working on in this space or token bonding curves is a little bit more developed there's lots of actual implementations the biggest one being Bank or that's what a lot of these groups use although a few people are starting to roll their own token bonding occurs and to really describe what a token bonding curve is I'll use the one I'll use the one that we're actually building which we're calling the Augmented bonding curve so a bonding curve at its core is just a smart contract and you could think of it as representing ownership in the community and if it's just a pure bonding curve you can buy the tokens whenever you want from the smart contract and they will be created and when you want to sell the tokens they'll be destroyed and the price of that token is determined by the amount of collateral in the pool this usually correlates the actual supply of the token but it doesn't have to so when you are buying or selling into this curve the price is determined by how much collateral is in the pool and this allows you to start this economy for micro economies there's this huge issue that token bonding curve solves which is liquidity within small market cap points if you have to if you want to create a token system for your community you need and you don't use the token bonding trip you actually have to sell it on the open market you have to find someone to buy your token and there's not always a buyer and if there's not a buyer the tokens worth nothing and so if it's a small market thing if you're trying to incentivize a small open source project you're probably not going to have very many buyers and sellers and are gonna have a liquid market well with the token bonding curve you can have it's a one sided market the smart contract will always buy and will always sell tokens and can really scale with the supply and demand of the market what we do in music planning curve is we take this this pure bonding curve and we add another we basically added Dow to it and we it we implement almost like taxation into this economy so you are opting in to supporting the common good and you have this little micro economy that really cares about providing this open-source software we're actually going to use it first to incentivize token engineering research and unite the community around developing more tools like this next year I hope that I don't have to just talk about Augmented bonding curves and harberger tax I want to see five ten other ideas that can come out and we just need these token engineers to stop to be able to avoid having to sell out and do client work and start doing the research that they really want to investigate and and dive into their ideas and prove them out so what we're going to do is we're going to build the trusted seed we're going to find people who care about adding value to the token engineering community and we're going to get them together and we're gonna have them effectively crowd from themselves to do their own research what they'll do is they will send their funds into a token bonding curve and if you will need to know if you know anything about token bonding curves you know you want to be the first person to buy into a token bonding curve because the price is super cheap and to mitigate that we do two things first we make everyone bolt by so they all get the same price and then we also take a huge cut of that bolt buy and we send it into a dowel you can imagine it like amalek dowel where it's a decentralized grant funding organization in that way they know that they're donating the people who are buying into this token bonding curve and buying into this Commons they need to be altruistic because if they're not altruistic you'll have a prisoner's dilemma issue and they'll start to escape but if you know that they care more about the value of the token engineering commune themselves then it will actually thrive and they'll have these tokens that will allow them to decide how to support each other and which grants to give so anyone who has the token will actually decide which grants to give and if they do a good job at making those decisions other people will want to participate and they can actually build an economy around supporting token engineering because if you're a donee donating if you're the etherium foundation for instance you have two choices now you could either send money to the token engineer that you want to support directly and lose a hundred percent of your value it'd be completely altruistic and self-sacrificing or you could actually buy tokens in the token engineering Commons use those tokens to allocate funding to that same organization and receive a financial asset in return you may lose money I mean you're set to lose money but you may also make money and oh the collateral pool this this hatch tribute as we call it the tax at the beginning for the trusted seed that's the seed funding round but as people sell the token it will actually there will be a tax there too we call it the exit tribute in homage to Molech who's really done a great work with their tributes so when you sell the token ten percent is going to that funding pool so anytime someone leaves the economy they're supporting the common good and that's the whole point of token engineering it's to align incentives so that when you're supporting the economy you are rewarded and when you are when you are taking from the economy you are you you are disincentivized and you but in a way you are always supporting the economy so we have an amazing team we're very lucky it's basically a giveth plus block science endeavor and we have incredible advisers including Simon daily Rivia who is one of the my favorite token engineers of all time and Geordi who's in the crowd right there Thank You Jody for coming we also have a good legal team because this stuff is sketch and we don't want to make any wrong moves but we're looking to build a trusted seed we want to build a trusted seed for all of the Commons that we're producing and we need people who are altruistic that actually care about funding open-source projects and basically I'm looking at you guys okay if you care about funding open-source please go to our website Commons org and click apply and tell and let us see we're gonna filter people because the trusted seed is very important and we're gonna find token engineers and people that we can trust that really care about funding open source projects we're gonna get them well together and we're gonna start this thing join us on telegram to learn more we're actually kicking off on November 5th remember remember the fifth of November it's happening the common stock is going to start this process is going to start this chested seed so become a member of the common stack and we'll talk more on telegram thank you guys