Comment by seibelj | Hacker News Reader

Comment by seibelj | Hacker News Reader

My world view, summarized to the simplest term, is “incentives”. You can find places and times where people act altruistically. We all do it regularly. We most reliably act altruistically when it comes to our own families, with our children as the highest recipient of our altruism.

When you get beyond the immediate family, relying on altruism as the organizing principle starts to break down.

Societies that provide incentives for delivering value to other citizens - going to work, doing a job, becoming wealthy if you drastically improve society - will win long term over those that provide disincentives to hard work and providing value.

Web3 and crypto provide artificial scarcity to digital goods. This is an experiment in economics. I believe providing economic incentives, when properly aligned with the tasks desired, can result in a more efficient and successful internet. Relying solely on volunteers in any group has very rarely worked - even the largest non-profits have highly paid directors and legions of paid employees. This is not some revolutionary idea, other than the fact that digital goods can have artificial scarcity.

Part of the problem here is that good incentive design is incredibly, incredibly difficult.

We've learned this lesson over and over again. If you apply an incentives layer to anything, people will attempt to game it. Watch what happens at any company that starts rewarding developers for number-of-issues-closed or lines-of-codes-written.

The only responsible way to work with incentives is to constantly monitor and re-balance them. I use Duolingo a lot and I find it really interesting watching how they tweak the various gamification models over time as people's behaviour alters. They need to balance their models such that people who game them will also learn the language most effectively.

The token model - represented by things like DAOs - generally requires this incentive design to be perfect up front. It assumes that people can design a perfect incentive system from day one - which obviously they cannot.

This goes right back to the beginning of smart contracts: Vitalik was famously inspired to create Ethereum after his World of Warcraft character got nerfed. But nerfing is essential to how game design works! If you don't constantly rebalance things your game ends up being broken.

I am a member of many token projects that have successfully altered their rules via governance vote. These include contract upgrades and fundamental changes to structure. It is possible to fix and augment post-launch, and in 2022 is quite common.

Yeah that's a good point - I'm wrong here to suggest that the rules are set in stone for every (or even most?) project.

the entire language used here, from altruism, to value, to efficiency makes no sense in a world that isn't scarce. You don't need efficiency or altruism when resources aren't limited.

Imposing artificial scarcity on the internet is like imposing the caste system on a modern society. It's a way to differentiate people by status in a world that has no need for that distinction any more. Literally putting a rotten economic system on a domain that could be free of it and practically limitless, like people driving cars with the break pulled so others can feel faster.

What we really need to do is get the ideology out of people's heads that burning energy so you can get a hexagonal twitter avatar to set yourself apart from all the round avatar people is a way to organize society.

Proof of Stake will come to Ethereum soon, and when it does, the environmental argument against NFTs and other ETH-based tokens will be moot.

On the concept of creating artificial scarcity, this is a philosophical debate and we will not agree.

But using the word scarcity seems to try and piggyback on what we all know scarce goods are. Goods become scarce because of excess demand or difficulty with production. A real finite thing.

what is scarce about tokens? the hash? why are they desired, for speculative investing?

"Excess demand" can be a 1st or 2nd order effect. If you artificially limit supply then a consistent amount of demand will suddenly become excessive.

No, think scarcity in the "artificial scarcity" sense where only 1000 copies of a certain handbag were made so they can market it as "limited edition" and demand a higher price than if they were making as many as they could.

Yes - Ferrari could make far more cars than they do. But new cars are limited edition and sold only to prior owners of Ferraris. This is a marketing strategy that keeps them artificially exclusive cars.

The problem is web3 hasn't yet come up with an experience as cool as owning and driving a ferrari and it's much easier to recreate/knockoff an nft than it is to make a facsimile ferrari

Scarcity is desired to increase perceived value.

I would pay a lot of money for a Crypto Punk, the very first NFT collection. The floor price is about $50,000 currently. I would pay around $10k, but maybe in the future I’d be willing to pay more.

Owning a Punk is a status symbol in crypto. I know many wealthy crypto people who have them. It’s like an expensive watch or classic car - I want it because of what it signals to the community I’m part of.

But at $50k… a bit too expensive for me at this moment. However I know people who have paid hundreds of thousands for them.

Why would you want to tag your addrs like this. I just don’t get NFT as a conspicuous consumption device. What happens to someone who lights a flare in the dark forest?

> I want it because of what it signals to the community I’m part of

Curious, what does it signal?

That you are a hardcore cryptocurrency enthusiast

And yet, our current medium of exchange relies on artificial scarcity as well, controlled by central banks. This is where your average crypto proponent will follow up with their spiel on the benefits of decentralization, but I personally believe decentralization is a distraction, or at best only relevant for those in charge of the supply of the currency. On the demand side, what cryptocurrencies really bring to the table is an alternative, asymmetrical channel for currency and values to move through; and in a capitalist system that naturally skews towards inequality, the more money changes hands, the more likely it is that the next hand to take it will be that of the rich. So as far as the rich are concerned, the incentives to bootstrap the crypto economy and keep it funded well enough to slowly suck up conventional economic activity is already there.

You and I have fundamentally different world views. I don’t see an increase of commerce = more inequality. I see it as more services and goods being provided and more needs being met. I like when commerce happens. It means people are voluntarily exchanging useful things and mutually benefiting.

Despite my cynical tone, I don’t see inequality as a primary outcome of commerce, either; I do see the increased exchange of goods that the crypto economy brings as a general positive. But it’s almost always been the case that the more commerce happens, the more extreme the gap between the rich and the poor becomes; arguably it’s not always a bad thing, as long as everyone’s getting a piece of the pie. I’m just speculating on why there’s big money rolling into crypto, and there will continue to be.

I question your assumption about the velocity of money belonging to rich people. Barring flash trading, if they’re not hoarding it and collecting interest, they’re spending it on real goods or investing? Isn’t that more along the lines of what seibelj said? Aren’t the rich mode likely to sit and let it collect interest?

Sure, they like to have “their money do the work,” but they still have to find (or grow) a system where large capitals can sit and collect interests.

There is big money coming into crypto because it is rebuilding the financial system with software protocols, assembled into building blocks, and each block is tokenized like a stock. It’s like being able to invest in TCP at the dawn of the internet. You can say this is a bad idea, illegal, and so on, but fundamentally this is what’s happening and the reason why VCs are investing.

The surest way to get rich in the world without using a gun or getting into a position of political power and stealing, is to create something people want to use voluntarily.

If I create a new widget and convince 10 million people to give me $10, I have $100 million of revenue. Let’s say my expenses are in total 75%. I’ve now made $25 million. This is certainly a princely sum of money, but I made 10 million people’s lives better! Or else they wouldn’t have voluntarily given me money.

Certain people would say, “You have $25 million when 99% of so little! This is unfair! You should give (some large percentage) of it back to society for the politicians to decide how to disperse.

And this is where I fundamentally disagree. The person who convinces enough people to give them that much money is rare. They have a unique ability to spot market needs, assemble people to work cooperatively, and work towards a goal of delivering widgets that meet the desires of society. I want to let them keep as much of their money as possible because they are highly likely to reinvest it properly, vs. the politicians which have a 99% chance of failure / theft.

As I’ve said, I express no judgement as to whether any of this is morally objectionable, or good/bad for society in general. You’re arguing with yourself at this point.

There are other people here who will read our comment thread and I am hopeful my arguments may encourage people to think differently whether or not you will.

"My world view, summarized to the simplest term, is “incentives”."

This.

Money has finally entered software for good.

For evil, I think.

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