TL;DR: Impact Alpha starts as a small project that rewards quality content on Farcaster, but it has plans to operate at the scale of network economies, and allow people to prosper based on the impact they create in the world. This article outlines how it can be done. For more in-depth discussion check out the Abundance Protocol Whitepaper or The Abundance Economy book.

Impact Alpha is the very humble beginnings of something much greater. So let me explain what it is.

The two biggest issues we have on Farcaster today are content discovery and the lack of incentives to create quality content. Impact Alpha aims to solve both of these issues. How? 

Right now content discovery on Farcaster (or rather Warpcast, the most dominant social media client on the protocol) is based on engagement – a legacy web2 model that was designed to maximize ad revenue. Likewise, building tipping tokens and incentives around the engagement model mostly incentivizes engagement farming and takes attention away from content that may be a lot more valuable to the network but doesn’t benefit the farming dynamics.

Impact Alpha is designed to change this meta. It introduces a new dynamic where the content that is most valuable to the network will be boosted the most and rewarded the most. Users therefore would have an incentive to create quality content and build tools that benefit the network (these would also be rewarded based on their value).

Impact Alpha achieves this by creating an incentive structure around content curation; curators get a daily point allowance, and their task is to proactively look for impactful casts and stake their points on the casts in proportion to their impact on the network.

Curators’ daily allowance then depends on users voting on the quality of curation (ie. how closely the staking matches community sentiment). The better the curation the more points curators will get. Low quality curation however will result in a diminishing point allowance – a self-regulating system.

But why should curators strive to increase their point allowance (and therefore maintain high quality curation)? Because curators get 10% of the reward distributed to the content (through tips and ecosystem incentives).

With Impact Alpha, users have an incentive to create content that benefits the network, and the most valuable content surfaces to the top. Curators have an incentive to proactively look for the most impactful content, while the network as a whole benefits from growth (both in the user base and financially).

Funding Farcaster Infra

But that’s just the first step. Once the meta of “impact = profit” is established, we can build and extend this capability much further. Instead of just applying this meta to content we can also apply it to apps, tools, and other infra built around Farcaster – including full-fledged clients.

This is an area where the economics are broken; Farcaster is supposed to be a decentralized network, but it's nearly impossible to build open source infra and tools on top of it in a financially-viable way. Sure, some tools are built, but not nearly enough, and usually the costs outweigh the rewards, regardless of their impact. This is not sustainable.

Impact Alpha will allow us to go from the “impact vs. profit” meta we have on Farcaster today to an “impact = profit” meta.

Today you have an economic incentive to build whatever lets you extract the most value from the ecosystem, not what benefits the ecosystem the most. You also have little incentive to share your code with others, because doing so would just help the competition and give you a smaller share of the pie.

The result is that the ecosystem gets none of the benefits of devs collaborating and enhancing each other’s work, while attention is fractured between the different competing projects.

Of course you can choose to forgo some of that profit so you can benefit the ecosystem more, or share your code with competitors, but that just reinforces the fact that you’re operating within an “impact vs. profit” meta.

So how does Impact Alpha transition us from a “impact vs. profit” meta to a “impact = profit” meta?

We can apply the same principles we had for digital content on Farcaster to apps and infra. Now builders can fully focus on building the things that benefit Farcaster the most, while curators will be looking to assess the impact of these tools on the ecosystem.

In this “impact = profit” meta builders don’t need to think about how to monetize, because monetization comes directly from maximizing impact. Builders can also freely open source their code; they don’t need to worry about others taking a share of their profit, since the more others use their code (even permissionlessly) the more impactful that code becomes, which means that they profit from it even more.

With this new meta your interests as a builder are fully aligned with the interests of the ecosystem. If you build something that leads to massive growth for the network you directly benefit from the impact of your work. The ecosystem also wants to incentivize builders to create the most impact since that leads to the most growth.

Building Economic Hubs

So now Farcaster can sustainably fund and expand its infrastructure, and builders can profit by making open source tools that benefit the community. The next step is to establish economic hubs on the protocol. Imagine a real-world community – a sort of network state – decided to govern itself using the tools built on Farcaster. 

Since now we’re dealing with bigger sums of money, we need to make sure that the community can have full trust in the protocol. For that reason we’ll need to bring some components of the protocol onchain, so that it would be much harder to game. For instance, instead of anyone being able to vote on the value of projects to the community, the protocol would select users at random to review proposals. This way it would be exceedingly difficult for any person or group to try to manipulate the vote.

So now we can have an IRL community, a social coordination layer, and onchain value consensus.

Combining these three can enable the community to fund public infrastructure without the need to collect taxes or have a centralized government. Instead, the protocol would essentially act as a high-throughput democracy; the social layer would express the interests and sentiment of the community, so anyone can determine what the community values, as well as how much it values those things.

Anyone who provides the products that the community needs would then be rewarded through the protocol based on the “impact = profit” model.

But what happens if the community says that it values something but then doesn’t want to pay for it once someone provided that product? In other words, if the stated preference doesn’t match the revealed preference? Very simply you’d have fewer people willing to create value for such a community since they won’t trust it to honor its promises. So the community always has an incentive to express its interests honestly and reward creators fairly.

Economic Engine for Network States

Once the ecosystem becomes more advanced, and its needs become more complex, the protocol would need to evolve as well. What would happen for example if the ecosystem wants to promote research in some scientific field? How would ordinary members of the community be able to evaluate any proposal if they don’t have the relevant scientific background?

Obviously it would need subject matter experts to check if proposals have merit. But then we have a new problem: how do we prevent collusion between project proposers and experts? If collusion is likely the system would lose legitimacy. A simple way to maintain the system’s integrity in this case would be to randomly select the subject matter experts, so that there is no way for proposers to know who will be evaluating their work.

If members have confidence that projects are reviewed fairly both based on their merit (with experts) and their expected impact to the ecosystem (with randomly selected voters) we’d be able to fund the projects sustainably.

Scaling the System

With both experts and ecosystem-wide reviewers in place, the protocol allows a network state to determine the consensus value of any kind of project, but how far can it scale?

What happens if a real network state – with millions of people – wants to use this protocol for decentralized governance? As a “high-throughput democracy” you can imagine the system would need to process thousands, if not hundreds of thousands of project proposals per day.

No DAO or grant funding mechanism today is anywhere near the capacity to process so many requests. Most DAOs can hardly handle a few projects in a week. So how can we scale Impact Alpha to deal with such a flood of proposals? And how do we make sure that the network state’s currency maintains its value if so many projects request funding?

The best way to maintain the value of the currency is if projects are only funded retroactively, so that funds are only released once the impact is realized and produces economic growth for the network.

Retroactive funding solves the problem of maintaining currency value, but we still have the problem of scaling. This is where prediction markets come to the rescue.

We know that the network will want to pay for a project based on the “impact = profit” formula. It doesn’t want to pay more because that devalues the currency. It also doesn’t want to pay less, because that hurts the credibility of the network, which translates to fewer contributors and slower growth.

So how do we make sure that a network state has enough reviewers to evaluate all the projects, and that the projects are evaluated both credibly and efficiently? We use prediction markets.

A proposer stakes funds on a project in proportion to the impact they expect. Those funds are then used to pay for subject matter experts and ecosystem-wide voters (all randomly selected) to review the proposal. The amount of expertise needed for each proposal then depends on the expected impact.

This creates a dynamic where proposers who want to maximize their return need to be accurate with their prediction. It also leads to efficient allocation of resources, since the protocol assigns reviewers in proportion to the expected impact. Supply and demand then regulate the market of reviewers, which means that the protocol can work at any scale – even for a network state with many millions of participants.

Solving Negative Externalities

We started with a content curation system on Farcaster, and now we’re talking about how this system can scale to the level of a network state. And how anyone would be able to prosper by creating impact in their community. What we haven’t talked about though is the emergent properties of this system. Perhaps the most important emergent property is solving the problem of negative externalities.

In the market corporations can offload some of their costs onto the public. They may, for instance, cut corners in the production process and pollute the environment. If a network state uses the protocol however it could disincentivize companies from creating any kind of externality that the public doesn’t tolerate.

How? Since your voting power in the protocol is proportional to your contribution to the ecosystem (“Proof-of-Impact”), those who create negative externalities in the ecosystem are essentially reducing their influence in the system. So everyone in the network state has an incentive to avoid creating externalities. In fact, they have an interest in eliminating the externalities that others create. That’s how they can create a positive impact (and generate a profit).

Superalignment

But what if instead of creating negative externalities in the network state they’d simply create those externalities in another network state? Here is where another emergent property of the protocol comes into play: superalignment.

Every company wants to maximize profits. But if a company creates externalities in a different network state it cannot make a profit there later.

And so all network states are in fact aligned if they use the protocol, because they don’t create adversarial conditions for one another to get ahead. What you get instead is that any contributor can simultaneously work for the benefit of multiple network states. If they create something that benefits multiple networks, that is how they can maximize their impact and profits.

So while Impact Alpha starts as a modest project on a small decentralized social network, the goal is to transform the meta from “impact vs. profit” to “impact = profit.” So that any individual can live their best live and prosper by creating impact in the world.