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Alana Levin10 Analogies for Understanding Concepts in web3
These are 10 analogies for understanding concepts in web3.These analogies are far from perfect, but I’ve found them useful in explaining crypto to my friends trying to learn about the space for the first time. #1. NFTs: a regular baseball could be considered a fungible “token”. A non-fungible token (NFT) is akin to a baseball signed by Mickey Mantle. One is common, the other has a unique signature.#2. DAOs: imagine a non-profit, but organized by strangers on the internet with a united cause. ...
Alana LevinHow to Retain Top Talent
Before I worked in venture capital, I worked at a firm called Boston Consulting Group. It’s full of great talent (in particular, high-slope young professionals), interesting work, and luxurious perks. Yet top consulting firms still experience really high rates of churn. I’ve spent a good part of the past few years thinking about why that is. More specifically, how to avoid the pitfalls that lead to high churn. One simple framework is to view the costs and benefits undertaken / enjoyed within ...
Alana LevinPublic Goods in Crypto
The concept of public goods in crypto is pretty popular. It’s discussed a lot with regard to layer-1s, protocol treasuries, and ecosystem growth. The term has also begun to pop up in investment announcements. I find this last part especially interesting — prior to seeing firms “invest in public goods,” I had never really thought of public goods as an asset class. To be honest, I still don’t. It’s worth taking a step back and thinking about what actually constitutes a public good. Outside of c...
Alana Levin10 Analogies for Understanding Concepts in web3
These are 10 analogies for understanding concepts in web3.These analogies are far from perfect, but I’ve found them useful in explaining crypto to my friends trying to learn about the space for the first time. #1. NFTs: a regular baseball could be considered a fungible “token”. A non-fungible token (NFT) is akin to a baseball signed by Mickey Mantle. One is common, the other has a unique signature.#2. DAOs: imagine a non-profit, but organized by strangers on the internet with a united cause. ...
Alana LevinHow to Retain Top Talent
Before I worked in venture capital, I worked at a firm called Boston Consulting Group. It’s full of great talent (in particular, high-slope young professionals), interesting work, and luxurious perks. Yet top consulting firms still experience really high rates of churn. I’ve spent a good part of the past few years thinking about why that is. More specifically, how to avoid the pitfalls that lead to high churn. One simple framework is to view the costs and benefits undertaken / enjoyed within ...
Alana LevinPublic Goods in Crypto
The concept of public goods in crypto is pretty popular. It’s discussed a lot with regard to layer-1s, protocol treasuries, and ecosystem growth. The term has also begun to pop up in investment announcements. I find this last part especially interesting — prior to seeing firms “invest in public goods,” I had never really thought of public goods as an asset class. To be honest, I still don’t. It’s worth taking a step back and thinking about what actually constitutes a public good. Outside of c...
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In crypto, people talk a lot about the concept of incentive alignment.
Different mechanisms for “incentive alignment” have emerged, including staking, vote-escrowed tokens (aka veTokens), and lockdrops. All of these are ways protocols can encourage participants to have skin in the game. The idea is that this skin in the game means the protocol’s interests will become partcipants’ interests.
Yet underlying these mechanisms is the question of how long tokens should be locked. Most determine the lockup on a time basis — weeks, months, years, and so on. But that’s where I think the discussion of incentive alignment starts to unravel. Time is somewhat arbitrary. For instance, what incentives are aligned with a five-year lockup but not a four-year one? How do you determine the right time horizon from one protocol to the next? If the protocol only takes three years to grow to a size people thought would take five years, should participants be allowed to unlock early?
Lockups based on time horizons seem to work directionally (i.e. five years is better than five months) but get hazy on a detailed level.
That’s where block-locked tokens can come in. Blocks are like a crypto-native measure of time. They’re also a better proxy of demand for a protocol. If you know the range of how many transactions per second a block processes, setting a block-based lockup helps align expectations between the protocol and the participants for how much both sides think the protocol will grow over a period of time.
One consideration is that block speed may slow as demand increases. If the goal is to unlock tokens as demand increases (i.e., as the protocol grows), block-locks almost seem to achieve the opposite effect — slowing unlocks as demand increases. But pure demand isn’t the right metric for aligned incentives. Rather, lockers should want protocol growth, sustainability, and success. Slowing block speeds suggests there’s work to be done in scaling supply and the protocol hasn’t reached the level of success lockers aligned upon.
Block-locking may work in a variety of scenarios. Helium’s HIP 41 is exploring the concept with regard to protocol governance / voting shares. I could also imagine block-locking working well airdrops, as a way to encourage the rewarded early users to remain interested in protocol growth.
In crypto, people talk a lot about the concept of incentive alignment.
Different mechanisms for “incentive alignment” have emerged, including staking, vote-escrowed tokens (aka veTokens), and lockdrops. All of these are ways protocols can encourage participants to have skin in the game. The idea is that this skin in the game means the protocol’s interests will become partcipants’ interests.
Yet underlying these mechanisms is the question of how long tokens should be locked. Most determine the lockup on a time basis — weeks, months, years, and so on. But that’s where I think the discussion of incentive alignment starts to unravel. Time is somewhat arbitrary. For instance, what incentives are aligned with a five-year lockup but not a four-year one? How do you determine the right time horizon from one protocol to the next? If the protocol only takes three years to grow to a size people thought would take five years, should participants be allowed to unlock early?
Lockups based on time horizons seem to work directionally (i.e. five years is better than five months) but get hazy on a detailed level.
That’s where block-locked tokens can come in. Blocks are like a crypto-native measure of time. They’re also a better proxy of demand for a protocol. If you know the range of how many transactions per second a block processes, setting a block-based lockup helps align expectations between the protocol and the participants for how much both sides think the protocol will grow over a period of time.
One consideration is that block speed may slow as demand increases. If the goal is to unlock tokens as demand increases (i.e., as the protocol grows), block-locks almost seem to achieve the opposite effect — slowing unlocks as demand increases. But pure demand isn’t the right metric for aligned incentives. Rather, lockers should want protocol growth, sustainability, and success. Slowing block speeds suggests there’s work to be done in scaling supply and the protocol hasn’t reached the level of success lockers aligned upon.
Block-locking may work in a variety of scenarios. Helium’s HIP 41 is exploring the concept with regard to protocol governance / voting shares. I could also imagine block-locking working well airdrops, as a way to encourage the rewarded early users to remain interested in protocol growth.
And I recognize that blocks may not be a perfect metric, either. This post is less about arguing block-locks are the right solution, and more about encouraging alternatives to pure time-based lockups. Incentive alignment is great, but it’s important to really understand what incentives we’re aligning and if the mechanisms we’re using are truly aligned with the goal. On the whole, I’m looking forward to more experimentation and innovation.
And I recognize that blocks may not be a perfect metric, either. This post is less about arguing block-locks are the right solution, and more about encouraging alternatives to pure time-based lockups. Incentive alignment is great, but it’s important to really understand what incentives we’re aligning and if the mechanisms we’re using are truly aligned with the goal. On the whole, I’m looking forward to more experimentation and innovation.
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