In today’s economy, too many things that benefit society are unprofitable — and too many profitable things harm society.

We see this everywhere in our daily lives.

Social media extracts profit from our attention instead of helping us build meaningful connections.

News media keeps us perpetually outraged and afraid instead of informing us.

AI is on a trajectory to hollow out our economy (or worse) instead of enriching us intellectually and materially.

And despite the breakthroughs of the information age, conflicts of interest in medicine, science, and agribusiness leave us unsure of what’s truly good for our bodies and minds.

So why does the system fail to serve people’s interests across so many domains?

It’s not really because of greed. Nor because of some conspiracy or shadowy cabal plotting to make our lives miserable. The truth is simpler.

Our economy currently has business models for consumer and commercial goods — but not for ecosystem goods, the kinds of goods that benefit society as a whole.

When we try to shoehorn ecosystem goods like journalism, AI, or medicine into limiting business models, we inevitably create misaligned incentives — a dynamic that enriches the few while disadvantaging the many.

With the acceleration of exponential technologies, these dynamics can easily push us toward dystopian — or even catastrophic — outcomes for society.

But there’s good news: we can change that!

In The New Economic Revolution, we unpack the mechanisms that produced our current economic dysfunction, explore where it’s headed, and — most importantly — show how we can upgrade the economy so that what’s good for society is also good for the market.

We show why blockchain is essential to making this transformation possible: it is currently the only technology that enables sustainable business models for ecosystem goods — not just consumer or commercial ones.

To stay updated or contribute, join the Revolution!

If your answer is “a lot,” here’s the good news: a new economic paradigm is emerging — one that allows people to prosper on their own terms, without dependence on extractive companies that don’t have their best interests at heart.

At its core, this paradigm rests on a simple idea: open and permissionless collaboration.

Here’s how it works: networks fund projects that strengthen their own growth and prosperity. Funding happens retroactively, making the process self-sustaining.

Within these networks, everyone has free access to non-scarce resources. People can build openly on each other’s work — and get compensated for it.

This model creates a new mode of production where individuals have the freedom to work entirely on their own terms, plug directly into Value Creation Chains, and get rewarded for their contributions

Imagine journalism under this new system.

The network signals its need for unbiased reporting on current events related to it — posting both the request and the payout. Contributors step forward: some do research, others conduct fieldwork, others fact-check, and still others publish reports in multiple formats. These contributors don’t compete with each other for attention or clicks, instead they all contribute to sensemaking in the network.

The network reviews the outputs and releases funding accordingly.

But here’s the challenge: if decentralized journalism is truly permissionless, who decides the value of each individual contribution?

A top-down approach, where the network has to review contributions is not practical — no more than consumers can do the same for any good they buy.

Can you imagine if, whenever you bought a product, you had to figure out how much the designer, the factory worker, and the shipper should each be paid? Now what if there are 100 people contributing to this process? 10,000? Such an approach just wouldn't scale.

Moreover, the more removed the assessor is from the contribution the less context they have on who contributed what.

Instead, what we need is a bottom-up, localized assessment system; for each output, a contributor can fairly evaluate the inputs — whether sources, collaborators, or tools — and post the weighted distribution alongside the final work. With AI tools, much of this process can be streamlined.

Of course, self-assessment raises the risk of abuse. What stops contributors from inflating their own share and minimizing that of others?

For that we need an incentive mechanism backed by staking and arbitration.

Here’s how this could work:

Anyone can dispute a contribution claim by staking the payout amount in question.

The contributor being challenged must stake the same amount.

Until resolution, payout on the disputed amount is frozen.

A decentralized arbitration system then settles the dispute; the rightful party gets their stake back, plus a portion of the other party’s stake. The remainder goes to the network (that can then compensate arbitrators).

This system creates powerful incentives:

If you overvalue yourself, you risk costly arbitration.

If you make frivolous claims, you risk losing your stake.

As a result, most disputes can get resolved amicably before ever reaching arbitration.

Why do both parties need to stake an amount equivalent to the payout?

Because if the amount was smaller, the contributor would have an incentive to overvalue their contribution, even a bit, as statistically they would have a chance to get away with it and be profitable.

One caveat: individuals without capital to stake could be excluded. This can be solved by allowing investors to fund stakes in exchange for a share of successful claims — ensuring that even less-capitalized contributors still have access to fair compensation.

With this mechanism in place, Value Creation Chains become both open and fair.

Journalists can focus on truthful reporting instead of chasing clicks.

Developers can publish open-source code without fear of exploitation, knowing they’ll be compensated whenever their work is used (and can make a claim on others if they don’t)

The result is a sustainable system where individual freedom aligns with collective prosperity.

You get the freedom to work on your own terms — and the community gains growth, resilience, and goods our current system could simply never produce.

A win-win for everyone.

This traps creators and builders in a relentless loop — chasing engagement while their true potential remains ignored.

Decentralized social media promised to change that. But so far, it hasn’t delivered. The centralized, attention-driven algorithms of Web2 still dominate Web3.

There is a crucial difference, though: in Web3, we don’t have to be slaves to extractive algorithms. We have the power to shape our destiny.

If platforms choose to remain stuck in the past, we will forge forward.

If they care only about the attention our content generates, we care about the impact it creates.

And if they focus only on attention-based rewards — leaderboards, creator coins, and the like — we will reward creators and builders based on their real impact.

This is exactly what Impact 2.0 was designed to do.

Impact 2.0 isn’t just another algorithm. It’s an economic engine for a new kind of platform — one centered on user alignment, not aimless competition for attention.

It’s a platform where creators and builders are fairly rewarded for their impact on the network, so everyone is motivated to contribute their best and benefit from this fair system.

How does Impact 2.0 work?

Impact boosts and rewards users based on their contributions to Farcaster — the impact of their casts.

But there are challenges:

Users must proactively curate impactful content, rather than passively boosting what the algorithm already serves.

They need to value content based on how it benefits the network — whether text, art, code, or more.

Users must trust that bad actors are filtered out, encouraging them to contribute funds and boost truly impactful casts.

Here’s how Impact 2.0 meets those challenges:

Curators start with a weekly allowance of 69 impact points and an Impact Score of 100. They use points to nominate impactful casts, staking on the cast’s impact in the network.

Nominations go through a decentralized validation — randomly selected curators vote on whether a nomination is accurately valued.

If validators find a cast overvalued, the nominator’s future allowances are slashed.

There’s also an option to challenge validations, creating a system that incentivizes good faith from curators and validators alike.

When a curation is validated, the system boosts that cast with “likes” proportional to its impact from users who opt in.

To motivate curators, the system rewards them with 10% of all contributions to the content they curate. Passively boosting popular content means missing out on rewards.

Users who boost impactful content receive rewards based on their contributions.

Both curators and validators grow their Impact Scores for quality contributions and lose points when acting in bad faith.

Curators who promote friends unfairly or inflate impact risk having their Impact Scores — and allowances — slashed to zero.

Curators can increase their weekly allowance by multi-tipping creators and curators in the ecosystem. The higher the Impact Score, the cheaper it is to gain more points via tipping.

To qualify for allowance increases, a portion of multi-tip contributions goes to the Impact Fund, used to grow the system and reward validators and contributors.

This design aligns curators, validators, and contributors around boosting impact on Farcaster while effectively filtering out bad actors.

Impact 2.0 is a proof of concept for a new economic model for social networks — one that puts users at the center, fairly rewards value creation, and aligns user and platform interests.

This is our chance to declare independence from centralized algorithms and build platforms that prioritize your interests.

Let’s get on the Impact rocket!

The contract went like this:

Users will drive attention to the platform, and in exchange the platform will provide them with distribution

Sounds like a win-win, right?

Well, not exactly.

Because platforms didn’t care how users drove attention — they only cared that they did

And what’s the most effective way to drive it?

Conflict and drama

The users who pushed outrage porn and sensationalism, exaggerated facts or fabricated claims for clicks, were therefore also those that got the most attention — and most distribution — on the platform

But that came at a price — both to other users and to society as a whole

Users could no longer tell what’s true and what’s made up, the media and institutions suffered from a crisis of trust, society became polarized, and the platforms turned into cesspools of toxicity

But what almost everyone forgot was that there was nothing sacred about the Attention-for-Distribution contract

It was not some fundamental principle of nature.

In reality, platforms could determine distribution in any way they chose

Attention-for-Distribution made sense in one context: when the platform makes money from advertising it wants to maximize user attention on the platform

But in the age of open graphs and cryptocurrencies, attention is not the only game in town

And once Network Economies enter the picture, things can change dramatically

Then we’d see the emergence of a new mode of production; where contributors collaborate, build in public, and get paid not for the attention they drive but for the value they create

This new social network paradigm would look something like this: communities, startups and businesses wish to grow and prosper from the new mode of production

They put money into the Network based on how much growth and benefits they expect to get from the system

A community may want unbiased reporting on local events

Startups may want to leverage the network’s collective intelligence to get advice and services that they otherwise couldn't afford on their own

Businesses may similarly benefit from the speed and compounding value of a vast network of builders creating open source systems

The platform’s role in this new economy is to serve as the medium for flow of value (both monetary and information) throughout the network.

The Network would then want to compensate the platform for the value it provides, and for the ongoing development and maintenance that goes into running it 

The new unwritten contract between the platform and users would thus be based on value creation, and not on attention — the more value users create on the platform the more they are rewarded

This is a true win-win-win; for users, for the platform, and for the Network Economy as a whole

Because unlike attention — that could benefit or harm others — value creation is always positive sum; it benefits everyone on the network

The new unwritten contract would therefore not only benefit the network, it would also pave the way for a new kind of social network and a new mode of production for the economy.

We can finally restore sensemaking, bring trust back to media and harmony to society

Let's write that contract!

As an ethical and socially minded person surely you'd refuse to buy it.

But the company's success in the market doesn't just depend on my actions or yours — it depends on the actions of multitudes of people.

What if, for example, using the product puts people at a significant advantage over non-users?

Or what if the product is a cure to a disease, or could save the life of a loved one?

Suddenly the ethical considerations become more complicated.

Of course if it's just a few companies engaging in such crooked practices it's not a big deal. But what happens when it's a lot more widespread? 

What happens when much of economic growth, the products and services that most people rely on, and most of the innovation in medicine and tech, essentially comes from theft?

Sounds unlikely, right?

Well, this is where our economy is currently headed — if Big Tech was based on the mantra of “move fast and break things,”  the AI age will be based on a new model: “move fast and steal things.”

The most innovative companies in biotech, engineering, robotics, and so on are likely to be those who harness AI technology with few scruples about scraping other people's intellectual property.

And so we're moving into a fundamentally unstable phase of the economy. A phase of extreme social instability, when one group becomes obscenely wealthy by stealing from others, while the rest of society is forced to choose between integrity and prosperity.

But what if we chose a different path?

A path where innovators can profit massively not by stealing from others but by rewarding people fairly for their contributions.

And where society can prosper without compromising its integrity.

How can we do it?

We can build an economy where the AI companies who fairly compensate everyone in the “value creation chain” are also far more prosperous than those who try to keep all the revenue for themselves.

So how is it possible? How can collaborative companies “share the cake and eat it too”?

The logic here is quite simple: it can be better to have just a portion of a much bigger pie than to have a smaller whole pie all for yourself.

Why would the collaborative companies have “bigger pies” to share?

Because no one wants others to make a profit at their expense, but when people are compensated fairly they're more than willing to cooperate.

Extractors then have a much harder time getting reliable information. Meanwhile, contributors will proactively help companies who reward them.

With this wealth of reliable information, and the ability to fill in knowledge gaps from contributors, collaborative companies will have a structural advantage in the market.

They will be able to innovate much faster than extractors who try to scrape intellectual property.

This principle applies not just to biotech or robotics. It works just as well for content creation — writing, art, video, and so on.

But why stop there?

If we can build an economy where AI companies have a financial incentive to open up and reward those whose data they use to train their LLMs, why not expand that concept to the rest of the economy?

Why not let people do research, build open source software, advance science in the open, and let everyone benefit from the fruits of this open collaboration. 

Then allow companies to take full advantage of this work — as long as they fairly compensate the Value Creation Chain.

The new mode of production that this paradigm will enable can be far more efficient, and lead to greater economic prosperity, than we've ever seen.

Yet, rewarding Value Creation Chains is easier said than done.

To get there we’ll need a mechanism that incentivizes each link in the value creation chain to faithfully report their own contribution, as well as how much others contributed to that link’s impact in the chain.

Without such credible data it would be extremely difficult to reward contributors fairly.

So how can we make sure that links don't overvalue their own contribution or undervalue the contribution of others? That would be the subject of my next post.

In many ways this is our approach to the multitude of problems that society faces today.

We see a crisis of trust in media and institutions, the looming problem of AGI misalignment, job automation, social polarization, etc., and think these are all disparate problems.

But what if we’re like the blind men in the fable? We think we’re looking at separate problems when in reality many of these are different symptoms of the same underlying illness.

And what is this “illness”? The current inability of markets to value people’s contributions to society — a market failure in public goods.

In social media, we see this with web2 platforms unable to value the impact of user content on society — Instead, they opt for selling users’ attention to advertisers.

With AI, artificial intelligence companies cannot be compensated for the impact that this incredible technology has on society — Instead, they need to close down their codebase so that they can sell user subscriptions to individuals and companies.

And in news media, journalists cannot earn a living from the value their work brings to society — Instead, they have to monetize the “content” by competing in the attention economy for views, clicks and subscriptions.

In each case markets can’t value people’s contributions to society, and the alternative ways people and companies attempt to monetize their work — trying to turn public goods into consumer and commercial goods — creates perverse incentives and negative externalities.

We then look at the results of these perverse incentives and externalities (ie., polarization, crisis of trust, etc.) and try to treat the symptoms of the illness.

But merely treating the symptoms will never cure the illness. It will only lead to other (and perhaps more severe) symptoms as the illness progresses without treatment or a cure.

So now that we’ve diagnosed the illness, how do we even begin treating it?

If the problem is that markets can’t value people’s contributions to society, how can we change that?

Perhaps it’s useful to start with a quote from the late UK Prime Minister Margaret Thatcher, who said: “..who is society? There is no such thing!”

Thatcher is right… though perhaps not in the way she intended.

There is no such thing as society.

That’s true.

Society is just a large group of individuals. It is merely a social construct.

So is that why markets can’t value people’s contributions to society?

Well, not exactly. You see, companies are also social constructs that are made up of individuals (workers, investors, etc.)

In fact, come to think of it, even individuals are social constructs. Each of us is comprised of trillions of cells that work independently and in coordination with each other to produce the emergent property we call the “self.” Buddhism even teaches that the “self” is in fact an illusion.

But let’s not digress into deep philosophical discussions on the nature of life, the universe and everything and get back to the question at hand: what makes “individuals” and “companies” so different from “society”?

Why is it that we have markets for consumer goods (sold to individual consumers), and we have markets for commercial goods (sold to companies), but we don’t have markets for public goods (sold to societies, or communities)?

The difference is that individuals and companies are cohesive economic entities, but societies are not.

If you have a product or service that a company values, you can call the company and sell them your product. You don’t have to chase individual employees in the company to be compensated.

In fact, if you had to chase after employees to pay you out of their pockets you’d struggle to make any money.

Because one employee would tell you: “Why should I pay for this? Your product benefits workers in a different department than mine,” and another will tell you, “Why should only employees in our department pay for this? Everyone in the company benefits from our work!”

You’d have lots of freeloading and little compensation — and more broadly, you’d have a similar market failure in commercial goods as we have in public goods.

But wait, aren’t there governments for public goods?

Sure. But governments — at least in their current form — don’t have the agility or public trust to intermediate between the public demand for goods and the people supplying those goods.

Even in a democracy, representatives only truly care about public needs for a brief time window every 2 or 4 years. What hope is there for government to act as a trusted intermediary at the scale we’re talking about here?

Will millions of individual creators call their government representatives and ask them to compensate them — at taxpayer expense — for the content they create? And even if it did, would the public have any confidence that the money was distributed based on the public interest (and not based on whatever benefits politicians)?

Such an approach is neither realistic nor desirable.

What we need then is to enable communities to form cohesive economic entities organized around the common prosperity of the community.

Such entities — whether local communities, cities, regions, states, or networks of individuals with shared identity — could serve as cohesive economic units

By forming a cohesive economic entity, each community could signal what public goods it values and compensate those who produce them.

The benefit of such an approach is that it’s additive — and therefore scalable.

There is no need to wait for millions of people to join the economic entity for it to work. Rather, you can start on a small scale and form a market for public goods. Then, more communities can form their own entities, which would grow the overall market.

Since public goods are non-rivalrous (one group using the goods doesn’t prevent another from using them), the different entities would not be competing with each other for who gets the goods.

The magnitude of demand for different goods across the various entities would, however, dictate how resources are allocated by producers.

So now we have a framework for developing a “cure” to the public goods market failure illness.

The challenge still lies in designing the mechanisms to enable economic entities to bring members together, allow them to credibly come to consensus around what is valuable to the community, and sustainably compensate those who produce those public goods.

It’s not an easy challenge — but at least we’re no longer blindly stumbling in search of a cure.

You were so excited working on it days and nights, knowing how many users could benefit from it

The only problem is, you don’t have much distribution since your account is quite small

You decide to launch the app anyway — as open source

But what happens next surprises you..

A bit after you launch, a much bigger account on the platform launches an app just like yours.

Very quickly that app gains traction and dominates the platform – not because the app is better than yours (it’s not) but because the user simply has a lot more followers and better distribution

All your time and effort were wasted

This is a problem faced by countless devs and creators on social media every day

They have an idea for something that can benefit the community, but they don’t want to just give the idea away and for others to get all the credit for it

But what can be done about it? 

- you could delay releasing the idea until you have better distribution

- you could scrap ideas that are “easy to copy” and only focus on those that are more personalized (branded), difficult to replicate, or that require network effects

- you could release closed source, proprietary apps  or copyrighted art

But notice what all these “solutions” have in common:

They force you to focus on superfluous issues instead of on creating the most value for the community

If this only affected 1 or 2 members in the community this wouldn’t be a problem, but these are issues that affect millions of users on social media every day

This dynamic hurts both the creators and the community as a whole

The damage to the community is incalculable

If everyone could just focus on value creation instead of having to jump through all these hoops the community would likely have been a few orders of magnitude more prosperous

It’s a massive coordination failure

And the problem isn’t that there are people who steal others’ work — you’re always going to have a few rotten apples on any platform

The problem is that the platform creates the incentives for users to steal by not penalizing such behavior

And it makes users less likely to create value for the community by not giving them proper credit for such work

What’s worse, the platform simply doesn’t care because who gets credit doesn’t affect their bottom line

No matter who gets credit for your work, the platform will still make money from the engagement

Because the platform doesn’t have creators’ best interests in mind, what could be an easy fix never gets implemented since the problem isn’t even on the platform’s radar

So how can this massive coordination failure be fixed? Suppose if users had an incentive to proactively note on a post whether it's influenced by other content on the platform, and assign how much it is influenced by it

Then, if a big account simply copies the work of a smaller account, users could point out that 100% of the value was created by the smaller account

If the work goes viral, the smaller account would get 100% of the funds flowing to the bigger account on the network

On the other hand, if the larger account adds value to the original work, say improving it by 10%, the two users would share funds flowing to the work proportionally to their relative contribution

Can such a system be gamed, with users falsely attributing credit to themselves or fraudulent accounts?

Not if it was designed well

For instance, users may need to stake some money to participate in the attribution process — if the community thinks the attribution is fair the users could get rewarded, but if it’s fraudulent the user’s stake could be slashed.

So now smaller accounts can create freely and openly on the platform (as public goods), knowing that if others use their work (“permissionlessly”) they would still get rewarded based on the value they add to the network

Users would also want to collaborate with others and add value to others’ work, instead of thinking how to extract value from others

At the same time attributors have a (monetary) incentive to proactively improve the value flow on the network, thus making the whole system work (this process can also be supplemented by LLMs)

When users can focus on creating the most value for the community, instead of being distracted by superfluous issues, they can thrive and enjoy their work more

At the same time the community gets the most growth and prosperity from this process, while the platform gets far more growth

There is only one catch in this process: it can only be done credibly on an open graph network.

That would be the subject of my next post..

But in the current media environment who has a vested interest in your success?

The sad reality is.. almost no one.

People are too busy building their own distribution channels — growing their following, getting engagement, all while trying to create something of value to distribute (..or not)

The platforms don’t care if what you create is valuable (this is true on FC too, by the way).

Their algo only cares if your content can help them sell more ads or grow.

So you’re competing with everyone on the platform for distribution, but you’re not competing based on how much value you contribute to the network, you’re competing on how much engagement you can get.

So everyone has the incentive to create less value and compete to get more attention.

Do you realize how mind-numbingly dumb and wasteful this whole dynamic is?!

This is what a coordination failure looks like.

This is what happens when you misapply scarcity principles in a non-scarce world.

Now imagine if the platform had a vested interest to surface content based on its value (or impact) in the network.

Suddenly you’re no longer competing with others for scarce attention — you only need to think about how what you create benefits the network.

The network may also want to boost contributors when others create or build on top of their work — this would incentivize users to build in the open, and maximize value creation in the network.

So now users have an incentive to create as much value as possible for the network, collaborate with others, improve on the work of others, and have a vested interest in the success of others on the network — you take care of creating value, and the network takes care of its distribution.

Users get to see the content (and use the tools) they’re most interested in, while the network grows in value — a win, win, win.

The next stage is to apply the same game theoretic incentives to both the platform itself and the content on it, and not only do you solve a massive coordination failure, but also get a network where people can prosper based on the impact = profit meta.

Yet every system we have to reward creators and builders on FC right now is easily gamed by users with more clout in the network.

This is true not just for FC's Engagement Rewards, but also for funding rounds that are explicitly meant to reward users for contributing value to the network (Rounds, QF, retro funding, etc.)

Either the system is entirely opaque (with voting taking place behind closed doors), or it is easily gameable - users get their friends/groups with more clout in the network to vote for them, or have more followers (or better distribution) so they can attract support by getting more attention.

What we want (and need) is a system where the incentives of voters align with the interest of the network (ie. rewarding users based on merit, not clout).

We want a system that is much harder to game.

In Impact 2.0 I'll be introducing such a system to Farcaster.

I call it Randomized Voter Sampling (RVS).

The principal problem we're trying to solve is: how do you make sure that a community can trust that the voting process wasn't manipulated by users, and that the outcome of the vote broadly reflects the view of the community.

The process works like this:

1. 1) Anyone can make a proposal about the value of a project/app/etc. to the network

2. Based on this expected value, the system randomly selects a group of validators to vote on the proposal

   Proposals that carry more value require a larger sample of voters

3. After the vote concludes anyone can challenge the outcome, which would lead to another round of RVS

By randomizing the sample of voters, proposers have no influence on who votes for their proposal, which means that they have to consider its value to the community as a whole.

The voter sample still needs to be large enough so that it is representative of the community consensus view.

But how do you make sure that proposers don’t abuse the system?

What if they constantly make random proposals with the hope of extracting some value from the network (making a lot of proposals in itself strains the resources of the network)?

Also, how do you make sure that voters do what’s in the network interest and don’t just vote arbitrarily or based on other considerations?

To address these challenges both the proposers and voters will need to have skin in the game; in Impact 2.0 Proposers will stake their Impact Score in proportion to the value of the proposal.

If the proposal is successful the Proposer’s Impact Score grows. If not, it will be slashed in proportion to the stake.

This ensures not only that the system isn’t flooded with proposals, but also that proposers’ valuations are as fair and accurate as possible.

It also incentivizes Proposers to proactively look for valuable contributions to the network (and not necessarily just self-promote).

Similarly, voters will have a stake in their vote; if the vote passes they increase their Score, if the vote is challenged (successfully) their Impact Score will be slashed proportionally.

This way voters have an incentive to be active in the voting process, and to vote based on the merits of proposals.

This mechanism can be used both continuously, where proposals roll in on an ongoing basis, or within a specific time frame (eg. for a contest).

Either way the mechanism ensures that every proposal is evaluated fairly by voters based on its merits.

The community can trust that the system is fair for everyone, contributors can focus on value creation instead of competing with those who try to game the system, while the network can attract quality users.

Impact 2.0 will be rolling out with the RVS mechanism later this month.

At its core, Farcaster is a decentralized*, censorship-resistant identity layer.

And because of that it's a platform disruptor!

Instead of Airbnb storing your data and getting 15% of owner/guest fees, Farcaster can be the trustless layer where owner/guest reputation is stored (and done in a way that's much harder to manipulate). The Farcaster-based platform can then provide the same service (connecting owners & guests) but without the middleman fee.

Anyone can then build additional services on this open source platform to help connect owners and guests (or provide additional functionality to either), thus completely transforming the industry and giving power back to its users.

Farcaster can do the same to connect Uber or Lyft driver/riders, Amazon buyers/sellers, Spotify creators/listeners, etc.

Since a key benefit of these centralized platforms is the (reputation) data they store on users, the Farcaster open graph can provide this reputation data and may be more credible and transparent at doing so (it can even provide the data while maintaining user privacy, with the help of zk-proofs).

All these centralized platforms (and many others) can therefore be disrupted and (potentially) built as transparent, open source platforms on top of the Farcaster open graph.

For now Farcaster is mostly focused on trying to disrupt social media. It is not terribly successful at that because it mostly clones the interface elements, and algos of X (all the way down to the verified checkmark design).

Unfortunately, this focus on social media is also undermining Farcaster's growth and adoption.

Instead of expanding our Total Addressable Market we're shrinking it.

Instead of the network surfacing apps, tools and platforms that expand the ecosystem's capabilities, we're forcing contributors to play by the algo rules of engagement-based social media.

This makes about as much sense as making the same contributors play by the algo rules of hosts/guests on Airbnb; "You built something that massively benefits the network? Great. We'll help surface your contribution to the network if you stay at a few more Airbnb homes and get more positive reviews from them."

How is this an effective growth strategy for the network?

Conflating Farcaster 'the protocol' with Farcaster 'the social media platform built on top of the protocol' limits people's perspective on what can be built on Farcaster.

Surfacing user contributions to the network based on engagement disincentivizes builders from developing open source apps and products that benefit the whole network, and drive them to build engagement-based apps and products that extract value from it.

Instead of Farcaster disrupting other platforms, Farcaster is now mostly disrupting its own growth potential.

We need to reverse this trend!

This happens because an entire class of goods in the economy — public goods — has no way to capture value; no way for producers to get a return on the value provided to others.

Without value capture there is little incentive to produce public goods in the economy. The result is that we are all significantly less prosperous for it, while our economy bleeds trillions of dollars in value each year.

Until recently this was an unsolvable problem in economics; we simply didn't have the tools to build a value capture mechanism.

But with the advent of blockchains (and programmable money) this is now just a question of coming up with the right mechanism design.

So what would a public goods value capture mechanism look like?

The best way to answer this question may be by looking at what works for other goods in the economy — specifically, commercial goods and the common good of network security.

Network security captures value thanks to the structure of blockchains, while commercial goods capture value thanks to the structure of companies.

Without these Coordination Structures, the goods would not capture value. And if they can't capture value, they can't be funded or produced at scale.

But what do these Coordination Structures have in common?

What can we learn from how they work?

And, most importantly, how can we use these insights to develop a Coordination Structure for public goods value capture?

We can derive four properties that blockchains and companies need for value capture.

These properties are: alignment, consensus, funding, and feedback loops.

In businesses, the profit motive aligns investors’ interests around the business. In blockchains, the value of the currency aligns user interests.

Businesses also make executive decisions through management that need broad agreement from investors and workers in the company. In blockchains, the decision to issue funds for network security is made through the consensus mechanism (the agreement of all nodes in the network).

Funding for ongoing business operations and commercial goods comes from a common treasury, or from equity or debt issuance. In blockchains, funding for network security comes from the network’s native currency.

Finally, the feedback loop for each business decision is evaluated based on ROI — the return on investment of the decision. In blockchains, the feedback loop revolves around the price of the coin, reflecting demand for using the network.

If a business or blockchain exhibits all of these properties, it enables value capture and can do so sustainably over time.

In contrast, if any of these properties is missing — if a business doesn't make decisions with broad support from investors and employees, or if investors have misaligned incentives — it's unlikely to be profitable or survive for long.

So what would a Coordination Structure for public goods look like?

First, it needs to align the interests of the members participating in it.

But unlike the profit motive for businesses, here people are participating in an ecosystem — or rather, a Network Economy. What aligns their interests then is the (individual) desire to benefit from participating in the network both financially and materially — a prosperity motive.

Second, it needs to facilitate agreement in the network on how much goods are valued.

Some points to consider here: it's crucial that participants in the network can trust the process.

If participants believe that bad actors can exploit the process, they’re less likely to participate in the network.

Also, the process needs to be scalable — it’s impractical for all participants to vote on every proposal, for example, especially in a large network with thousands of proposals each day.

You’d also want participants to be informed about what they're evaluating.

Finally, the process needs to be Sybil-proof — participants shouldn't be able to manipulate the vote by creating multiple fake accounts.

Now, obviously, there are various ways to achieve these objectives, but here is a good starting point: we can have participants selected at random from reviewer pools. Random selection greatly reduces the risk of collusion between proposers and reviewers.

This selection can be proportionate to the expected value of the proposal. This way the system can use resources efficiently while still having a representative sample of the network for each proposal.

Reviews can also be two-tiered. In the first tier, domain experts review the credibility of claims in the proposal. In the second tier, network-wide reviewers determine the value of the proposal to the network based on expert feedback. This ensures that a representative sample of the network can have an informed evaluation of the proposal.

Then, to prevent Sybil attacks, participants can have a vote on proposals based on their contribution to the network. This contribution can be in the form of non-transferable tokens, so that no one can have a vote greater than their impact in the network — even if it’s distributed across multiple addresses.

There can then be additional layers of security, such as the ability of users to challenge decisions, locking funds, slashing for fraudulent reviews, and so on.

So we can see that it's possible to achieve all the objectives needed for value consensus to form, and for a network to be able to trust the process.

Third, the Coordination Structure needs a funding source. Since we want funding to align with network participants’ interests, the funding needs to be based on currency issuance.

Everyone in the network then has an interest to both maintain the value of the currency and maximize economic growth from public goods.

As public goods contribute to the network's economic growth, demand for the network’s currency would grow also. If growth in demand for the currency matches currency issuance for public goods, the currency can maintain its value.

The network wouldn't want to overvalue public goods, since that devalues the currency. It also wouldn't want to undervalue public goods, since that makes others less likely to produce public goods for the network. The best strategy then is to value public goods fairly, based on their impact on the network.

Which brings us to the fourth (and last) element: feedback loops. A good way to ensure that public goods capture value based on their impact is to reward the goods retroactively — once the impact is realized. This way, the network has more confidence that funds are properly managed.

So now we have a structure that aligns the interests of network participants around the prosperity motive, facilitates agreement in the network on how much goods are valued, funds the goods from currency issuance, and does so sustainably through retroactive funding.

We thus have the blueprint of a Coordination Structure to capture the value of public goods — but we still need to turn this blueprint into reality.

So how can we do it?

Achieving value capture for public goods may have a far greater impact on our economy than achieving AGI in LLMs — trillions of dollars in value are at stake.

For this reason the effort cannot be limited to one person or organization. It needs to be an ecosystem-wide effort, involving all the major public goods projects in the space.

Our next steps should therefore be to put this coalition together, get the top mechanism designers to hammer out the mechanisms for this Coordination Structure, and start prototyping the system.

The faster we realize value capture in public goods, the better for crypto — and for the world. Let’s get to work!

The truth is that it may never happen unless we dispel an entrenched myth that is holding us back.

That’s because exponentially growing public goods funding will require a different approach from what we’re doing today; these goods will need to capture value.

The difference between goods that capture value and goods that don’t is like the difference between funding car production from the sale of the car and funding it from cookie sales.

If you fund car production from its sale then you can scale production, because with each additional car sold you can produce more cars.

If you fund car production from cookie sales — or any other external source of funding that operates independently of the good produced — then you need to find more people to buy your cookies for every car you produce, regardless of how valuable these cars are.

It’s not a scalable or regenerative process.

And that’s the essence of value capture; it’s the idea that when you create value for others — through a good or service — you can secure a portion of that value for yourself, typically in the form of compensation.

So what is keeping us back from capturing value in public goods?

Currently, all public goods funding platforms in web3 rely on external sources of funding. None of them have a mechanism that allows public goods to capture value.

The bigger problem though is that most people in the public goods space believe in the myth that public goods cannot capture value.

If people don’t think it’s even possible, how can they make progress toward building value capture mechanisms?

They can’t. And that’s why so little progress has been made on this front.

Why do people believe public goods can’t capture value?

The argument goes something like this: public goods, unlike cars or other private goods, are non-excludable — you cannot restrict people from using them — and because of that they cannot capture value.

We need to bust this myth!

The reason public goods don’t currently capture value has nothing to do with their excludability.

The real reason is that there is no proper Coordination Structure that allows public goods to capture value. Once you have such a Coordination Structure these goods would be able to capture value too.

What is this Coordination Structure?

Think of the common good of network security in blockchains. Network security is non-excludable; you cannot restrict users of a network from benefiting from it. And yet, we have a Coordination Structure, in the form of blockchain networks powered by consensus mechanisms, that allow miners or stakers to be compensated (capture value) when they secure a network.

We can equally think of companies or businesses as Coordination Structures that allow commercial goods to capture value.

Even though airplanes are excludable goods, if you did not have airlines that created demand for airplanes, they wouldn’t be able to capture value and they wouldn’t be produced in the economy.

No matter how much travelers would want to crowdsource the production of an airplane, they’re highly unlikely to produce the vast supply chain for the systems and components needed for the production of planes.

But once you have a business like an airline creating demand for planes, the profit motive incentivizes such a supply chain to emerge.

The same logic applies to all other commercial goods (in contrast to consumer goods) in the economy.

If non-excludable goods can capture value when a Coordination Structure is present, while excludable goods cannot capture value in the absence of a Coordination Structure, it’s not the excludability of goods that allows them to capture value, it’s the existence of Coordination Structures that create demand for them.

How then do we apply these insights to developing a Coordination Structure for public goods? That would be the subject of my next post

They dictate what you see, who you can interact with, what you can say, and how much money you can make from your own content.

If they don't like what you say they can censor or ban you.

They can do this because their economic engine is based on monetizing your attention. They don't work for you. They don't care about you, and they have no interest in your well-being or success.

But it doesn't have to be that way.

We now have a unique opportunity to reshape our entire social media landscape.

We can give users full control over their online experience, and empower them to do things that were not possible before.

In this new media landscape a platform will not be able to succeed unless it puts the well-being and success of users first.

What's even better? Legacy social media platforms will not be able to compete in this new landscape unless they abandon their abusive business practices, open up their algos and data silos, and start putting the user in the center.

So what does it take to create this new social media landscape?

If legacy social media is based on platforms monetizing user attention by having full control over user data and user experience, the new landscape will need to transform all three layers of this stack.

In other words, we'll need a new economic engine, a new data architecture, and a new user interface layer.

The good news is that much of this stack is already in place. The rest – the economic engine – can be built with existing technology.

If we look at a protocol like Farcaster, we already have a social media platform that's based on an open social graph and distributed data hubs.

On Farcaster anyone can read user-generated content from the hubs and build a custom user interface and algos to serve the data. Users in the protocol have control over what they post to the hubs and no one can take away their user identity.

All this already exists.

What's still missing here is the economic engine.

If the dominant economic engine on Farcaster is monetizing user attention, then we're just recreating the same dynamics we have in legacy social media.

Even if you technically have control over what you post, the platform still dictates who sees your posts. It therefore also dictates who interacts with you and how much money you can make from your content. And if the interest of the platform is monetizing your attention, it will treat you as their product. It won’t put your interests first.

If we want a social media landscape that puts users in the center, the economic engine for such a landscape can't be based on attention monetization.

It can't be based on subscriptions either; platforms using such a model will tend to benefit a majority of users at the expense of others, and not the network as a whole.

What we want however is for platforms to respect the interests of all users.

The economic engine will therefore need to align the interest of platform developers with the interest of users. This is already done somewhat well in the blockchain space, where the interests of those securing the network align with the interests of the network as a whole.

But while blockchain mechanisms like Proof-of-Work or Proof-of-Stake work well for network security, we need something that goes much further; we need an economic engine that can incentivize developers and service providers to build the tools and infrastructure that empower users the most.

Ideally, we also want this engine to enable collaboration on an open platform infrastructure, since this would give everyone the greatest ability to improve on the system and to build more tools to benefit users.

If we built such a mechanism we could create not just a social media landscape where the user comes first, but an entire ecosystem of apps and products that far surpass anything we have today.

Imagine using apps like Spotify or Netflix, but with a much greater ability to decide what music or show you’d view. Instead of the platform pushing content on you according to what benefits its bottom line, you’d  be able to use your social graph to look for the music or shows that your friends, or other users with similar tastes, love

You can’t do that today because social media platforms can’t make money from user data if they openly share it with other apps.

With a different economic engine, every app would be able to leverage the open social graph to greatly improve user experience. It would also be able to integrate or build on other apps to further empower users.

All this would be possible if we had a mechanism that allowed the network to value the impact of developers’ contributions – a “Proof-of-Impact” mechanism.

But we can have such a mechanism!

What makes such a mechanism possible is the architecture of open social graph platforms; unlike legacy social media, where the platform has full control over user content and what users see, open social graph protocols cannot hide or change user content.

This open architecture also allows developers to build tools to filter out bots or bad actors who are trying to manipulate opinion on the network.

The result is that open graph networks can be more trustworthy than the legacy platforms. And because users can trust the content, they can agree on what they value in the network.

That is the foundation needed for a Proof-of-Impact economic engine.

A network that can agree on what it values can also agree on the value developer contributions provide, and can fund those contributions.

And if the funding comes from currency issuance – the way it does in blockchains – we can make sure that everyone in the network has skin in the game; the network wouldn’t want to overvalue contributions, since that devalues everyone’s holdings. The network also wouldn’t want to undervalue contributions, since few developers would then want to contribute to a network that doesn’t value their work.

So now we know that it’s possible to have a social media landscape that puts your interests first and empowers you. But “possible” doesn’t mean that it would happen.

Legacy social media and other vested interests have every incentive to make sure that they remain in control, and that you remain their product.

What we need then is a movement of people – developers, creators, and supporters – who want to realize the vision of transforming our media landscape, and putting users’ interests first.

Now it’s time to act. It’s time to put the user in the center.

Mike Natanzon is the author of The Abundance Economy and founder of Abundance Protocol, a consensus value mechanism based on Proof-of-Impact.

Farcaster: @abundance / X: @Abundance_DAO

The adoption of the heliocentric model was not merely an advancement in astronomy; it was a fundamental shift in how people understood the world they lived in. In the 1,400 years prior to that shift, the dominant view was that of the Ptolemaic model, a theory that attempted to reconcile the geocentric view of the world with the observation of planets appearing to move in retrograde.

This geocentric model contributed to the belief that the laws that govern the heavens were fundamentally different from the laws that govern life on Earth. The shift to a heliocentric model, therefore, helped us realize that the universe is governed by one set of laws. This realization paved the way for Newtonian physics, the Scientific Revolution, and ultimately, modernity.

Today, economists have their own “geocentric” myth, but this time, it’s not about the universe revolving around the Earth; it’s about all economic activity revolving around scarcity. That’s because the consensus among economists today is that unless something is scarce, it has no exchange value in the market and, therefore, no economic value. And yet, it’s clear that vast swaths of human activity are valuable, despite not having exchange value in the market.

What makes modern economics so medieval in nature, then, is its inability to unify all of human activity under one coherent theory. Much like the geocentric model before it, the implication in modern economics is that there are two realms of existence: the economic realm, governed by the laws of supply and demand, and the non-economic realm, governed by social or cultural consensus.

Without a unified economic theory, we are forever forced to choose between doing what is profitable in the market and what is valuable to society. And while there is some overlap between these, too often, they come into conflict. With the rise of exponential technology, this conflict grows into full-blown crises—from the crisis of trust in media and institutions, social polarization, climate crisis, automation, and AGI, among others.

Pursuing a coherent economic theory to unify all human activity (as well as resource allocation) is, therefore, not some empty ivory tower intellectual exercise. Much like heliocentrism and Newtonian physics before it, such a theory has the potential to bring us out of our Economic Dark Age into an age of economic prosperity and abundance.

So what does a “heliocentric" economic theory look like? What would economic activity revolve around if not scarcity? The Galileo moment we need to look at is the advent of blockchain technology—or rather, one very specific aspect of that technology: its ability to value non-scarce products.

What does this mean? The laws of supply and demand in a market always apply to the goods that are being exchanged. It doesn’t matter if people invested a lot of time and resources into creating a product—if the product itself is not scarce, it has no (exchange) value in the market. Blockchains don’t follow this rule.

Blockchains need network security to ensure that only valid transactions are included in blocks and to prevent attacks on the network. But network security is a non-scarce common good; it benefits all network participants but cannot be commodified. Yet, blockchain networks like Bitcoin and Ethereum have managed to fund their network security to the tune of over a trillion dollars. And they did it self-sustainably—without relying on government subsidies or philanthropic contributions.

How did they do it? Instead of scarcity, blockchains put consensus at the center of their economic activity. All nodes in the network agree on a set of rules for how a new block is added to the blockchain. Network participants who follow these rules and effectively secure the network are issued cryptocurrency by the network. Because the currency issued dilutes the holdings of all network participants, they are all aligned in their interest to not devalue their holdings while maintaining the integrity of the network.

Scarcity, of course, still plays a major role in blockchains. The scarcity of the cryptocurrency itself—or, more importantly, the demand for it—is what incentivizes participants to want to secure the network in the first place. But here, too, there is a catch! This scarcity is determined by the rules that all network nodes agree to—by consensus.

So now we have the first hint of economic activity that revolves around consensus rather than scarcity. But network security is just one very specific activity. How far can we push the envelope in turning valuable, non-scarce activities into market-valued ones? Well, perhaps we can push it all the way.

Obviously, we should not expect to hard-code every beneficial network contribution and its associated value directly into the protocol. That would be absurd. Instead, we can extend existing consensus frameworks to encompass any beneficial contribution to the network. This would require the network to follow specific rules for verifying contributions that benefit the network and assigning them economic value.

What makes such a process self-sustainable is the aligned interests of all network participants; they all benefit from maintaining the value of the network’s native currency while maximizing economic growth in the network. Achieving both of these objectives necessitates agreement on the value of non-scarce contributions.

Putting consensus value at the center of economic activity would create a dynamic where people no longer need to choose between doing what is profitable in the market and what is beneficial to society. Instead, every activity that benefits the community would necessarily be profitable—the greater the benefit, the greater the profit. This alignment between people’s self-interest and the common good could resolve the many crises we face today and usher in an age of mass prosperity.

Mike Natanzon is the author of The Abundance Economy and founder of Abundance Protocol, a consensus value mechanism based on Proof-of-Impact.

Farcaster: @abundance / X: @Abundance_DAO

Impact Alpha is built on the thesis that if you create incentives within a network to encourage impactful actions, you can establish a positive feedback loop between the impact created and the currency used to incentivize it. In other words, the goal isn’t simply to distribute 10M (or 100M) $degen to creators through Impact Alpha. Instead, the process itself is intended to increase the token's value, so that 100M $degen could eventually be worth 100M dollars—or more. This principle can then be applied to any network economy and its native currencies.

To achieve this, Impact Alpha must become a "household name" within the Farcaster Ecosystem. That’s when the positive feedback loop the system is designed to create will have its strongest effect.

So this is where Impact Fund comes in. The Fund currently has three sub-funds: a Creator Fund, Development Fund and Growth Fund.

The purpose of the Creator Fund is to reward builders and creators on Farcaster based on their contribution to the ecosystem (impact = profit). Many users hesitate to multi-tip or auto-tip $degen because of the tip-for-tip rule. There is no such risk with Impact Fund because @impactfund only distributes funding onchain and doesn’t tip. The Creator Fund also reduces the amount of "spammy" micro-tips on FC.

The purpose of the Development Fund is to help offset some of the costs of full-time work on Impact Alpha, and the broader vision of creating a new economic paradigm. Since the project is open source those who contribute to its development can also be rewarded through the Development Fund.

The purpose of the Growth Fund is to add incentives and rewards to those who curate, contribute and spread the word about Impact Alpha while the system gets to the scale where it can operate self-sustainably. This Fund is meant to replace the Raffle and Rewards program we currently have and allow contributors to support the system’s growth.

Impact Fund will have a somewhat similar mechanism to @degenpad - contributors will be able to choose a portion of their daily $degen allowance to go toward the Impact Fund and decide on how to split it between the sub-funds. Impact Fund contribution would then go toward the user’s Contributor Score.

More on the Contributor Score and how it will be used in Impact Alpha in future posts.

With Impact Alpha creators and builders can focus on making the most impactful work for the Farcaster community, while curators are incentivized to proactively look for great content and drive discovery (and tips) to it.

As a creator or builder all you need to do is focus on creating things that benefit the Farcaster community. If you have tip allowances you can auto-tip specific curators or the ecosystem at large. 90% of tips go to creators and 10% to curators for their effort.

As a curator you get a daily allowance of $IMPACT points. When your staked casts are upvoted, your daily allowance increases (and vise versa). The best strategy then is to stake points based on the value of casts to the Farcaster ecosystem. Doing so will increase your allowance over time and allow you to stake more points – the more points you have staked on quality casts the more tips you're likely to get. You get 10% of tips that go to your staked casts thru Impact Alpha

Login to Impact Alpha at impact.abundance.id (see demo)

Install the $IMPACT Console Cast Action on your Farcaster client (see demo)

Stake $IMPACT points – use the Cast Action to stake $IMPACT points on great content – the more valuable the content to the ecosystem the more points you should stake (see demo)

Up/downvote (qDAU) – the system depends on curators staking points based on the impact of the cast. If you see inappropriate staking or overvalued casts downvote those. Upvote quality staking. These votes affect the future allowance of curators, so they have an incentive to stake points based on the impact of casts

Unstaking – if you accidently staked too many points on a cast you can unstake the extra points from the cast, as long as no one else up/downvoted on it. A downvote will result in lower future allowance

Multi-tip – you can multi-tip any tip allowances you have thru Impact Alpha frames. If you multi-tip thru the frame of another curator the system would distribute 90% of the tip to a random sample of 10 of their picks (proportionally to points staked), while curator will get 10% of the tip) (see demo)

Auto-tip – before allowances reset Impact Alpha can distribute your remaining $degen, $ham & $hunt tip allowances. You can choose specific curators (to distribute allowances to their picks) or ecosystem-wide (see demo)

Share custom multi-tip frame – you can use Composer Actions to share the picks based on specific curators, channels, and timeframes (make sure your custom selection has curated casts)

Explore – you can explore curated content in the app or by tapping on Explore in frames (see demo)

Maybe you'd distribute all the money equitably: every man, woman and child gets the same share. What would that look like? Well, maybe everyone has the same amount but not everyone knows how to use their money equally. Some people are gonna save it, some will gamble it away, and some will offers people an option to handle their money for a fee (thus making billions in the process).

If you come back after a few years you're likely to see a level of inequity that's not too far from what we see in the economy today (or at least strongly trending in that direction). Don't believe me? Just look at the economy of Russia; within 35 years since the fall of communism their level of inequity (Gini Index) is about the same as that of the US.

At the other extreme you could be "hands off" and let the market do its thing. What would that look like?

You’d definitely get a lot more productivity than at the other extreme, but not without a cost. Now instead of equal resource distribution you get distribution based on a power law – a few people will have most of the planet’s resources while most people will have significantly less. The real problem though is that the market can’t fix the problem of negative externalities; so you have some people at the top who made incredible contributions to society, but others may be there simply because they figured out ways to offload a lot of costs onto society to get to the top.

But is this really the best solution we can come up with? Why should there be a tradeoff between productivity and fairness, or between self interest and the public interest? Well, there may be a better approach, which doesn’t involve merely moving up or down the scale of self-interest vs. public interest. Maybe we can optimize for both.

The mental model for this approach starts with zooming out – like, all the way out – and thinking how we got to where we are from the very humble beginnings of, let’s say the Stone Age. We have all this information today at our fingertips, all the incredible technology and modern amenities, but it’s not like we have any more resources today than people had during the Stone Age. The resources on our planet remained the same, but our reality is totally different.

Now think what life in the year 2024 would have looked like if people from the Stone Age forward adopted different approaches to distributing resources. If technological progress had been just 10% quicker from the time of the Stone Age, the world in 2024 would have looked more like 2524.

And that may be the best intuition to how money – and therefore access to resources – should be distributed in the economy. It has to be based on what leads to the greatest progress in scarce resource use; the better you are at driving this progress the greater your monetary reward should be. Why? Because you’re lifting everyone up in the process; you’re aligning people’s economic self-interest with the public interest.

Not incentivizing such progress, or having alternative incentives, basically means you’re slowing down this progress and reducing everyone’s wellbeing.

Another way to think about it is that the people living in the bottom 10% in 2524 would still have vastly better lives than the wealthiest people in 2024. So the quicker we are at getting to that standard of living the better the outcome for everyone.

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).

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.

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.

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.

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.

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).

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.

Can you trust that the news you’re reading or watching are meant to inform you, and not to keep you glued to the screen to sell you ads?

Can you trust that the drugs you’re being encouraged to take are meant to heal you, and not make you dependent so the corp can sell you more drugs?

Can you trust that the food you’re eating is nutritious, and not just empty calories that are cheap to produce and addictive?

When that is the meta in the economy, you have to do your own research on every product, service, & source of info, because you cannot rely on others to provide you with credible info when you don’t know if they have your best interests in mind.

But what does it mean to “do your own research” in an environment where you can’t trust the credibility of any piece of data – where people are just as likely to post reliable info as they are to distort data for personal gain? It means that you have to invest an inordinate amount of time and energy to research any news event, or investigate the claims about any product you use. 

So let’s say you DYOR and now you want to share your findings with others. But how do they know that they can trust your findings? How do they know that you’re not just making false claims for personal gain? As long as the financial incentive is there – as long as that’s the meta in the economy – there is no way for them to know, and they too will need to (individually) do their own research about your claims.

It means that we have a trilemma in our economy between knowledge, trust, and financial incentives. We can have any two but not all three. In other words we can do our own research within the current economic meta but then we don’t trust others’ claims. We can also choose to blindly trust others’ claims within the current meta, but then we won’t really know the facts. Or, if we didn’t have an adversarial economic environment, we could trust others’ claims and have a high degree of certainty that they are factual.

This situation is clearly unsustainable, but how can we solve this trilemma? Obviously what we want is an environment where we can trust the products we use and the source of info we consume. By simply having reliable media sources we can make more informed decisions about what products we consume. And if we’re more informed, producers will have the incentive to create products that align with the interests of consumers, instead of solely focusing on profits.

So how do we change the meta for our information environment?

Changing the meta starts with changing the economic incentives; if journalists are paid based on the value of their reporting to the public interest, and not based on the engagement their content generates, they’d have an incentive to report the facts.

Then, if the incentive structure itself is transparent to everyone – if it’s built on the blockchain (so anyone can review the code) and the mechanism is easy to understand, then you can have a completely different meta.

Because anyone can “DYOR” on the incentives, and then have a lot more trust that the information is credible and independent of hidden interests.

Once you have credible information you can have news that’s meant to inform you, pharma companies that are focused on making drugs that actually help people, a food industry that’s focused on nutritious produce and so on. 

But it all must start from an information economy where the meta is aligning profit with value for the public interest.

With this logic in mind it benefits L1s and L2s to incentivize builders and creators to develop the infra and tools that would grow the network. The question though is how do you incentivize this at scale? While infra on a blockchain can lead to greater overall demand for the network that doesn’t necessarily mean that the piece of infra itself would generate returns for the builder. And if there’s no return for the builders what would motivate them to put time and energy into benefiting the network?

What if networks decide to reward builders based on the amount of txs that utilize their infra? The problem here is that the amount of txs doesn’t always correlate with the value to the network. You can imagine “farmers” building infra that is unnecessarily complicated and primarily designed to generate lots of txs but creates little value for the network. Such infra may even be regarded as malicious if it clogs the network with garbage. So merely counting txs doesn't surface value.

Another approach may be to allow the community to vote on builders to get funding. We now have Quadratic Funding, which combines voting and funding, where the more contributions a project gets the more funding it is likely to get from a matching pool. What this approach still misses is that builders are rewarded more on the popularity of their project than on its impact to the network. This also requires builders to spend more time engaging the community than building something impactful that benefits it.

And then we have retroactive funding. Here the idea is that projects are only rewarded once their impact on the network is assessed. Having the certainty of an impact-based reward allows builders to get investors to fund the project with the expectation of the reward from the network.

This approach – famously implemented by @optimism – is quite promising, but it’s not there yet; first, the system needs to be scalable. If there are a few hundred projects to review, maybe a group of a hundred or so reviewers can handle it. But what happens if there are many thousands of projects? Second, currently the goal is to reward builders from sequencer fee profits. But the impact of projects on the network cannot be fully captured merely by the increase in fees. If we want to have a real ‘impact = profit’ model we need a feedback loop that captures the value of the contribution to the network. And for that we need to engage the network's social layer.

So using specific metrics doesn’t work to surface value because those can be easily gamed. Using popularity doesn’t work for similar reasons. But rewarding projects retroactively based on their impact is a promising path if the review process is scalable.

Why not then scale the review process by putting the right incentive structure in place?

Thanks to the open social graph, we have an abundance of data on user interactions (& onchain activity). A network can use this data to reliably determine which users are highly aligned with it. It can then offer these users an incentive to look for and review network activities (and dev work) that grow the ecosystem.

If the network rewards users proportionately to the value they surface, it can get users to proactively surface all contributions based on their impact - much like investors proactively look for undervalued stocks in the market. If users try to game the system however they can lose reputation - and future earnings.

Developers are much more likely to focus on value creation for a network if they see that the network rewards contributors based on the impact they make (and not based on engagement farming for grant votes, or maximizing some arbitrary metric).

The networks that can best surface contributor value are therefore the ones who will attract the most talent and get the most growth.

The best path to get there would be by combining retroactive funding (where the impact is clear) with a social coordination layer that is aligned with the network, and has an effective incentive structure to surface value at scale.