The Problem: The current incentive systems for many applications and ecosystems in crypto, specifically governance token rewards, mining, and airdrops, are naive and will not extend to mainstream consumer adoption.

They are inefficient because they employ low power utilitarian incentive mechanisms and low levels of abstraction.

They may have worked in a bull cycle but a speculative environment masks the inefficiency (specifically by shifting everything up and to the right in incentive framework below).

If your need is for only thousands of users to adopt (for example, to operate an L1), this model may be perfectly sufficient.

But if your goal is to sustainably motivate millions or billions of users on web2 scale, you'll need to draw from a more comprehensive and potent psychological framework.

Luckily, businesses have been experimenting with how to tap into psychological incentives for hundreds, if not thousands of years. We can learn a lot from studying web2 loyalty programs which are among the most highly evolved at-scale incentive systems in the modern world.

Here is a quick framework. The basic model, which I’ve thought about for a while, is to distinguish incentive mechanisms from lower strength utilitarian incentives like utility and money to higher strength experiential and social incentives like curiosity, access, and status.

But it doesn’t end there. High value people tend to also play games at high levels of abstraction. So in thinking about how to replicate the best of the loyalty programs from web2, we should also consider abstraction as a semi-independent dynamic.

An extended incentive framework

Examples: Casinos and Bored Apes

In the sole context of gambling at a casino, consider the difference between slot machines, table games, and poker tournaments.

• Slots = everything denominated in money. Most direct.

• Table games = chips used as direct proxies for money. Some abstraction.

• Poker tournaments = chips used as abstract proxies for money. High abstraction.

You can also use this model to consider the evolution of a particular trend. For example, Bored Apes.

• May’21: Relatively inexpensive and fun

• Sep’21: Status signal for “iykyk”

• May’22: The celebrities have them

• May’23: Still cool (in our opinions), but no longer carry “iykyk” abstract signaling

One of the reasons NFT communities have been so successful is because, unlike fungible tokens (with a few exceptions), they’ve managed to tap into the higher order experiential and social motivators, even if much of this was propelled by speculation in the last cycle.

However, these experiential and social motivators are real and durable, just as people continue to join private social and country clubs in the physical world.

Closing thoughts

As with all models, this one is incomplete, but hopefully offers insights into how to promote incentive designs that move beyond direct, utilitarian models in web3.

As we build in consumer, we need sustainable incentive systems in web3 that work outside of bull markets, and for these to work, they need to move upstream in the hierarchy of psychological motivators.

This also means we in web3 need to up our game to design products and experiences that are actually delightful and useful. Token games, while effective in driving behaviors, often drive the wrong behavior, and so should come much later in a project’s evolution: only after it has demonstrated real value.

I recently spoke with a former colleague who was previously an exec for one of the largest crypto projects that you’ve definitely heard of and probably used. He put it well: “The element that interests me the most is your pursuit of a consumer use case for crypto/blockchain that does not involve financial speculation.”

All of us in web3 will benefit from his advice.

For nearly a decade, I led product at Google for some of its most advanced marketing and measurement products. This included measurement of over $100B in revenue, growing products from nothing to millions of users, and leading an Ads-wide transformation from 3rd party to 1st party data, which I began advocating for shortly after joining in 2013. Now, another data transformation looms, but few see it coming.

TL;DR

1. The internet model for personal data is broken and getting worse.

2. This model will only be fixed when we get the tools to individually assert ownership over our data.

3. Zero-knowledge data will transform the internet and the marketing that powers its economy.

The internet model for personal data is broken and getting worse

In the second it took to read the sentence above, over a million user events were logged and stored by Google alone through the use of a single advertising feature which I designed and built while at Google.

And this is just the tip of the iceberg. Our cars, smart TVs, smartphone apps, and credit card companies are all collecting and reselling our data… … sometimes with our knowledge … rarely first offering a choice … almost never giving us anything useful in exchange.

Regulators and users fed up with these practices have demanded changes. However, obtaining informed consent in practice is hard, as over 80%+ of users opt-out when presented with a clear choice. Meanwhile, for every company trying to do this the right way, there are two others willing to lie, cheat, or steal to obtain this data.

As trust erodes, the playing field tilts further toward companies with the brand and scale to focus on valuable user data collection and signed in experiences. This disadvantages everyone else, like smaller publishers, content creators, brands, and most startups.

To make matters worse, these companies will soon be feeding our data into AIs to precisely tailor content in real-time to maximally influence us. Having worked at the intersection of AI, privacy, and marketing for years, I am personally unsettled – this reality is closer than we think.

Simply by using services on the internet, we are opting into this extractive model where our data can and will be used against us – as long as we let others own it on our behalf.

This model will only be fixed when we get the tools to individually assert ownership over our data.

Lawmakers and regulators have begun combating these dynamics over the past 5 years but technology consistently outpaces regulation.

With every new regulatory protection, the worst offenders find new ways to build workarounds by creating new join IDs, striking new data licenses, and employing new dark patterns.

Confronted with dozens of companies whose entire business model revolves around using our data, as individual users, we are practically powerless.

We don’t even possess a common vocabulary to express what it means to take ownership over our digital identities, let alone our data.

For 99% of us, the foundation of our digital identity itself is something borrowed, lent out by an issuing authority. Email addresses, phone numbers, usernames, and even domain names are all examples. Anyone who has ever had one of these identities revoked or suspended, usually as a result of an error by the issuer, knows the pain and frustration of having part of our identity stripped away.

A true system of individual data ownership must be built upon an inviolable self-sovereign foundation. In other words, we should be able to prove who we are online, disclosing as little or as much information as we want, without anyone else’s permission or participation.

By this point, crypto-inclined readers will guess where we are headed. Looking past the scams and speculation, crypto at its core is a movement about self-sovereignty over anything digital of value. First it was coins, then code, then collectibles.

Crypto offers the promise of self-sovereignty over something even more valuable- our identities. But we are still far from where we need to be to assert this ownership.

Consider:

• The vast majority of our digital lives and the data we generate is still exclusively aggregated and owned in the existing system.

• Yet it also doesn’t all belong on a blockchain where anyone can view it.

• Even the subset of our data that does live on blockchains is being analyzed, sold, and used against us.

  • At this moment there are a dozen well-funded companies whose entire business model revolves around doing exactly this. Sound familiar?

  • Once we start receiving the same creepy and annoying ads when signing in with our wallet, we will quickly appreciate that private-by-default in web3 is no less desirable than on the internet at large.

In short, we need a private-by-default, easy-to-use, and permission-able system in order to fully express the endless complexity of our identities. We call it Zero-knowledge Data.

It will use the same public key infrastructure that supports blockchains, but doesn't inherently require blockchains to work (though many synergies exist), and must be easy enough for anyone in the world to use.

Zero-knowledge Data is part of a broader system of Self-Sovereign Identity that is being built as we speak by many talented teams, like our friends at Privy, Disco, Spruce, TBD, NFID, Benri, W3C, and the Decentralized Identity Foundation. It will permit us to own, permission, selectively disclose, and importantly, revoke data about our identities as needed- all critical prerequisites for true privacy, which we define as informed consent and control over our personal data.

Zero-knowledge data will transform the internet and the marketing that powers its economy.

Digital marketing remains the primary engine driving the internet’s economy to the tune of $500B+ per year. Marketing is also the chief cause of why user data has become so valuable and why it’s broken. Now we are witnessing the slow death of cookies and similar identifiers on which the entire system has been built.

The current consensus among my former colleagues and marketing experts is that marketing will gradually move away from user-based measurement and personalization. Instead, it’ll regress to 1999-style contextual advertising (think magazine-style) supplemented by probabilistic modeling (i.e., guesstimations) built by teams of PhDs that don’t even trust the results themselves.

If 2029 advertising looks like 1999, this is a sad end state.

Is this really the best we can do?

Some might argue “good riddance to ads”, but I believe that’s because we’ve become inured to bad advertising arising from a flawed system.

Marketing, executed well, can be a force for good: distributing money to content creators (who can provide information and services for free), driving value for users, and delivering value for advertisers.

User data leakage is a byproduct of the existing system, not a core requirement.

Imagine what marketing could look like if we could build anything, unconstrained by the current system?

Let’s take a look…

Marketing could enrich our lives by pushing us to discover things we didn’t know about that actually interest us.

Push marketing: When browsing anonymously in my news app, I see an ad suggesting a trip to Mexico’s Isla Holbox island, which is highly rated by other travelers sharing my taste for off-beat travel destinations.

This suggestion is highly useful as I have just discovered something new that precisely matches my interests.

None of my underlying data is shared with the publisher, advertiser, or ad platforms. Upon display, an impression is recorded using an identifier that can prove I am eligible to see the ad but nothing else about me.

Marketing could improve our lives by pulling trusted recommendations across our networks during our consideration process.

Pull marketing: I book the trip and a few weeks later am planning some activities. Recommendations are intelligently pulled from across the web, people I follow, and people in my network. I realize that my friend Marcia actually visited Holbox last year and highly recommends the Azul Bioluminescence tour, which is also recommended by one of my favorite people on Instagram. Booked.

I have just saved hours that I previously spent researching reviews while feeling more confident in my choices as a result of a trusted recommendation.

Again, none of my underlying data needs to be shared with the publisher, advertiser or ad platforms. Recommendations can be pulled using privacy-preserving methods and assembled on my device. Impressions through conversions can be tracked using a series of provably unlinkable identifiers in exchange for a small discount or other perk, if I agree.

In both scenarios, marketing becomes a source of serendipity, while my personal data stays private, no longer fed into 1,000+ separate ad trackers.

While seemingly implausible in the context of the internet, we are all familiar with this phenomenon from our daily in-person interactions where it’s called word of mouth.

Why hasn’t this been done before? Because it requires a different model, built around several properties:

• Useful: optimizes for marketing most useful to me, not the highest bidder

• Personal: understands my context and unique data, resources, and networks

• Private: does not require sharing any underlying or persistent data with intermediaries facilitating the marketing

• Permissioned: All the above required to opt-in, and I can opt-out at any time or easily switch to alternate providers if they do a better job

A year ago, this was science fiction, but now the technology exists to bring this model to life, building on recent developments in decentralized identity standards and zero knowledge cryptography.

Moreover, when we achieve this model, the market for marketing will be vastly larger than it is today. So much potential value is wasted through the trillions of impressions that serve to the wrong people for the wrong things. Almost everyone – advertisers, publishers, and users – loses in the current model. And this value could directly contribute toward helping to build the internet on better foundations.

At Icebreaker, we are building this future model for digital marketing based on zero knowledge data, with the goal of transforming the way the internet economy works to one that is useful, personal, private, and permissioned.

We believe in a marketing that enables us to tap into the full power of our digital identities to make our lives richer without leaking our data so that it can be used against us.

If building toward a world where we control our own data resonates with you, we invite you to subscribe for our journey. If you’re a builder, join us.

Warmly, Dan

Second party data, a bit more refined, Mutual agreements, a data-sharing find. A lesser-known cousin, more honest it seems, Yet no hero of privacy, as it still peeks at our dreams.

First party data, with consent not so clear, When we visit websites, cookies stealthily appear. Still in the shadows, they hold the key, The owners of secrets, our captivity they decree.

Enter then zero party data, a scheme so sly, A subtle persuasion, a lure, a wry try. With quizzes and surveys, their tricks did unfold, Coaxing out secrets, our data they’d hold.

But lo! A new hero, a fresh wind that blows, Enter our protagonist, zero knowledge data arose. Where companies operate, unseen is the clue, We users are masters, controlling the view.

In a world that’s consensual, encrypted, and fair, Privacy now cherished, trust restored with great care. This wondrous new era, the future, the key, A realm called “zero knowledge data,” the pinnacle, we see.

With joy, we proclaim this ode to the vision, Born from a world where privacy has risen. In the name of the people, of progress, and right, We celebrate zero knowledge data, a beacon so bright.