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Make programmable incentives work for YOU.

by Nico VergauwenNovember 29th, 2018

Too Long; Didn't Read

<em>Exploring more programmable incentives use cases.</em>

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Exploring more programmable incentives use cases.

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A quick refresher

In our last blog we presented ‘Knuckles’, a peer-to-peer marketplace for human intelligence. In this decentralized application or ‘dApp’, users can issue tasks they’d like a hand with. Users can attach a bounty to their task to incentivize other users to help them.

This mechanism of bounties lies at the core of many applications like StackExchange, Hackerone.com or Amazon Mturk. ‘Knuckles’ relies on that same mechanism of incentives but works very different under the hood. Previously we would have relied on a central operator like Amazon or HackerOne to provide this service for a fee, in return the central operator takes care of hosting, security, payment processing and arbitration. Knuckles on the other hand omits this trusted third party and allows parties to directly engage with one another.

Stack Exchange is a network of question-and-answer (Q&A) websites on topics in diverse fields, each site covering a specific topic, where questions, answers, and users are subject to a reputation award process.

This is possible because we use a ledger that’s distributed over a peer-to-peer network of all participants. In an earlier blogpost we’ve laid out a concept called ‘Programmable Incentives’. Quick refresher:

Blockchains like Ethereum allow us to write code or ‘smart contracts’ that live on the blockchain. This allows us to make conditional value transfers. With programmable incentives the goal is to reward positive outcomes and behaviour and disincentivize bad behaviour

In the rest of this blogpost we’ll lay the groundwork for some other exciting use cases for programmable incentives.

Customer Loyalty Program & Marketplace

Customer loyalty programs are nothing new, far from even. It’s highly likely that you too have a library of customer cards from different stores, many of which have points on them, but you never really visit those stores all that often. Then, when you’re shopping in one of your go-to places you’re desperately trying to find the right card when it’s your turn at the cashier, such a joyful experience. Additionally, loyalty programs are most often something only offered by larger companies, as the overhead for SME is larger than the ROI. On top of that is it the merchant that implements a centralized IT system that prevents double-spending of points.

What if we could solve those problems using a distributed ledger? Instead of a separate card or app per store we could join the vendors together on a single blockchain platform. Each vendor would be able to issue their own token, which works as a point system. These tokens are transferrable, so you can trade loyalty points with friends and family. Each merchant would implement his/her reward conditions in a smart contract (e.g. Minimum purchase amount). All of this without the stores having to establish a direct trust relationship for this. Isn’t that awesome? One could even build a marketplace where you could effectively trade those points directly with anyone, seamlessly.

Social Responsibility Network & Collaborative Commons

Another use case we’ve discussed extensively and even have a concept for on the table is a network catering to Social Responsibility, where business, non-profits, people and governments come together to create a positive network effect. To keep the length of the blog post in check we’ll leave government out of the discussion for now. Sadly, volunteering numbers are in decline. Something that’s likely to be attributed to multiple causes. One undeniable fact is that volunteering has been historically driven by intrinsic motivation, maybe this just doesn’t cut it anymore in a society where our lives seemingly get more busy and stressful. The passion to help others is something one either has or doesn’t, our solution does not change that. But we can perhaps try to ignite a spark through incentives. The two main other reasons for people to do charitable work are professional development and the ability to receive discounts at local businesses. Maybe if we can combinate the latter with intrinsic motivation it can yield positive results.

We could issue ‘badges’ on the blockchain, non-transferrable tokens, that represent a proof-of-completion as verifiable credential. Tokens could be organized by category and merchants would be free to marginally lower prices to holders of tokens that represent causes they approve of. When an entire community approves of a cause, there is a community wide incentive and thus social pressure to maintain the equilibrium and associated positive outcomes (collaborative commons). Additionally, should a scheme of marginal price discrimination be implemented which raises prices slightly for non-volunteers but lowers prices for people with a ‘badge’, merchants could effectively contribute more than the cost of contribution.

To implement the ‘sense of purpose and impact’ that comes with charity a voting mechanism could be introduced to give influence to contributors over the charity they’re contributing to (either through donation or volunteering). This could be done by way quadratic voting where a donation of X would result in a voting power of √X, but that would be a subject for its own blogpost.

Sustainable Transport

Another great example of ‘collaborative commons’ would be eco-friendly transportation to reduce the ecological footprint of a community or nation. The incentive and disincentive could be in the form of a carbon tax. We could implement a mechanism of price discrimination as described above. Where the government would tax bad behaviour (high carbon footprint) slightly more and good behaviour would get a slight tax benefit. A dynamic equilibrium would guarantee the incentive. Essentially what you’d get is a carbon credit market for people.

A cool concept we’ve played with in our minds is incentivizing the notorious Blue bike/Antwerp city bike rides using smart locks and a GPS tracker. We could then keep track of time and distance and pay out a reward according to the total of “good” distance and time travelled by the entire community.

While distributed ledger networks of IoT devices are still a novelty, identity, tracking of distance and carbon credits could still be maintained on a ledger of local municipalities and companies with such an offering.

Artificial Moral Agents

To conclude we’ll discuss a more futuristic topic in short: how AI and incentives match together. AI is one of the current hot topics in tech, with its rise also come concerns about its dangers. More specifically on the topic of morality and the dangers of AI improvements outpacing our understanding of it.

Blockchain could potentially offer a solution for creating AI that resembles having a sense of morality. There could be incentives and disincentives in the form of a machine reputation system. The challenge is to create an economic system for the AI to play in that promotes good outcomes for society. You could literally imagine this as different machines playing a virtual game within certain confines that should lead to good outcomes.