What incentives are best for decentralized platforms?
By boris, March 07, 2018
One of the major advantages of the blockchain is that token models make it much easier to incentivize users. For example, during the early days, you can hand out tokens to reward early users and solve the chicken and egg problem that so many social platforms face. With decentralized platforms, the value that is created by users (user-generated content) is not generated for a central entity like Facebook, but rather accrues with the users and token holders. Such models might spark completely new monetization opportunities, such as monetizing users’ healthcare/genomics data.
There is a lot of merit in these assumptions and token models are a powerful mechanism to incentivize behavior. However, when thinking about incentive models in decentralized platforms, most people tend to overlook the years of research that has gone into studying how users behave. After all, blockchain technology may be new, but human behavior isn’t.
Gamification pioneer, Gabe Zichermann, introduced the SAPS model – Status, Access, Power, and Stuff – for designing a reward hierarchy. SAPS is ordered in priority of what customers/users want, as well as ranked from stickiest to least sticky, and cheapest to most expensive.
Status – Badges, rankings
Access – Beta access, sneak previews, company and behind-the-scenes events
Power – Moderator position, special entitlements
Stuff – Money, discounts, merchandise
In a Twitter thread last month, Jeremy Liew made the point that while the SAPS model is useful for thinking about gamification/rewarding systems, it’s incomplete. For him, the first step in the hierarchy should be love: “people engage b/c they love a product.”
3. It misses the most important reason that users do something – because they love it. That's the starting point
— Jeremy Liew, Partner at Lightspeed (@jeremysliew) February 2, 2018
Jeremy made the important point that going down the SAPS path is a one-way street. Once you start rewarding behavior with financial incentives, users won’t do the same thing for status, access or power.
We can apply the SAPS model (and Jeremy’s views) to decentralized platforms. If you want to build a powerful decentralized platform, don’t start with financial incentives. “Stuff” is the least important driver of people’s behavior on platforms. Think about other ways why your users should engage with your product and use it. As Gabe said: “Only once you’ve exhausted all the other options should you consider including stuff in your gamification design.”
Following this logic, it might not make sense to do an ICO right away as this immediately puts a financial value on a token. If you want a sustainable strategy for long-term success, focus on building a passionate community of developers and users through all the other means (Love, Status, Access, Power…). Then, after you build scale, you can reward the most active users with airdrops. A good example of this approach is Numerai, an AI-based, crowdsourced hedge fund where data scientists around the world contribute to build stock market predictions.
Many organizations and researchers have been grappling with incentive schemes for years. A lot of work has already been done on the best ways to get users started on the journey, increase engagement and encourage certain behaviors. There’s always room for innovation, but don’t lose sight of the work that’s already been done.