Sustainability is one of those elements of a cryptocurrency protocol that is often neglected because it’s not as sexy as things like scalability and talking about getting your TPS to that “Visa level”.
However, it remains one of the most essential conversations about a protocol’s ability to survive for the long haul and continue to thrive.
Essentially, sustainability asks, “how do we pay for stuff?”
The fact is that cryptocurrencies are not corporations.
Even if you were to claim that cryptocurrencies or tokens are securities - they are still very decentralized and act much more like infrastructure, similar to TCP/IP.
“When you talk about a protocol that’s open source, the idea is to minimize the operational cost of that protocol. So things like putting tolls on the protocol or intellectual property on the protocol - even if it’s well intended, for example to fund a foundation, are likely to be less competitive than completely open and free protocols” says Charles Hoskinson, co-founder of Ethereum and now working on a third generation blockchain project, Cardano.
Because of this, it becomes much more of a challenge to determine the way in which we should sustain these systems long term.
Some models include a patronage program, where a team of developers from a company are dedicated to work on a project for a specific period of time.
Not only is this a band-aid type of solution but it also inherently gives that company or its team of developers an enormous amount of centralized control over what is meant to be a decentralized technology.
Even now, the W3C is engaged in a contentious debate about the prospect of integrating DRM into the browser. Entities like the EFF have already pulled out of the W3C due to this notion that bigger companies are wielding too much control and pushing for resolutions that serve large content distributors rather than facilitating a free and open web.
Then we have ICO’s.
ICO’s remind me of being one of Donald Trump’s kids. Yea sure, you know you get to start off with a bunch of cash, but eventually you know Daddy’s money is gonna run out.
“The problem is that an ICO isn’t an indefinite event or a continuous funding event. Rather, it’s a large flood of money in the very beginning to do something. But, no matter how large that pile of money is, it’s finite and will eventually run out” says Hoskinson in a presentation sponsored by his blockchain technology firm, Input Output Hong Kong (IOHK).
Cardano’s solution to this problem is to create what’s called a treasury.
Essentially, this treasury will be funded by a portion of each block reward that is reinvested into the protocol.
The treasury acts like a decentralized bank account. Money can only come out of this account thru a democratic method of voting for proposals to upgrade the protocol.
This model isn’t actually new, per se. Dash also uses a treasury system to future-proof itself and provide a decentralized source of long term sustainability.
Now either Bob or Alice can submit a ballot said treasury and propose an upgrade to the protocol. From there, the token holders can begin the voting process. If enough token holders like the idea or upgrade, then the ballot will be approved and the treasury will dispense funds to Bob or Alice.
“This abstract model is actually incredibly robust because it has way of being refilled on a continuous basis, it’s directly proportional to the overall influence and size of the currency - so as the currency grows, it has more and more resources available - which in turn can be spent to grow the currency, so there’s a positive feedback loop. [It also] has a democratic process, a democratic participation connected to the system that allows the stakeholders in the system to start having discussions about priorities, namely ‘what ballots ought to be funded?’”
Imagine you’re a dApp developer who has an idea for a project you want to build. Currently, you would have to do an ICO and essentially issue an arbitrary token as a means to raise the money necessary to make your project into a reality.
The treasury empowers the token holders to make decisions on where funding should go based on the merit of the projects and the needs of the protocol.
While this treasury system looks good on paper, it’s in fact extremely complex and involved.
Cardano hopes to deploy the first generation of this treasury by Christmas of 2018.
Who knows, by then the prospect of getting ICO money may be like negotiating with Ebenezer Scrooge.
