The most important feature of cryptocurrency protocols, in my opinion, is their ability to capture network value (think Steemit, LBRY) in a liquid, tradable token. What this means is that the once latent value of digital platforms have suddenly become relatively liquid and easy to transact. Your random internet scribblings could, through Steemit, be potentially worth plenty of money.

Digital content are like “The commons” from the work of 19th century British economist William Forster Lloyd. Our digital commons are, arguably, the self perpetuating content and meme snowballs on social media sites(YouTube, Reddit, 4chan, Twitter, Quora, Stack Overflow. But while the nature of digital goods means there is no risk of overconsumption, blockchain platforms designed around capturing value from digital commons still risk oversaturating the market with platform tokens through poorly designed cryptonomical systems.

Crypto-Economic Problems

The problem with content platform tokens (STEEM, LBC) is economic in nature.

Token rewards create an abundance of bagholdlers (ahem community members) but no natural buyers beyond speculators or ahem altcoin investors. The Cryptonomic system of these platforms have abundant supply, but no persistent demand. Thus if enough hodlers were to liquidate their holdings, it would drive down price, and impose a cost on everyone else on the network as a whole. Unsustainable.

We have thus far been blessed with a speculative “hyper moon” cycle in the general cryptocurrency market. Each “moon” cycle on Steem and LBC allows a portion of content producers to liquidate at a relatively high price, making bag hodlers (I mean, community members) out of shitcoin speculators.

In an ironic way, content creators on Steemit and LBRY are being subsidized by the bad traders of crypto Twitter.

The resulting volatility from each pump cycle is great for traders but subpar for content creators and content platform. Platforms need a critical mass of active users necessary for a self sustaining constant stream of content, and users want steady income. Youtube and Patreon has shown that great content comes from steady income streams, and that incentives are directly linked to the quality of content itself.

It’s clear that current solutions are less than ideal (eg, Steem power’s millennia long withdrawal process). For these platforms to become mainstream the liquidity problem needs to be addressed directly.

Potential Resolutions

A better system simply needs to account for and balance both the supply and demand of the Cryptonomic equation.
The most obvious solution seem to involve designing cryptonomic systems that tie the value token to the value created and offered by the platform such that these tokens become intrinsically valuable.

Ether for instance, has its price is tied to the use of the Ethereum blockchain through ICOs, gas, and contract costs. Thus increasing a net increase in users results in a net increase in token price, increasing the value of all projects on the platform. Ether is also relatively stable compared to STEEM and LBC because its functionality generates a steady stream of demand.

What other token business model can we build around blockchain platforms?