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Designing New Economies – Blockchain for Social Innovation [IEEE Ecuador Technical Chapters Meeting 2023]
Traditional market economies have proven incredibly efficient at financing, producing and distributing private goods. At the same time, they continue to prove ineffective in financing and conserving public/common goods, be they forests, wildlife, climate change, social equality or even peace. The so-called “tragedy of the commons” partly explains the root of this problem, relating it to the huge differences in incentives that drive economic agents in markets for private versus common goods.
In mathematical language, anyone who pays for a public good, by increasing the level of production of that public good, is benefiting N people, but is only getting 1/N of that benefit himself. Therefore, interested individuals tend to contribute only to public goods whose benefit/cost ratio is greater than N-to-1. In contrast, an individual buying a television will pay 100% of the cost, but will also enjoy 100% of the benefit, which makes it much easier to make investments based on a benefit/cost ratio of 1-to-1.
Leveraging the capabilities of blockchain technology to design new market mechanisms, the P.R.I.N.G.O – Private Incentives for Common Goods project provides a platform aimed at escaping this issue by realigning incentives in commons economies so that private actors make as significant profits as in private goods markets if their actions bring real value to the common good. P.R.I.N.G.O establishes a strong link between the commons and the video game industry. The rise of digital assets/Non Fungible Tokens (NFTs) in 2021 evidenced that there is a demand from users to own digital goods (a song, a sword in a video game, etc…) and trade them in open and decentralized markets. The rules governing these markets are public (based on open source code deployed on a blockchain), allowing decentralized economies to be built around them.
The platform developed in the context of the project enables the acquisition of real-world commons represented by dynamic NFTs in video games and, more importantly, allows their owners to potentially evolve them according to rules defined through a Decentralized Autonomous Organization (DAO), increasing their market value if their actions match the needs of the commons, generating a recurrent flow of value back to society.
P.R.I.N.G.O obtained a grant in the 2nd ONTOCHAIN call, launched under the Next Generation Internet (NGI) initiative of the European Commission to fund knowledge management solutions based on Blockchain and the Semantic Web that aim to preserve the structuring, integrity and reliability of the information and content of innovative digital initiatives.