The Staking Internet – New Formats for Mass Collaboration

By Rosemary Heather

Text orginally published in 221A‘s Blockchains & Cultural Padlocks Digital Strategy Research Report. More info here: https://221a.ca/wp-content/uploads/2021/05/BACP_Research_Report.pdf


This essay looks at blockchain-based staking networks as a prototype. Staking is a way to collectively manage a network using cryptocurrency dividends to incentivize participants. A staking network also provides the tools for decision making. In this basic form of network governance, the foundation is laid for a new era of internet citizenship. Broadly speaking, the first internet gave voice to the individual, and gave a home to niche concerns. Communities were built based on common interests without regard to location of participants. This ability to “connect” people, was a much ballyhooed capacity of the early internet. The next internet gives this connected populace new powers; specifically, a new understanding about the kinds of self organization the network makes possible. With the first internet, platform interfaces like Facebook and Google brought communities together—and grew massively rich in the process. The next internet changes the narrative. Power shifts away from the internet giants, by giving voice not only to niche but also collective interests. With the current internet, the value created by network effects has accrued to the entities that own a platform and its network. By contrast, staking enables the value created by a network effect to accrue to the users of that network.

Staking is an incentive/disincentive mechanism for the alignment of group action. As such, staking presages cryptocurrencies creating a new kind of internet, one based on the self-organizing tools blockchain makes possible. This includes the mainstream emergence of the DAO (decentralized autonomous organization), a format for collective governance, as a new type of online organization. Taking first a look at how the conditions for staking are embedded in the current UGC (user generated content) internet, the essay ends with recommendations to 221A for 1) running one or more nodes as part of the organization’s conceptual and business practice; 2) creating a staking pool pilot project to promote crypto web adoption in the legacy arts community.

Introduction

The culture of the current internet is an effect of users embracing the technology—specifically, in the form of user generated content (UGC), i.e., posting photos to Instagram or family news to Facebook, writing restaurant reviews on Yelp, participating in discussion boards on Reddit, or setting up a side-hustle on an ecommerce platform like EBay. Most internet users don’t do all of these things, but they probably do a few of them, daily. Blockchain technology offers a further iteration of this hands-on relationship to the network. The current internet profits from UGC by monetizing user data. Blockchains hold out the possibility for users to own and make money from their data—just one example of the utility blockchains can bring to internet usage.

“Blockchains are in the process of building an internet with stakes.”

UGC creates much of what we experience as contemporary culture today. Internet-based communities thrive globally. Through memes, tweets, message boards, chat rooms and other forms of shared internet content, UGC generates today’s cultural conversation. The negative effects of this are well-known. UGC is a vehicle for fraud, bullying, and disinformation. The consequences have been world changing. Weaponization of UGC by foreign and domestic actors created the still unfolding Brexit drama—just one example. Another: the global pandemic is best understood as a public health crisis, but UGC distorts the problem. Internet born tribalism needlessly politicizes the issue. Viral videos of anti-masker tantrums become flashpoints for culture war polarization. Covid19 vaccines bring a post-pandemic world into view, but UGC-fuelled anti-vaxxers threaten to prolong the crisis, needlessly.

Blockchains have the potential to be UGC on steroids, with all the attendant good and bad effects. This is already evident in the booming global culture that surrounds cryptocurrencies. However, looking beyond blockchains used for financial speculation, other possibilities come into view. Blockchains are in the process of building an internet with stakes. [1] This is UGC with stakes for the user, to be won or lost. More mundane than a dystopian Libertarian-led future, blockchain based solutions offer a chance for a better internet.

The Internet

The writer Joshua Cooper Ramo has a maxim: connection changes the nature of an object[2]. It’s a useful idea. For example, in the aftermath of World War II there was broad agreement that fascist ideology was a bad thing. The fight against resurgence included the banning of Nazi affiliations. Network connection wreaks havoc on this principle. Not only does Facebook not ban Nazis, it gives them a platform. Facebook is indifferent to the negative unintended effects of its own power, claiming not to be the “arbiter of truth” in Mark Zuckerberg’s words. But the power of the platform creates connections between the would-be Nazis among us. Connection changes the nature of the object. In this case, the Nazi creed is no longer constrained by the laws of sovereign nations—or even the shared values upon which the post-war consensus in the West was built.

Facebook is a microcosm of our age of connection. Whatever the distortions and uncertainties it has wrought upon us, whatever we might think of the platform and the people who run it, billions of people still elect to use it on a daily basis. Networks define us beyond the ability any one of us has to opt out of using them. [2] 

Cooper Ramo writes: “The act of linking our bodies, our cities, our ideas—everything, really—together introduces a genuinely new dynamic to our world. It creates hyperdense concentrations of power. It breeds fresh chances for complex and instant chaos.”[3] He notes that we are at the early stages of this epochal shift, which is as consequential as the Enlightenment or the Industrial Revolution.

“NETWORKS DEFINE US BEYOND THE ABILITY ANY ONE OF US HAS TO OPT OUT OF USING THEM.”

The origins of this transformation began in the late 1960s when ARPANET[4], a project of the U.S. Department of Defence, began to study how to share information across a network of remote computers (a node is a nexus of data transmission on a network and the initial network consisted of four nodes). The solution they chose was packet switching, in which data is broken up and transmitted across the network, then assembled again at its destination. Packet switching ensures broken spokes in the network are inconsequential. Designed to ensure that data seeks the most efficient path of transmission, a broken spoke means data shifts to another path. The operational resilience guaranteed by packet switching makes use of the redundancy built into network topography. Duplicated paths of transmission overcompensate for potential failure points in any one part of the network. This foundational internet is in essence a distributed computing operation, and carries within it the seeds of what will become blockchain technology more than 40 years later. 

The Blockchain Internet

Today’s internet is a success because the protocols at its base layer have been designed as open source and not proprietary. Using these freely available technical specifications private companies have each built their own little corner of the web. The utility of the technology for these companies derives, however, from each segment’s connection to the wider network. In this sense, the network is collectively managed. Through self-management, each section of the web contributes to the viability of the network as a whole; at the same time, the network as a whole isn’t dependent on any one part of the network to remain viable.

The story of the contemporary web[5] starts with private entities building proprietary applications on top of this network made from open protocols. 40 years on, Facebook, Amazon, Netflix and Alphabet (Google), are amongst a “new breed of companies that are the fastest growing in history”.[6] Collectively known as FAANG, these companies have created immense value, and changed the world in the process, all because each one found a business use case for networks. The global popularity of user generated content has been key to their success.

Through the network—and its extension through mobile and web apps—FAANG have shown an incredible ability to scale. Their business model combines free use of apps and platforms with data collection of the resulting online activity. Users readily incorporated UGC into their lives because of its utility as a “social” media[7]. The network enhances already existing social networks through the facility of connection, offering a form of convenience and personal affirmation that is difficult to resist.

With UGC, citizens of the world become de facto citizens of the internet, because of what these internet tools enable users to do. This agency plays a foundational role in 21st century commerce. In 1980, the futurologist Alvin Toffler coined the term “prosumer”[8], which combines consumer and producer into one. Toffler suggested the idea in reference to what he predicted would be a trend of mass customization, in the wake of a saturated market for standardized products. Toffler foresaw the lack of differentiation in mass production leading to bespoke products tailored to consumer tastes and needs.

With the advent of network society, customization took on a different form. The reason for this was not only a need for market differentiation. Far more important is the kinds of user agency digital tools enable—i.e., our UGC powered digital life. On a digital platform, as the saying goes, the product is you (and your data). Toffler’s customization became a reality in the 21st century activity of creating one’s personal brand—for profit, social status, or just for fun—which UGC helps to facilitate.

A further factor is basic economic necessity. For many, UGC is a source of income. The rise of the internet has a parallel in the rise of neoliberalism. Neoliberal ideology, a belief in unregulated free market capitalism, has driven economic policy in the West for the last four decades. It’s legacy is a ruinous landscape of short-term jobs and stagnant wages. Neoliberalism has created an army of underemployed or undercompensated workers. This underemployment creates a highly motivated workforce, who are supplementing their income through the quasi self-employment offered by the “gig economy”. Writing in the Guardian, George Monbiot notes that neoliberalism “redefines citizens as consumers.”[9] Tofflers’ coinage offers a better fit: neoliberalism redefines citizens as prosumers. The gig economy of part time, on call, or temporary employment is arguably a species of UGC. Whether working as an Uber driver, delivering take out orders for DoorDash, selling your crafts on Etsy, or setting up an ecommerce business on Shopify, the performance rating you get from your customers is key to the continued viability of your gig employment. This market micro segmentation of the side hustle workforce makes good on Toffler’s vision. In the end, it’s just a more extreme version of the UGC invitation to become both producer and consumer of your own content. The need to secure wages is one driving factor behind the popularity of prosumption.

Web platforms have been shepherding users along this road to personal brandom for some time now. In early promotions of the network as a social technology, this idea was sometimes expressed by companies placing the prefix “my” ahead of a product or platform. For instance, the Facebook precursor, Myspace, which was the biggest social network by user base from 2005-2008; or CocaCola’s music download site MyCokeMusic.com, which had a relatively brief two-year existence in Europe.[10] Putting the user in the driver’s seat is the implicit message too conveyed by the “i” suffix appended to Apple products—the iPod, iPhone, and iPad (released in 2001, 2007, and 2010, respectively). Apple smartphones and their competitors enabled the creation of the mobile app economy. While at first, use of Facebook was limited to university students, by 2006 the app was made open to the public. The subsequent explosive use of the two products[11], Facebook and smartphones, is a clear case of business symbiosis. By the time of his death in 2016, Alvin Toffler had seen the prosumer become a dominant economic force, with the user playing a starring role in the rise of these technologies.

Recent years have proven, however, that UGC agency comes at a cost. There may be a symbiotic relationship between platforms and their user base, but only the platforms

got fantastically rich in the bargain. If prosumers created the internet behemoths, the behemoths repaid them with an erosion of their personal well being on a number of fronts. On the neoliberal internet, precarity is a way of life. Worker entitlements, such as health benefits and paid sick leave, threaten gig economy profit margins and tend to be avoided, if possible.

In 2020, a group of app-based companies in California, including Uber and DoorDash, sponsored the Proposition 22 ballot initiative. Prop 22 was successful, ensuring that gig workers in the State would continue to be classified as independent contractors and not employees. This, the most expensive ballot initiative in California history, is worth mentioning because of the way it exemplifies the Gordian Knot of problems facing an internet-based workforce. The platforms behind Prop 22 spent over $200 million USD to avoid costs associated with employing, as opposed to contracting, their workers. In advance of the ballot vote, Uber bombarded its drivers with messages urging them to support the initiative. A group of Uber drivers fought back with a lawsuit against the company, claiming that the “barrage” of messages violated their employment rights. The lawsuit was ultimately unsuccessful because it could not prove that drivers would face penalties from Uber for not supporting Prop 22.[12]  Regardless, Uber subjected its drivers to a kind of app-based psychological warfare. The workplace intimidation was implicit, if not liable in a court of law. The case shows that, in addition to precariously employing its workforce, Uber imposed a disciplinary regimen on its drivers, even if more implied than stated. This is in addition to the monitoring drivers are subject to via the performance ratings they get from their passengers.

The Uber story is part of a larger tale about today’s participatory surveillance culture spawned by UGC. The tracking of user data creates today’s familiar bastions of internet empire (Facebook, etc.), while also subjugating users as fully surveilled points of aggregate data.[13] The thinking around surveillance capitalism is beyond the scope of this essay. Still, the concept should be noted in passing because of the way the surveillance capitalist extracts value from internet relationships. Facebook, for instance, monetizes the data related to not only your internet purchases, but also your interests—the groups you belong to, the conversations you participate in, the stories you “like”. So there is internet commerce made up of the platform as a marketplace for goods and services; then there is another commercial internet, one that profits from the data internet usage produces. The internet self is thoroughly enmeshed in the imperatives of internet commerce. These are imperatives that play out in the form of algorithmic behaviour modification or control. The relationship is “top down”. As noted, however, this top down dynamic (me as a highly differentiated but still categorized Facebook user subject to algorithmic nudges and manipulations) is still dependent on a “bottom up” dynamic, one that consists of my online life, an entity that comprises me and all my myriad internet-based relationships.

Having an internet life is an already established behaviour. Within it lies the seeds of the next internet, one that extends today’s UGC-based forms of internet agency and commerce. The sharing economy, as represented by AirBnB and Uber, can be seen as an early form of this new type of internet relationship. You can rent out your home on AirBnb through a connection made possible by the network. Using AirBnB is different from subletting your home through newspaper want ads or even using Craigslist, because of the app’s reputational scorecard. Though not perfect, online reputation metrics instill a sense of confidence about a transaction. AirBnb and other sharing economy apps are living documents of this form of internet-based relationship.

Creating, while simultaneously documenting, collective events in real time is a fair definition of what the internet does. It’s also a pretty good definition of the blockchain.[3]  Bitcoin, the original blockchain use case, was invented in 2008, and is the brainchild of a person or group of people known by the pseudonym Satoshi Nakamoto. Blockchains today create the backbone of a new type of internet. A blockchain is in essence a database, but one that is duplicated thousands of times across a network of computers and is subject to ongoing self-audits to reconcile its content. On average, these self-audits happen in regular intervals (depending on the blockchain), each one producing a block of data, which is added to the list (the chain) of transactions. This is a way of using the network that has obvious benefits. The blockchain database isn’t stored in any single location, meaning the records it keeps are truly public and easily verifiable. No centralized version of this information exists for a hacker to corrupt. Hosted by thousands of computers simultaneously, its data is accessible to anyone on the internet. Since its invention, the Bitcoin blockchain has operated without significant disruption. To date, any problems associated with Bitcoin have been due to hacking or mismanagement of applications associated with the blockchain, not the infrastructure itself. In other words, these problems come from bad intention and human error, not flaws in the underlying infrastructure.

A network of computing nodes make up the blockchain. Together, nodes create a powerful second-level network, a wholly different vision for how the internet can function.
Every node is an administrator of the blockchain, and joins the network voluntarily (in this sense, the network is decentralized). Collectively, the nodes on a blockchain manage a ledger of transactions, which is constantly updated according to a cross chain agreement, or consensus.  (Because of the role node operators play in network consensus, they are often also referred to as network validators.) The Bitcoin blockchain operates according to the proof of work (POW) consensus algorithm. POW offers each validator an incentive for participating on the network: the chance of earning bitcoins.

Nodes are said to be “mining” bitcoin, but the term is something of a misnomer. In fact, each one is competing to win bitcoins by solving computational puzzles. By design, nodes operating the POW algorithm have a low probability of success in each competition, in effect randomizing the process. This guarantees an averaging out of successful validators across the network[14]. Bitcoin’s cross-network computing process, which undergoes regular self-audits, ensures that the data it manages is secure. However, while it is extremely difficult to override the network, this form of data security comes at the cost of an excess expenditure of network resources.

Blockchains burn electricity to mint coins; specifically, POW blockchains do this. Bitcoin, as the marquee example of a cryptocurrency, is often derided as being extravagantly wasteful for this reason. Proof of stake (POS) is the proposed solution to this problem.

The Staking Internet

Bitcoin was the raison d’etre of the blockchain as it was originally conceived. In the decade following bitcoin’s invention, thousands[15] of other versions of this blockchain use case have been created, to varying degrees of success.[16]

A bottom-up internet already exists, to the extent that it was built by UGC. But the agency UGC provides users comes with considerable costs. These are not limited to the invasion of privacy that comes with tracking of user activity across the network (those ads you see on Facebook connected to your Google search the day before). Free access to internet platforms also enables all manner of internet fraud, imposture and distortion of information.

Blockchains turn the internet into a mechanism that can create value and authenticate digital information. With Ethereum, the number two blockchain by market capitalization (Ether is its native token) blockchain technology gains an additional layer of functionality[17]. Launched in 2015, Ethereum has the most active developer ecosystem of any blockchain. The platform was first envisioned by the technologist Vitalik Buterin in a white paper he wrote when he was seventeen. Buterin’s vision was to make blockchains programmable through the implementation of automated, chain-based “smart contracts”[18]. Blockchains use networks as secure, encrypted data verification mechanisms; building on this capacity, a smart contract executes on a blockchain when certain pre-specified conditions are met. A data feed of real time information would trigger such an event. A simple example would be a successful bet placed on the outcome of a sports match, which would then prompt a cryptocurrency payout. An online ecosystem that combines the legacy internet with blockchain technology enables this kind of chain-based automation.

In Buterin’s vision, Ethereum has the potential to create a global computer, or what he calls the Ethereum Virtual Machine (EVM). If fully realized, Ethereum creates a network that thrums with countless automations. Smart contract use cases are in development for everything from cross border finance and solar grid management, to home purchasing (transfer of title) and voting in elections. This vision for the EVM is notable for the way it gives the user a more direct role in certain kinds of transactions, while displacing the people and bureaucracies that previously acted as intermediaries for them. Blockchain users can leverage the network for direct (peer-to-peer) interactions with a vast field of potential connections globally. This is today’s internet, in other words, but with a powerful added dimension of functionality made available to the user.

Blockchains are a mechanism for creating digital network-based value. A smart contract based ecosystem for digital assets is being steadily built out to leverage this value.[19] The staking internet plays a central role in this ecosystem, in two ways: as a vehicle for financial investment, and as a function of network security.

As a financial investment, a staking internet is an internet with table stakes for its users. In a gaming enterprise, investing table stakes means you are willing to risk losing your stake for the chance of winning more than you bet—poker, sports betting, etc. In a business context, Wikipedia defines table stakes as the “minimum requirement to have a credible competitive starting position in a market.”[20] It’s a similar proposition of winning or losing on a bet in a game, but with higher real world consequences.

What staking means in the context of a network is somewhat different. The competitive starting position of networked table stakes is by definition a collective proposition. This is true not simply because staking is a form of pooled investment; in general, traditional financial products—a pension fund, for example—also fit that definition. The difference resides instead in the internet-based, peer-to-peer nature of the staking relationship. Simply put, staking is an evolution of certain types of behaviour the internet makes possible. Automations combined with self organization contribute to the viability of whatever good on a network is under collective management.

As a function of network security, the staking internet is a foundational part of the EVM. Staking is made possible by the proof of stake (POS) consensus algorithm. In late 2020, the Ethereum blockchain began the process of shifting from POW in favour of the less resource intensive POS, a long promised upgrade for the platform. POS achieves network security in a similar way to the POW blockchain protocol: through the management of a shared ledger that is reconciled at fixed intervals by network validators. However, whereas POW requires cross network computing to verify each transaction, POS takes a different approach to achieving network consensus. POW blockchains incentivize network participation by rewarding node operators with coins. With POS, validator nodes stake coins (i.e., make a security deposit) in exchange for the right to help manage the network. Stakers earn interest on their deposits from network transaction fees, with stakes locked in for a specified amount of time. For each block produced, validators are selected according to a randomizing algorithm. Through this randomizing process, each validator is incentivized to help manage the network via the chance to win a block of coins. Equally, validators lose some or all of their stake in response to any action that is detrimental to the network. Leaving the POW protocol for POS allows Ethereum to process transactions faster, promising greater mainstream viability. Ethereum’s move to POS is still early enough in its implementation to be considered unproven. If successful, it will help to scale the network, in theory creating a cryptocurrency ecosystem that rivals legacy finance.

The Emergent Internet

“We’re at the Early Stages of a Truly Novel Structure That can Organize Humans and Money”[21]

Olaf Carlson-Wee

Blockchains have the potential to shift the top-down internet into a more equitably bottom-up technology. Incentivization to form relationships on the network is at the heart of the cryptocurrency story. Because it’s still in the early stages of its development, most blockchain success stories adhere closely to the original raison d’etre for the technology: internet money. But that will change. Networks + crypto presages a new era of networked relationships. Financial incentives made possible by crypto have the potential to transform the relationship users have with their internet lives. Particularly ripe for change is the top-down dynamic in which users enrich the internet giants in exchange for the privilege of having a digital life.

One proof of concept for a bottom-up internet derives from staking; i.e., the user’s participation in the proof of stake protocol. For the typical user, staking as it currently functions is a way to earn interest on your crypto, much like earning interest on your savings account in a legacy bank. In many important ways, however, staking is an entirely different proposition. An investment in a stake is an investment in the staking protocol. Staking is a prototype version of a more fully user controlled bottom-up internet, in other words.

These negative effects of internet use are well-known. However, the advantages of UGC are such that users tend to overlook its downside. The value created by users is primarily social—though this generalization should of course include every business opportunity that comes from participating on the network, along with all businesses launched on the internet or because of it. In terms of producing a skilled army of content creators, however, UGC lays the foundation for the next era of internet use, one that is underpinned by cryptocurrency networks. This means, potentially, that social interactions on the web (restaurant or product reviews, commenting on and liking your friend’s post, producing and sharing memes, etc.) could be profitable for users. Further, the enhanced utility that users get when UGC is combined with cryptocurrency will in all likelihood have other more profound effects, starting with the users’ relationship to the network.

Staking blockchains have the potential to reset the balance between the proprietary web and its vast global user base. The large internet entities get their massive scale because of how easy it is to coordinate users on the internet. Users come together on the current internet most typically by virtue of common interest and shared emotion. In the best version of this internet, money is raised through crowdfunding for people in need. In the worst, the internet crowd becomes a mob, one that bullies without consequence. Staking promises a better internet, one on which altruism and self-interest align, and where bad actors get penalized.

“Token networks… align participants to work together toward a common goal.”[22]

Chris Dixon

Currently, this kind of alignment happens at the level of the crypto token. As Chris Dixon, quoted above, notes: the common goal for today’s active crypto networks is “the growth of the network and the appreciation of the token.”[23] This feedback loop drives the creation of value in the cryptocurrency industry. Joel Monegro describes it as a process in which token holders are “stakeholders in the protocol itself.”[24] Another way of saying this is that successful network projects benefit from network effects[25], but with users investing in the network itself. Early investors in bitcoin or ether are also creators of the network. This happens either through the building of products or services that help extend its functionality, or through pure speculation on the tokens. The thousands of tokens[26] that come after bitcoin and ether, took a similar approach (if not to similar success in the majority of cases). If cryptocurrencies get derided as ponzi schemes it is because of this curious tautology that lies at the heart of their inception: users of the network own the network. Running a blockchain node or staking on the network offer two variations on this idea. 

A large part of crypto activity today focuses on speculation.[27] But this happens alongside the many blockchains that are prototyping other kinds of use cases for the technology. Innate to this stakeholder internet is the true meaning of decentralization. User-owned networks reduce the role of intermediaries and allow users to directly accrue profits that typically go to large entities like Google et al..[28] Staking is only the beginning of this transformative approach to online life, one that in future will include users owning and profiting from the data that accrues from their activity online.

Decentralized Autonomous Organizations (DAOs)

The UCG internet is the result of an ongoing mass collaboration. This starts with the router that connects users to the network, on up to the posting, commenting and sharing of daily internet use. Most users don’t think about the underlying network infrastructure that makes UGC possible—or they do, but only when their network stops working and they need to contact their internet service provider (ISP) to troubleshoot the problem. Outages in network service tend to be temporary and easy to fix. Similarly, most users don’t think about the role they played in expanding their ISP network when they plugged in their wifi device. In this sense, everyone with an internet router runs a node on the network. However, the network is rarely thought of in this way. Instead, an internet driven by UGC agency dovetails all too perfectly with the imperatives of neoliberalism. The neoliberal ideology of self-actualization fits nicely within the UGC fairytale, which gives users a voice, an audience, and in some cases material success. This ideology disconnects users from their agency as a collective entity, however, even as users enjoy the benefits of their digital agency on a daily basis.

There’s an argument to be made that legacy media instills the disconnect users have to the role they play in helping the large internet platforms to prosper. No longer passive receivers of the broadcast media, the UGC internet populace nonetheless are passive about the personal cost of their internet use: free labour, daily surveillance, and behaviour manipulations. Up to now, reasons to think about the role each user plays in the UGC mass collaboration have been lacking. But crypto networks, and specifically staking networks, provides a reason—and more importantly an incentive—to having a more hands on relationship with the network. The opportunity is not to just earn interest on one’s crypto but a shift in perspective. Staking offers a step forward in a much needed reorientation of users’ relationship to the network. What previously was freely given away to the large internet entities becomes a new form of collective power. At its most basic, this power resides in an understanding of the role we can play in the management of staking networks and the seeds of a new agency this gives us.

As a leading art organization, my recommendation is that 221A stake on and set up and run one or more blockchain nodes. This would be the first step in an educational outreach initiative to explore what an internet underpinned by cryptocurrencies could mean for artists and arts organizations internationally. The longer-term objective would be to create a DAO as a collective experiment in online community building.

Bitcoin mining is now dominated by a few large players. Huge resources are needed to run a profitable mining operation, pricing most people out of the market. Staking offers a counter narrative. It is simple to stake on a network using an app. To run a node and become a validator on a staking network requires a more serious investment of business resources. In its own particular way, however, staking has the potential to fulfill the original vision for bitcoin: a decentralized network that rewards everyone who participates in its management.

221A would be a leader in building a stakeholder network of organizations. Beyond this, the goal could be for 221A to expand their node/staking activity into the running of a DAO. Blockchain technology enables the creation of a network owned and operated by its users. The format of the DAO adds governance mechanisms to staking-based network engagement. The potential that DAOs offer for creating new relationships, between users and the network and between arts organizations, is still at a very early stage. As an organizationally innovative arts organization, 221A is well positioned to explore the potential of this technology in the formats of staking/node operations and DAOs. Below, I propose one idea for a pilot project designed to introduce artists and arts organizations to the crypto space, with a view to securing their longer-term participation on the crypto internet.

A 221A Staking Pool Pilot Project

I recommend that 221A explore setting up a staking pool; i.e., pooling the crypto resources of participants with the purpose of earning crypto dividends on a staking network. For instance, a minimum amount of ether could be determined for participants to join a 221A run Ethereum Beacon Chain node. Terms of participation—such as timeframe of commitment (how long the investment is locked), what percentages of revenues are (calculated in proportion to amount invested), and terms for participants to exit—could be programmed into a smart contract. Other decisions could be determined through a DAO, with investment in the staking pool giving participants voting rights (one vote per investor). Further, a pooled investment on a crypto network could be the preliminary stage of 221A setting up an artist’s trust. In the trust, revenues from pooled resources could be allocated as determined by DAO participants. If it functions as a nonprofit, the staking pool and trust should not violate the terms of 221A’s nonprofit status, though of course more research on this question would be needed. Overall, the project’s goal would be to create better awareness about the next web and its utility for new forms of collective intelligence and network-based collaboration.


Footnotes

[1] Tech billionaire Peter Thiel, cofounder of Paypal and an early bitcoin investor, one of the most high profile proponents of seasteading, is an investor in the Seasteading Institute. See: https://www.seasteading.org/

[2] Joshua Cooper Ramo, The Seventh Sense: Power, Fortune, and Survival in the Age of Networks (New York: Little, Brown and Company, 2016)

[3] Cooper Ramo, Ibid.

[4] ARPANET is the acronym for the Advanced Research Projects Agency Network https://en.wikipedia.org/wiki/ARPANET

[5] Though often used interchangeably, the internet and the web are two different things. The former refers to the open protocol network; the latter, to the proprietary internet that has been built on top of it.

[6] Ibid. The author cites: Uber, Instacart, Alibaba, Airbnb, Seamless, Twitter, WhatsApp, Facebook, Google.

[7] “I said, ‘Well, it’s not like service media, and it’s not quite informational media — it’s social media!'” she said. “It wasn’t media we were creating — it was media we were facilitating,” Jeff Bercovici, “Who Coined ‘Social Media’? Web Pioneers Compete for Credit,” Forbes, Dec 9, 2010
https://www.forbes.com/sites/jeffbercovici/2010/12/09/who-coined-social-media-web-pioneers-compete-for-credit/#3cf3ee1251d5

[8] Alvin Toffler, The Third Wave: The Classic Study of Tomorrow (New York: William Morrow, 1980).

[9] “Neoliberalism sees competition as the defining characteristic of human relations. It redefines citizens as consumers, whose democratic choices are best exercised by buying and selling, a process that rewards merit and punishes inefficiency. It maintains that “the market” delivers benefits that could never be achieved by planning.” George Monbiot, “Neoliberalism – the ideology at the root of all our problems,” The Guardian, April 15, 2016. https://www.theguardian.com/books/2016/apr/15/neoliberalism-ideology-problem-george-monbiot

[10]  Seán Byrne, “Former #1 EU music service MyCokeMusic to close down,” Myce, June 21, 2006 https://www.myce.com/news/Former-1-EU-music-service-MyCokeMusic-to-close-down-11991/

[11] “Number of active users at Facebook over the years,” The Associated Press, October 23, 2012 https://finance.yahoo.com/news/number-active-users-facebook-over-years-214600186–finance.html “Unit sales of the Apple iPhone worldwide from 2007 to 2018,” Statista, February 19, 2020 https://www.statista.com/statistics/276306/global-apple-iphone-sales-since-fiscal-year-2007/

[12] Faiz Siddiqui and Reed Albergotti, “Court rejects Uber drivers’ bid to bar app from pushing political message on employment status,” The Washington Post, Oct. 28, 2020 https://www.washingtonpost.com/technology/2020/10/28/uber-prop22-ruling/

[13] Ramona Pringle, “’Data is the new oil’: Your personal information is now the world’s most valuable commodity,” CBC News, August 25, 2017 https://www.cbc.ca/news/technology/data-is-the-new-oil-1.4259677

[14] In theory—the near monopolization of bitcoin production by a few players in an ongoing problem. China has dominated in recent years, but that could be changing. Tom Wilson, “Crypto asset manager sees bitcoin mining shift from China to North America,” Reuters, February 11, 2020 https://www.reuters.com/article/us-crypto-currencies-idUSKBN2052FW

[15] “There are approximately 5,392 cryptocurrencies being traded with a total market capitalisation of $201bn (as of  April 22, 2020).” Rick Bagshaw, Coin Rivet, April 22, 2020 https://finance.yahoo.com/news/top-10-cryptocurrencies-market-capitalisation-160046487.html

[16] Estimates are that, to date, over 1700 cryptocurrency experiments have failed. The list includes many scam or joke coins. Coinopsy is a site that indexes failed coins. Though easily dismissed as noise, a quick scan of the site provides a snapshot of an internet ecosystem made up of professional and niche communities that were thought to have a potential user base for a cryptocurrency token. See https://www.coinopsy.com/dead-coins/

[17] Ethereum has inspired many rival smart contract platform projects. When judged according to the amount of “meaningful economic activity” each one shows, these so-called Ethereum killers appear to have failed in their mission. See : Matthew Finestone, “Ethereum Enhancers, Not Ethereum Killers,” Coindesk, October 14, 2020, https://www.coindesk.com/ethereum-enhancers-not-ethereum-killers

[18] The concept of smart contracts was first proposed by Nick Szabo in 1994. In 1998, Szabo also proposed the idea of bit gold, a digital currency that is recognized as the precursor to bitcoin. https://en.wikipedia.org/wiki/Nick_Szabo

[19] 2020 saw huge growth in the popularity of decentralized finance, or DeFi, most of it built on the Ethereum blockchain. See: Alyssa Hertig, “What is Defi?” Coindesk, December 3, 2020 https://www.coindesk.com/what-is-defi

[20]  Wikipedia, “Table Stakes,” https://en.wikipedia.org/wiki/Table_stakes

[21] Olaf Carlson-Wee, “We’re at the Early Stages of a Truly Novel Structure That can Organize Humans and Money” The Defiant, August 20, 2020https://thedefiant.substack.com/p/were-at-the-early-stages-of-a-truly-85f

[22] Chris Dixon, “Crypto Tokens: A Breakthrough in Open Network Design,” Medium, June 1, 2017.  https://medium.com/@cdixon/crypto-tokens-a-breakthrough-in-open-network-design-e600975be2ef

See also Moloch Dao’s Ameen Soleiman: “Ethereum is a coordination platform. As the cost of coordination itself drops, the most disruptive opportunities will be the one’s that enable unprecedented levels of coordination.” “MolochDAO: Could This Decentralized Autonomous Organization Help Ethereum Scale Faster?” Unchained, March 1919, 2019 https://unchainedpodcast.com/molochdao-could-this-decentralized-autonomous-organization-help-ethereum-scale-faster/

[23] Ibid.

[24] “When a token appreciates in value, it draws the attention of early speculators, developers and entrepreneurs. They become stakeholders in the protocol itself and are financially invested in its success. Then some of these early adopters, perhaps financed in part by the profits of getting in at the start, build products and services around the protocol, recognizing that its success would further increase the value of their tokens. Then some of these become successful and bring in new users to the network and perhaps VCs and other kinds of investors. This further increases the value of the tokens, which draws more attention from more entrepreneurs, which leads to more applications, and so on.” Joel Monegro, “Fat Protocols” Union Square Ventures, August 8, 2016 https://www.usv.com/writing/2016/08/fat-protocols/

[25] “The value of a product or service increases according to the number of others using it.” “Network effect,” Wikipedia. Facebook is the par excellence example of a business benefitting from a network effect.  For multiple millions of users, their personal networks on Facebook provide a value that banishes any thought of leaving the platform. https://en.wikipedia.org/wiki/Network_effect

[26] “There are approximately 5,392 cryptocurrencies being traded with a total market capitalisation of $201bn (as of  April 22, 2020).” Rick Bagshaw, Coin Rivet, April 22, 2020 https://finance.yahoo.com/news/top-10-cryptocurrencies-market-capitalisation-160046487.html

[27] Venture capitalist Chamath Palihapitiya refers to this phase of the technology’s development as a “ghetto of day traders and speculators.” Kyle Torpey, “Former Facebook Executive Makes The Case For A $1 Million Bitcoin Price,” Forbes, April 5, 2020. https://www.forbes.com/sites/ktorpey/2020/04/05/billionaire-explains-the-path-to-a-1-million-bitcoin-price/#475241312c79

[28] That is, the dominant global tech companies collectively referred to as FAANG: Facebook, Amazon, Apple, Netflix and Alphabet (formerly known as Google).

[29] Cade Metz, Bitcoin Will Never Be a Currency—It’s Something Way Weirder, Wired, June 1, 2017 https://www.wired.com/2017/01/bitcoin-will-never-currency-something-way-weirder/


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