Building Regenerative Systems on Crypto Rails
0x1CC2
July 26th, 2022

Last week I introduced regenerative design and some of the key principles for building regenerative networks, protocols, and economies. 

This week, I want to explore how crypto values and Web3 tech can drive the adoption of regenerative systems. 

Right now we have a systems problem. As a society we are fighting the inertia of big business and the status quo of how things work. In order to change these systems, we need to focus on adoption and increasing the scale of small, resilient micro-systems.

The best way to drive adoption is through the use of incentives, which motivate people to take a particular action. 

Incentives: Helping Us Make Decisions

Why do people act the way they do? What motivates them to decide to do one thing and not another? Among a variety of viable options, what leads us to choose the things we do? 

Economists would say incentives. 

Incentives are anything that motivates a particular action. Broadly speaking, there are two types of incentives: intrinsic and extrinsic. 

Intrinsic incentives are motivations based on our values, personal feelings of meaning or purpose, or doing something where there is no obvious external reward. Examples of intrinsic incentives include taking pride in your work, having a sense of fulfillment after completing a task, doing something because it develops your character, or learning something new. 

Extrinsic incentives are external factors that motivate a particular activity and include receiving economic incentives like getting paid for a job, being praised by your peers for your work, or having exclusive benefits for belonging to a group. 

Traditionally, economists identify five types of economic incentives

  • Tax incentives: mortgage rate deductions incentivize home ownership. 
  • Financial incentives: getting paid for work or given stock options in a company. 
  • Subsidies: government subsidies for farmers incentivize them to produce certain crops. 
  • Rebates: energy rebates can motivate homeowners to install solar panels on their house. 
  • Negative incentives: In America, people paid a penalty for not having health insurance through the Affordable Care Act. 

Web3 tech and crypto open up a new set of extrinsic incentives for users to take certain actions, which can promote the adoption of regenerative systems. Some unique crypto incentives include: 

  • Airdrops: Optimism retroactively airdropped tokens to Gitcoin grant donors. 
  • Onchain status: Owning a particular NFT like PoolyNFT may grant holders future rewards. 
  • Staking rewards liquidity: Projects can incentivize holding and staking tokens, which supports a project over the long-term.
  • Voting rights: tokens and NFT can grant holders governance rights within the community or organization. 

When there is a lack of clear incentives, people lack the motivation to make decisions. The result is that despite the presence of technology and systems that can positively impact our society, adoption remains slow and we end up fighting the status quo for far too long. 

Crypto has a unique opportunity to offer a short cut, driving adoption through a variety of mechanisms that offer potential financial reward, in addition to the traditional economic incentives. 

While this is a significant driving force for change, perhaps the bigger lever regenerative systems can use is intrinsic incentives, gaining access to a whole new layer of capital and incentives. 

Building on Our Values

Crypto and Web3 offer a unique value proposition: a way of working and participating in the world that more closely aligns with our values. It is not obvious at first, but the intrinsic incentives for adopting regenerative systems may be just what we have been waiting for to finally change and transition from the broken industrial model. 

Decentralization: Decentralization is a core Web3 value and may not excite the wider culture, but what does excite people is the increased freedom and agency you find in DAOs to work on things you are passionate about. When power and agency are distributed, communities can accomplish much more than they imagine. 

Open-source: The open-source, transparent nature of Web3 means that people have the information and access they need in order to make decisions. Open-source code makes it possible to fork successful projects, increasing the scale and ability to iterate quickly on a problem. 

Decision-making: Decentralization and decision-making go hand in hand, but consent-based decision making deserves its own recognition. By allowing anyone to propose an idea, build a squad around it, and get support from the community, 

Mission-driven orgs: Most businesses primarily focus on profits and mission-driven organizations tend to struggle to make a profit. Most DAOs are mission-driven organizations that organize around a shared vision. The journey is centered on intrinsic incentives like community, trust, collaboration, and connection. 

Onchain reputation: The blockchain enables incentives for how we act and our onchain digital identity and reputation.

Self-sovereignty: Not your keys, not your crypto. Cryptography opens up ownership opportunities and supports financial independence for creators like never before.

Capital: Beyond simply financial capital, many Web3 communities acknowledge the value and significance of human capital, social capital, and natural (environmental) capital. 

By taking advantage of these intrinsic incentives, Web3 communities have an opportunity to build regenerative communities and networks that have the potential to organically scale. Over time these small micro-systems and economies will start to overlap and connect, creating larger regenerative ecosystems. 

Summary

The goal of regenerative design is to develop systems and networks (communities) that are restorative and emergent, benefitting both humans and the broader ecosystem. It does this by focusing on creating circular economies for sustainable consumption and to improve resource efficiency in the system. In order to drive adoption of these systems, networks, protocols, and apps can make use of crypto values and Web3 technology to offer users a unique set of intrinsic and extrinsic incentives. 

Incentives motivate people to act. Design the right systems with the right incentives, and we have the potential to create the better world we know is possible. 

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