Regenerative Finance and Web3 for Public Goods

on Monday, July 4, 2022

Regenerative Finance (ReFi) is about combining web3 finance tools with regenerative purposes like tackling climate change or cleaning up the oceans. ReFi pioneer Jeff Emmett discusses the promises and pitfalls of ReFi for providing public goods and nourishing the commons.

Jeff Emmett

Jeff Emmett is a Token Engineering researcher and Communications Lead at BlockScience, and co-founder of the Commons Stack. Drawing inspiration from mycelial networks and biomimetic processes, his goal is a toolkit for customizable regenerative economies that support purpose-driven communities. Jeff is the author of 'Rewriting the Story of Human Collaboration' and 'Challenges & Approaches to Scaling the Global Commons'.

Episode notes

  • What is regenerative finance (ReFi)?

    • "The term DeFi means decentralized finance. This would be contrasted to centralized finance. In our existing economic system we have markets which are often intermediated by major players. We buy ETFs created by Blackrock or JP Morgan etc, and they basically centralize and control a lot of our financial infrastructure. So what DeFi offers is sort of decentralizing that capacity to create instruments for borrowing, loaning, leverage. But what a lot of critics have mentioned is that it's kind of empty finance, which it is. So where ReFi comes in is trying to take those same mechanisms, mechanisms like liquidity mining, or proof of work and proof of stake in general, and rather than using it for finance for the sake of finance, it's putting regenerative practices and principles at the heart, and then using those mechanisms to support that regenerative endeavour." - Jeff Emmett at 6:08
  • You’re one of the founders of CommonStack. On the site it says you’re about “sustaining public goods”. Could you tell me a bit more about that …

    • What do you mean by public goods and what’s the challenge in sustaining public goods?
      • See the work of Eleanor Ostrom.
      • "There's a matrix of four types of goods: private goods, club goods, common goods and public goods. We have mechanisms that are very good at producing private goods and club goods. Private goods are things that are mine and not yours and which are scarce,there's only a certain number. For example, my shoes are a private good; my shoes are not your shoes, when I'm wearing them, you can't wear them. A club good would be something that you can put a gate around, but it doesn't actually run out. For example a golf course, or a movie theatre would be a club good. We have effective business models for these types of goods." - Jeff Emmett at 13:58
      • "Where it gets a little more tricky is on the other side of the matrix, to common goods and public goods. And the tricky part is we can't control who accesses them. So things like clean air, or clean water or open source code, or anything that is freely available, and thus can be overrun. - Jeff Emmett at 14:50
      • Streetlights are a classic example of the publics good problem. They are non-rival and non-excludable: my use of the street light doesn't diminish your use of it, and if we put in streetlights in a town, there's no real way to put a barrier to stop someone who hasn't paid for the streetlights from using it. What we are seeing today and going back in history, is that there is a challenge in maintaining those kinds of goods. The problem that can happen is, for example, if Jeff is paying for the streetlights, but he knows that Rufus is benefiting from the streetlights but not paying the taxes that he should, then Jeff might think 'why am I paying taxes?'. Before you know it, no one is paying for streetlights and there are no streetlights anymore. - Rufus Pollock at 18:16
    • How do you support “sustaining public goods”?
      • "At the common stack we're aiming to build tools that improve a community's ability to raise funds, coordinate on the use of those funds, and make decisions together on how to allocate their collective resources." - Jeff Emmett at 16:57
      • "How these tools help us coordinate is less about excluding the people who don't pay and more about aligning the incentives of the people who do such that it's a win win." - Jeff Emmett at 22:27
  • Could we walk through a basic model of public goods funding and how web3 (e.g. blockchain, smart contracts, DAOs, bonding curve) help address this?

    • Public goods walkthrough


    • Beach clean-up project, TrashHero, example set out in Jeff's 2018 article. Explored from 24:03

      • Annotated version:


      • Jeff: The aim is to clear beaches of trash (cleaning a beach is a public good). An issue faced is how to raise funds for materials to help the volunteers clear beaches (an example of the public good problem). One tool in addressing this issue is a bonding curve. A bonding curve is a mechanism to issue a token based on assets placed into reserve. So we establish a DAO and issue trash tokens, THC. We issue these tokens at a price that is defined by an algorhythm that icreases the price of shares as more shares are sold - bonding curve.
      • Jeff: What this tool is trying to do is align the incentives of people who want a clean beach. They contribute the money to fund the cleaning of a beach and in return get a token. Tokens are good for two things: you can sell them back, probably for less than you put in because the project needs to fund itself; and use them to vote on how the money is spent/ what projects are funded.
      • Rufus: I spent time as an economcis researcher working on this problem, how to fund public goods. The way we address the public goods issue at the moment is often by institutional means, eg the state: if you live in the US, you pay taxes, and then get access to the ediucation system and other public goods. My question is in relation to TrashHero is, why would people put money in? What's different here than just donating to a cause?
        • Jeff: donations fall pray to the free rider problem. With donations, you give and get nothing back. What if we take a non profit collaboration like cleaning beaches and we make it investible, we allow people to speculate on cleaning beaches. Look at the rampant speculaiton in hte stock market these days eg Tesla. That means Elon Musk is capitalized to fund any project he wants. What if rather than buying tech stocks, blue chips, or governemnt bonds, I could invest directly in trash change token. That DAO is funding grassroots projects in my neighborhood solving public goods problems.
        • Rufus: People invest in Tesla because they think Tesla is going to make them money, they anticipate a return, getting more money out than they put in. How does that work here? With TrashHero, how do I get my money out in the end? If everyone get the money they put in at the end AND we spend money on the beach clean up, how does that add up, how is that possible?
        • Jeff: Is it possible for everyone to enter this community and exit with more money than they started? No. Especially if you are looking at it as something that begins and ends with no other money coming in, then no. But you could have revenue coming in from elsewhere. Eg is TrashHero said to the Thai Government, we're going to clear up your beaches. If we do that, can we get an outcomes payment of $500,000? If we weren't to do that the cost of aquatic damage would be $1million, so you're saving $500,00. So the Thai Government say yes and pay $500,000.
        • Rufus: At that moment, you've moved from trying to solve the public goods problem using a DAO, to some other entity funding public goods. So TrashHero is not solving the public goods problem any more, the Thai Government is. This is an age old thing, governemnts give money to fund public goods.
        • Jeff: I disagree, this is a union of concerned citizens who come together and crowdfun the money. The new part is not the outcome of the government giving money, the new part is what incentivised the government to give the money. We're not saying this is an entirely new thing, what we're doing is using interesting incentive mechanisms to crowdfund money and give local, democratic, participatory budgeting of those funds.

Some left over questions

  • Bonding curve just seems to be a way to automatically issue shares at a preset rate in an enterprise. How is this helpful?
  • What problems are there? For example, what stops someone with private information about the success of enterprise buying tokens early?. Or conversely, who hears bad news from selling back on their news?
  • And doesn’t that undermine trust in the markets which is a crucial ingredient in their functioning? Trust in securities markets is in fact a public good - and a very valuable one.
  • What happens if a gap opens up between the secondary market for your token and your bonding curve, why would you buy from the bonding curve system (i.e. entity) when you can buy cheaper on the secondary market?

Episode Transcription


tokens, money, people, shares, public goods, common, company, treasury, tesla, community, blockchain, fund, sell, problem, buy, question, clean, bit, point, pay


Rufus Pollock, Jeff Emmett

Rufus Pollock 00:00

So welcome everyone to our latest episode in making sense of crypto and web three, and today I'm joined by a special guest, Jeff Emmett, who is a token engineering researcher and communication lead at block science and a co founder of the common stack. He draws inspiration from mycelial networks and biomimetic proposes processes. And his goal is a toolkit for customizable regenerative economies that support purpose driven communities. And he's the author of rewriting the story of human collaboration and challenges and approaches to scaling the global commons. I also just want to give new listeners a little bit of context before I dive in with Jeff, which is this series is an in depth exploration of crypto and web three, which as many people who are listening, listening will know is become a massive phenomenon. Very bold claims are being made about its potential impact claims that go far beyond plastic technology boosterism of better or faster to claimed for the radical transformation and improvement of our economic and social systems. At the same time, there is an extraordinary level of debate about these claims, even on basic points and definitions. And overall, this is a very controversial and even polarising topic with strong Pro and anti counts. This series is about helping us a new and anyone interested in this make sense of what is going on. And to evaluate for themselves some of these key claims were starting by exploring specific hopes and aspirations and their associated ideologies. And one final point I want to make before we dive in is that throughout this series, we're taking we're making a real effort to steal man, as we would say, any position to put the best version food of any position, whether it's positive or critical, and then have that and then evaluate it from there. And what that means is that it doesn't mean that I or even people I'm interacting with necessarily endorse everything, we're saying, we're trying to set up the best version of it possible, and then examine it critically and open mindedly. Well, thank you, Jeff, for joining today. I thought we could start out by maybe first of all, actually saying a little bit just like very briefly, how did you come to this area? Like, how did you end up on in this topic? You know, that would be actually really interesting. Just to ask a little bit of a biography. Biographical background.

Jeff Emmett 02:29

Yeah, certainly. So my my official training, I mean, university, a topic of study was electrical engineering, which I think set the kind of the, the stage for a lot of the work that I'm in now. But I kind of took a left turn after graduation, and then the travelling, I was in the travel and tourism industry as a guide for about a decade working in Southeast Asia and Central America, parts of Africa, and really, you know, seeing different different perspectives and different ways people lived. You know, I never really thought I would be back in the engineering space. But around, you know, 2016 2017 I was really looking around the world and wondering what was going on, there seemed to be this, you know, disconnect between our political systems and what the world needed. Brexit. Trump was elected president, there was this kind of far right populism sweeping the globe. And I mean, on top of environmental crises, biodiversity loss, you know, all everything going on. And, and I was kind of just looking around going, what is happening, and how can we address these these problems and kind of went down the rabbit hole of, you know, whole number of various tools, and, you know, electoral reform, universal basic income, a whole bunch of, of exploration, and then I got to got to blockchain and kind of went down the rabbit hole a bit on the insistence of a friend. And, you know, it was probably a bit of a naive epiphany. But I do remember one day in my garage, actually, I got up and I was running around the house, screaming, it's blockchain. It's blockchain. It's, you know, that's, that's going to fix everything. And of course, you know, nothing's going to fix everything. But I think there is a really important tool here. It's a kind of a new, a new substrate of design. And I think we're still at such early stages of this technology. And there is such potential for, you know, higher level coordination systems or maybe even lower level coordination systems that we can create, you know, we have we have a new substrate of design, almost like silicon is a is a design substrate for microchips. We now have tokens, which is a design substrate for coordination, potentially at higher levels than than we've enabled before. So that was kind of my foray into the space and of course, there's been a lot of learning since there's no there's no tool that will fix all the problems. That's that's the first thing I think there's a lot of naivety in the space and optimism which which is great, but It can also be a little bit blinding. You know, there's a lot of reinventing the wheel, which I think can can, we can definitely learn a lot from existing systems and continue to build with those systems. And you know, we don't have to develop everything all over again. But yeah, I think that's kind of what what got me into the crypto space. And what's what's kept me here is, you know, a lot of really interesting, bleeding edge research that I think can can help us solve some really big problems.

Rufus Pollock 05:30

Well, thank you. Let's come to the first question that I wanted to ask you, which was, I think it's fair to say that I understand, you know, one of the areas you'd be associated with in side of the crypto space is what is called regenerative finance, or Rafi in contrast to, you know, deathy which is decentralised finance. Can you say a little bit about what Rafi is what is regenerative finance? You know, and I know it might be sprawling, so you know, the nutshell version, but give a rough indication of what you take it to be or understand it to be?

Jeff Emmett 06:11

Sure. So the term defy is sort of like D decentralised finance. So this would be contrasted to centralised finance, you know, our existing banking system economic system, where, you know, we have these markets, they're often intermediated by major players, you know, we buy ETFs, those are created by Blackrock or JP Morgan or whatnot, they basically centralise and control a lot of our financial infrastructure. So what what defy offers is sort of decentralising, that capacity to create instruments for borrowing loaning leverage, I mean, the the defy toolkit is quite massive. But what a lot of you know critics have mentioned is that it's kind of empty finance. And it is. So where refi comes in is trying to take those same mechanisms, you know, mechanisms like liquidity mining, or I mean, proof of work proof of stake in general. And rather than using it for sort of, you know, finance for the sake of finance, it's, it's putting regenerative practices and principles at the heart, and then using those mechanisms to support that regenerative endeavour. And I think that's, that's absolutely necessary in this technology is real value, there's, there's a bit of a meme joke going on in the crypto common space, which is where I spend a lot of my time is, you know, these, these tools need to do something other than just create more, you know, magic internet money. That's, that's what most of defy does is, you put in your magic internet money, and your magic internet money grows, and then you take out more later. Sure, that's great. You know, it gets the interest of people who are here just for the money. And unfortunately, I would say that that's probably most of the space, you know, there is, you know, rampant speculation, it's basically, you know, a giant casino on the internet, most of it. Of course, there's, there's, you know, this very interesting and emergent space, where, you know, people are claiming Rifai is the way that we can, you know, fund the planting of trees or fund the drawdown of carbon from the atmosphere or essentially using these mechanisms to, you know, utilise magic internet money to do you know, regenerative ecological services for the planet, which we which we sorely need.

Rufus Pollock 08:38

So if I just play that back, so, leaving aside, we have traditional finance, which is formed, you know, traditionally, finance is a main means of transferring capital between two parties. It has various methods of doing that there's people you have capital investors, or people who want to lend their money and they want to transfer it to people who want to borrow it. So you know, I've got my money I've saved and you want to build your house, you need a mortgage, or you're starting a company. And the thing is over time, or even perhaps, Regina, it's quite centralised, it goes through new limited number of banks. And the whole point of like blockchain, in general, is it's all more decentralised. And so there was deathy, which kind of means we've got like, you know, the equivalent of stock exchanges, but which are decentralised in the sense of there's no central exchange in a way, etc, etc. And there's a dozen and you said, the issue is that really a lot of that is kind of empty, it's empty finance. It's kind of finance, you know, even worse than traditional finance and finance for the sake of it, you know, and then there's this regenerative, which is this real excitement of like and relate to the commons, right? Well, but maybe we could we could turn these tools or use these tools for really, like profoundly important and valuable purposes of addressing the climate crisis of addressing ecological crisis, of sustaining the call means in other areas, you know, building software excetera. And that's, that's what then Rafi is it's kind of regenerative finance. It's using these tools in that area. Is

Jeff Emmett 10:12

a play. Yeah, yeah, definitely.

Rufus Pollock 10:14

So you must wrong because it's, yeah.

Jeff Emmett 10:17

Yeah. And I think that, you know, there's, it goes a step beyond, you know, and I don't know if this is too much of a rabbit hole for this conversation, but even the traditional monies that we use in, you know, the traditional economies, you know, the US dollar, the Canadian dollar, these are, these are all economic mono cultures that are enforced by colonial nation states. And I mean, just just putting it out there that these are not the most healthy forms of currency. They're, they're imposed, they're centralised, I mean, in weight, centralization and decentralisation isn't one thing. You know, the way is created is actually fairly decentralised. But the way it's controlled is still fairly centralised. And there's there's a lot of issues with using enforced monoculture economies. And I think what this technology one of the most important things it offers is the potential for economic permaculture. These booms and busts we see in the global economy. I mean, we would see those booms and busts if the government of Canada imposed on every farmer that they could only grow apples, we would see massive booms and busts in crop production. And we understand that in agriculture, but we don't seem to click with that in economics yet. And I think what what this movement really offers is the separation of money and state and the potential for a plethora of various currencies, that will enable much more granular control and better feedback loops than then current nation state economies can. And I think that's a fundamental problem that causes all untold number of problems down the line, from, you know, ecological devastation to social inadequacy to, you know, funding wars and not and not climate regeneration. Yeah, and I think we're at the beginning of something really important in exploring these kinds of tools.

Rufus Pollock 12:14

Yes, just to take that go, it takes us back, we might not divert it into a more classic kind of point about why Bitcoin or, you know, other forms of, you know, potentially kind of cryptocurrency, which are not controlled, are sort of have could be transformative in the economic sense. I mean, we I think we could come back to that, if we have time, because it's another intriguing topic. It's one we've talked about. In other other episodes, I want to focus but it's interesting says you also subscribe to that one, as well as the basic referee points, there's kind of like taking, you know, different kinds of money make this difference to how you know profoundly how we can run our economy. Let's come a little bit, then into the referee side, which is around the kind of the comments because they said you're one of the founders of common stack. And on the sign, it says that common stack is about sustaining public goods, I think we're building says we're building common space micro economics, micro economies, sorry, to sustain public goods, through incentive alignment, continuous funding and community governance. Now, what just starts, the crucial phrase means rather, was sustained public goods. And then using that, how the How can you say a little bit about maybe just first of all, for our for, for our listeners that what do we mean? Can we give an example of what we mean by a public good? Or, you know, just just illustrate that or, you know, other comments? I think often they're related together? And then maybe something about how, what's the challenge in sustaining them? And then how you support sustaining public goods?

Jeff Emmett 13:49

Sure. So public goods, if anyone wants to have a look deeper, I highly recommend the work of Elinor Ostrom. And the study of the commons. I mean, you would, you definitely come across her multiple times. There's a matrix of four types of goods that's worth looking up if you're interested. There's private goods, club goods, common goods and public goods. And our you know, we have mechanisms that are very good at producing private goods and club goods, private goods are things that are mine and not yours. And they're, they're scarce. So you know, there's only a certain number so like, my shoes are a private good, right? My shoes are not your shoes, when I'm wearing them, you can't wear them. A club good would be something that you can put a gate around, but it doesn't actually run out. So like a golf course, or a movie theatre might be more like a club good. We have effective business models for these types of goods. You know, we have actually probably too many private goods. We've got 1000 different brands of toothbrush. You know, we've got business models to produce to produce private goods and club goods. Where it gets a little more tricky is on the other side of the matrix that common goods and public goods and then tricky part is we can't control who accesses them. So things like clean air, or clean water or open source code or anything that is, you know, freely available and thus can be overrun. So, you know, there there is the possibility that too many farmers can graze on a common field, for example, and this was the the seminal example of the tragedy of the commons, quote, unquote, from Garrett Hardin. And I think the 50s or 60s, wrote about how the Commons is unsustainable, it will always be overrun by the people within it. And therefore, we should have, you know, government intervention or some form of privatisation to protect these shared resources. And Elinor Ostrom is life was basically, or her work was going through real world examples of communities that manage shared resources as a commons. And she and she proved Garrett Harden's tragedy of the commons wrong, or at least, that he was talking about the tragedy of the non Commons. So the Commons is also a bit of a tricky word. A lot of people think that it's referring to a resource, it's actually I think the best definition that I've heard was was from David Bollier. And the Commons is a combination of three things. It's a common resource, like clean air, a community that uses it, and the rules and procedures by which they use it. So things like, you know, the the Atlantic fisheries, and Canada, the fisheries, it's an open resource, but if every fisherman over fishes, we will destroy the resource. And I mean, we, this has happened and is happening. And yeah, but but we also have rules such as you know, quotas, or, you know, size of fish that can be taken in, and if it's below that, you know, it has to go back, etc. So the Commons is this combination of three things a resource, a community, and the rules by which the community can use that resource. So at the common stack, we're aiming to build tools that improve sort of a community's ability to raise funds coordinate on the use of those funds, and make decisions together on how to allocate their their collective resources.

Rufus Pollock 17:18

So just Just a sec, just, I mean, a community could be I mean, just to distinguish something here, obviously, it could just be in any enterprise. I mean, the company is anything, but what the contract particularly talks about sustaining public goods. So you don't just mean any corporation or any group who just want to do anything. You mean those who are focused on public goods i to reiterate their permission, let's pick an example. You pick fisheries, fishing, you know, which is a classic thing that can maybe as is a rivalrous or subtract double as it often would be putting the terminology, good I, if I take the fish, you can't take them, but it's difficult to exclude me, there's no way to kind of put a put a line around, you know, the fishing site, anyone can go in there and fish. But there are other things which are maybe more classic, even public goods, which are non rival and non excludable. For example, an idea, anyone who knows, Jefferson famously said, He who gets an idea from me, is someone who likes a candle from mine, they gain light without darkening me. Idea, ideas, streetlights, were also the classic other example, which is the update of Jefferson. If we put in streetlights in a town, there's no really way to put a barrier to stop me who hasn't maybe paid for the streetlights or you know, stops you from using it. But also, my use of the street light doesn't diminish your use of it. So those kinds of goods. And what we're seeing now is in human history, and going back a long way, there has been a challenge in maintaining those kinds of goods where we can't easily exclude people, and also even an ISP. Also for those whether whether whether they're rival or non rival, particularly where it's hard to exclude people. So we've cut down you know, in Jared Diamond's book collapse, you know, we cut down too many trees on Easter Island, there are ecological collapses, going back since basically at least 567 1000 years as far as we can tell. But in more and now today, we have challenges like it's hard to fund open source software, we're not addressing the climate crisis was difficult to clean up plastics in the ocean, etc, etc. So could you say a little bit then about, let's just kind of just delve in just for most sorry, before I go on is the challenge in this is this excludability problem? How do I stop someone coming along? Who gets to use this resource? Who isn't contributing to it? And then the problem that often happens once that starts beginning if if Jeff knows that Rufus is coming along, and Jeff is paying for the streetlights, but he knows that Rufus is living in a town benefiting from the streetlights but not paying the tax. access that he should, Jeff might be like, Why am I going to pay taxes and before you know it, we've kind of gone lower and lower and lower, and then no one is paying for streetlights. And there are no streetlights anymore. And so that kind of unravelling of the Commons or the unravelling of the provision of the public good. So could you speak a little bit then about how, particularly for me, how you sustain? How does common stack or your work or what you're interested in, or even just the blockchain and web three, and these technologies, the bonding curve, all of this stuff? How do you think it helps us sustain public goods?

Jeff Emmett 20:40

Sure, yeah, you touched on a lot of interesting points there. And I think what you what you just laid out that, you know, I'm not willing to pay because you're going to use it without being willing to pay this is this is a classic example of the free rider problem, also known as the prisoner's dilemma, which also kind of, you know, when you scale it up is is the tragedy of the commons, you know, everyone who takes but isn't willing to give, you know, adds up to that, that small problem, that suddenly becomes a big problem. And I, you also mentioned that, you know, what the tools I'm talking about could be used by any enterprise, you know, for example, in private goods production, and I agree, there's, there's definitely overlap with, you know, existing sort of incentive models, you know, companies use some of these tools already, you know, they issue stock, they give that stock to their employees, their employees are now stakeholders, if the employees work hard, that stock may go up in value, everyone is now a winner, you're, you're including you're putting a boundary around the firm. And you're and you're growing together. And this is very similar mechanism to what we're talking about. But now we're applying it to, you know, things that don't have that explicit boundary. So this could be just an a amorphous community, it doesn't even have to be a geographically located community, it could be a global, purpose driven community. So you're you're, you know, you're orienting around a specific problem, for example, you know, trash cleanup, or climate, you know, climate change mitigation, as opposed to, you know, my geographically located community wants to wants to do this, we can have globally purpose driven communities that, you know, don't require, you know, to be to be physically co located to to address problems together. So, so onto the question, how do these tools help us coordinate? I think it is, it is less about excluding the people who don't pay, and more about aligning the incentives of the people who do such that it's a win win win example. So I think we're verging on a new form of digital public goods. And this is I mean, it comes down to it money. If we, as a community come together, let's say you and me and 20 of our friends, we have a local problem, maybe there's too many potholes on our road. And I mean, this, this isn't necessarily an issue, we could,

Rufus Pollock 23:08

we could take your trash here, example. So I even if that's okay, I might just just give me a second, because I kind of, I did a maybe a small change, and you can correct me, as I as I do it, if I do it right or wrong. I can put it in here, but we can kind of walk it through and I can add annotations, which would be awesome. So I'm just gonna share my screen. And I'm gonna pick I think, I think it's this one. Here we go. So people, the audience who are listening in can kind of follow along. So that's, that's what I'm getting at the beginning is there's this kind of like, there's this a project. In this case, I think I'm referring here to just for the audience, we'll put it in the show notes, but a great blog post in 2018, about this kind of trashy road project. So do you want to, I'm going to add notes, but you want to walk us through and I, I can always I may have made a few tweaks, but feel free to like, correct me to the original. All right. I think it's here this article. Here we are. Yeah. So yeah, join us started. We've got this project when we need to clean up the beaches.

Jeff Emmett 24:12

Yeah, so So trash euros, an organisation actually they're spreading throughout Southeast Asia. But when I when I was there, they were starting off in southern Thailand. And they were doing amazing work. They were getting together a bunch of volunteers each week. They were going around to businesses in the area and asking for donations for supplies, you know, trash bags, protective gloves, some beers after for the volunteers, you know, and obviously their costs have expanded with with teams and advocacy and whatnot in the in the years since. But, you know, a common issue was raising funds to procure materials to enable this great work to continue. So the this was one of the examples that I had that I used in my initial Old 2017 article talking about some of these tools, and one of those tools is called a bonding curve. And a bonding curve. I mean, it's essentially a, a mechanism to issue a token based on assets placed into reserve. So one thing to know about about blockchain technologies is we have something called smart contracts. And smart contracts are essentially ways to have programmable money, if you want to put it simply. So, you know, if x happens, then send y funds here. And you can do all sorts of, you know, fancy programmatic commands for how the money should should operate. But what we're focused on here is, yeah, yeah, please check in.

Rufus Pollock 25:46

So for audience like for people, because I kind of had to do a bit of reading about bonding curves. But I mean, to be fair, like, just if I told me if I'm getting this wrong, but you could just think, imagine a normal company, it can issue shares, and often a lot of discussion, I think most of the audience members, if they're nothing could just replace the word token with share. So there's that there's trash, your project might be nonprofit, but it doesn't really matter for the moment, but it's kind of got these shares, it's going to issue. And the point is, we could write an algorithm, it doesn't matter whether we were on the blockchain for this moment, I have to say or not, but I've kind of like, I can issue like, a share with a kind of predefined algorithm of what price I'll sell shares at. So at the beginning, you know, you could write pay $1, and get one share of the trash Euro, trash Euro, I think it's trashed Euro THD, record trash, or yes, you're recording Exactly. And then later on the price will this is what we mean by the bonding curve, the price will have gone up. So at some later point, when more tokens have more shares, issued, maybe I've issued 1000 shares now for my project, the price to buy a share will go up. And this is like maybe like a normal company. The analogy here is that normally, if I buy in an enterprise, you could have, you know, I don't know, let's speak Facebook, you know, at the very beginning, you know, Peter Thiel bought his shares and Facebook at a really low price. And then when you bought shares, you know, 10 years later, they were much more expensive, because Facebook had got really successful. So I'm just thinking the analogy of real life is that share prices, you hope, go up. But here, it's kind of fixed. And the point is that you've sort of automated the ability of a Treasury in a company to issue shares to people. And it should be said to buy them back, it can buy and that can also be determined to buy them back at a different, normally lower price, it's almost always obviously set up, that the company can sell its shares, and then buying them back at some different but normally lower price. And that's what the bonding curve describes is this token supply. And this is the diagram from DSPs, just to acknowledge, there's this increasing number of shares or tokens issued, and the price to buy a token is going up. And here I've done it in dollars, I think you did it in ether or, but just to make it easy for our audience may be less familiar with Bitcoin or ether, whatever. So just to walk us through how this project, imagine that there is this this real project trash hero, and they decide to form a Dao, which is like a blockchain company or organisation a distributed autonomous organisation. That's step three. And if they kind of create these shares, or tokens, and then what happens, that's what I want to understand next. So they're issuing these, you're running track here. Oh, Tyler, and Jeff is are with other people locally. And you and I come along, Rufus. And what happens? I know Jeff comes along here, maybe, but we could have no room first. Maybe that's even better. I don't want to pay for what I'm doing that. X. And we'll delete that. So Rufus comes along here. And what happens then you just says to me, Hey, you can buy some trashy recording to support the project? Oh, yeah, tell me how it goes.

Jeff Emmett 29:01

So I want to I want to play on that shares or equity analogy a little bit more, because because it is similar, but it is also different in a way. So I mean, what these what these tokens are, essentially are governance tokens. So I mean, you can say shares in some way or governance tokens as well, because you can vote generally you vote on who's on the board. And then the board, you know, decides who's on the executive. And then the executive decides everything that goes on in the company. So as a shareholder, you have very limited say, over I mean, you're kind of give giving feedback into the highest level who's on the board, the board decides the executive the executive decides else. Tokens,

Rufus Pollock 29:45

rocker aakriti it's not, but just just a second because Yeah, well, you keep going that I want to come back to funding question but okay, yeah, why would I get the money but Okay, so there's direct more direct democracy in the Dow. I understand that normally, it's more like we vote on every proposal. It's like a company where we vote on every resolution that are every apple?

Jeff Emmett 30:03

Surely not? Hopefully not actually, I think that's one of the naivety of the current space is that everyone votes on everything. And I think that's another problem. You know, there's there's this opposition to hierarchy and a lot in the crypto space think everyone should decide everything, this also doesn't work. And we're seeing that play out in the Dow space. Now, it's just too much attention overhead for everyone to decide everything all the time.

Rufus Pollock 30:27

And this is fascinating, because I went through this whole cycle, having come from an era that was all about the egalitarian in the 2000s, about liquid voting and liquid democracy. And I do a lot of work on participative budgeting, yes, we tend to the wheel, but okay to tell me a bit more, I guess I'm just interested. So we're right at the beginning and trash, you're a token is getting issued. And you're telling me also some stuff about it, it's not quite like a share, because you're about to say a bit more like what's different from traditional equity.

Jeff Emmett 30:54

So So essentially, this is this is kind of like an economic game, to raise funds for a public good. So cleaning a beach is a public good, right? The people who show up later who had nothing to do with the cleanup, they enjoy a clean beach, but they didn't contribute to the cleanup. So this is this is their that, that free rider problem again. So essentially, what this technology these tools is trying to do is align the incentives of people who want to clean beach such that they can a put in the money to do it. So everyone, you know, stands around a table, and everyone put some money on the table. And in exchange for that money, you're issued a token, which is kind of like a receipt for the money that you put in. So if you put in, you know, 10 bucks, and I put in 1000, then I get more tokens back. Right, right. So tokens are good for two things. And you mentioned already that you can sell them back. So I can I can burn my tokens or give them back to the smart contract, and it will issue me, you know, my my reserve assets, my dollars, probably less than I put in because the project needs to fund itself. But I can always exit. But the second thing I can do with those tokens is use them to vote how all of the money is spent. So yeah, I mean, proportionally. So if I put in less money, I have less, say if I put in more money, I have more say. And that's just the lighting, you know, the sort of, yeah, that's a bit of a tangent. So we've all come together, we've put our money on this table, we've issued the smart contract as issued us the tokens. And now we can allocate basically using participatory budgeting. But with some with some key differences. We've got, you know, voting participatory buddy budgeting systems are still kind of working with, you know, the technical debt of voting systems, you know, namely that everyone has to get together, we've got to discuss these budgets, we've got to figure out

Rufus Pollock 32:51

before we come to that, so So wait, wait, what, okay, let's come to that. So we're just waiting. Let's keep going. So step five, here, is we're gonna there's some project, if I put it more generally, there's like, now the owners of tokens get to vote. What projects to do? Yeah, yes, eg payout 10 of these tokens to someone for cleanup of the beads. That was I think, in the if I go here, I think this was the example. So how do we get more resources? And then we were like, Yeah, this is the point monies come in peep some people. So I come back to that, because I got some questions. But then we organise a beach cleanup, and here you put his five, I'm gonna change it a bit, but just to make the numbers easier. But basically, someone pays out 10 trashy roto coins to clean up a beach yacht? I think that's his point about, you know, and potentially turn a profit. So what, how are people? So basically people now start coming in because they can get paid money to clean up the beach? That's the idea.

Jeff Emmett 33:53

Yeah, right. So so now we have sort of a proposal system, which is sort of like grassroots democracy. If we in our community of 50 people, if I see something that needs to be done, I can put in a proposal and say, Hey, I see this needs to be cleaned up, I can do that. And I just need 10 Trasher old coins to do that. Or maybe I see, you know, hey, there's a big problem in another province or another country entirely. I want to see that funded, I can put up a bounty you know, so a proposal is kind of one side and a bounty is kind of the other. So a bounty is basically like, you know, a pool of money floating on the internet and it says, hey, if this beach gets cleaned, and you can verify that it's been cleaned, and it can be authenticated, that that work has been done, then this money will be released to the wallet that achieves that. So we kind of unlocked this like internet based bounty system, you know, where we can crowd fund. We want to see you know, these beaches cleaned or we want to see you know, 100 PPM drawdown of carbon in the atmosphere and when Add is completed, funds are released to the addresses that that participated in that.

Rufus Pollock 35:05

So I just want to check something here again for myself. I, as I said, I worked for quite a long time even as an economics researcher on this question of how do we fund open source open knowledge in general. And these ideas or many people have done prizes for state or group funding, the Royal Society, for the arts and UK famously put for prizes in the 18th century, this was a subgroup. This is the general sentence, just to be clear, these are great. They're not in them, and you're trying to get out it's like, okay, so that these are all kind of like, things we did before that we can do on the blockchain. What I'm trying to get out here, like maybe to take me back or you guys, why would people put money in the normal problem with public goods is people don't put enough money. That's, that's why we have a public goods problem. It's why if I think we've all even like if we've lived in a shed house of a problem of a free rider problem with washing up. We've all seen things in our society that underfunded, we aren't dealing with the climate crisis. While we do deal with some public goods, mostly that has been through elaborate institutional means called things like the state that make basically, you could call it a very large scale club, good. If you're a member of the United States, if you're still in the United States, you have to pay taxes on the exchange, you get access to the US military, you get access to the US system, or consulates worldwide, you get access to the education system, you get access to all of these things. You know, and I'm trying to understand at the moment, which is this intriguing point of how it says we sustain probably because there's new ways we can sustain probably won't be through that a bit. In this case, what, what what I'm getting back, even at this stage here is why do people put money in why do you why is Rufus Bob or Alice? And maybe we're all just like, yeah, I get, we can do a tip set up. But even in local communities, we know the limits of that, like people, you know, if I've tried to do things in my local community, and sometimes they succeeded, sometimes they haven't. Why is it people are contributing money in here? Why do we involve all this financial stuff? Why don't we need to give money back to people? And because if I'm honest, at some point of it sound off in the background, people are gonna get to speculate in these tokens. And so that's the reason. You know, when I've looked at, you know, some of the projects that have token changes price a lot out there. But if that speculation wasn't there, what's different from just like donating to a cause? That's where I'm, I'm, I've still been a bit mystified out. So can you can you walk me through that a bit? Like how sure how it helps.

Jeff Emmett 37:38

Yeah. So I would say donations, fall prey to the free rider problem. So you know, if donations are, I mean, altruists are wonderful. But our system is systemically burning them out. Because they're expected to give and not receive in return. And that is the fundamental difference between the nonprofit sector and the for profit sector, is that I mean, you could probably get a little more nuanced than that. But donations are a sucker's game you give and you get nothing back. So so let's let's, let's play a little game here. What if we take a nonprofit collaboration like cleaning the beaches, and we make it investable? Now now that's saying we allow people to speculate on cleaning beaches and someone might say immediately Well, that's dangerous we shouldn't allow that there's there's a bunch of

Rufus Pollock 38:28

good with that. Just take me here if we're looking at roofer so at the very beginning, Jeff, you came to me and said, Hey, I bought and let's see one of the first buyers I pay $100 may get 100 trashy roto coins? Yeah. Some of that I get is being used POB is how do I get money? Like I'm trying to get how do I get money back? Yeah, like walk me through that a little bit?

Jeff Emmett 38:50

For sure that so if we're talking about sort of global trash cleanup efforts, so I mean, let's say this this community starts with 20 people and it produces a lot of value you know, we've we've cleaned up a lot of beaches, the people who are in are really gung ho and you know, some some foreign foundation hears about this or maybe even the government of Thailand itself goes wow, this is such a great project. These volunteers have come together pooled their money and done this we actually want to support this Well now there's there's a pipeline there's there's a way to see this is where for profit corporations have an edge over nonprofits is that they have access to global pools of capital investing in Tesla, I mean look at the speculation that rampant in the the stock market these days you know, Tesla's valued at and how many hundreds of times its its earnings, etc. But on the flip side, that means that Elon Musk is capitalised to do any moonshot that he can possibly imagine. go to Mars, dig tunnels under the earth, anything he's got all the capital available at his fingertips because he has the investable tokens called equities in various different companies. If we can unlock the the potential for investment like right now, what are my options as a millennial in investing, I can buy tech stocks, I can buy blue chips, or I can buy government bonds. What if I can invest directly in climate change token or trash cleanup token. And that meta Dow funded all sorts of on the ground grassroots collaborations in my neighbourhood that are doing something that I that I find truly important, I could care less about more apple flavoured computers coming onto the market or more like Tesla's coming out, sure, all those things are important. But those are the only options we have right now for long term investing. And I think this will offer the opportunity for people to invest directly in the social initiatives, the environmental initiatives, and outside of any individual company doing these things, I think we're really limiting ourselves bit by creating, you know, companies who can create equities, with Dows and tokens, we can literally put our money where our values are, and that that value can flow according to you know, direct democracy, local participatory budgeting to all of these on the ground efforts that are actually producing value in the way that we need it.

Rufus Pollock 41:19

So let me just let's walk this through though, because there's some, it's, I get the passion, and I kind of weigh what's already get ahead, I'm equally passionate about making, like, we need to shift how society is working, what I'm trying to get at those who don't quite have quite yet. So in Tesla, and I follow Tesla quite a bit, at least the vast majority of people there, they may talk, obviously, many of them I'm not saying don't care about environmentalism, but a lot of the talk is like they're going to make money because Tesla is going to take over the car market. So like the thing is, people are giving money because they anticipate some return for that they're gonna get more money out than they put in and I'm trying to work out you know, how does that work here let's just kind of really work this through here so I've let's go back and keep concrete I put my money and I put it in $100 for my 100 Trash hero coins. Alice put in more later how and even here You said he gets the project gets more successful. So you know like peep the beach is getting cleaned up if I think in your in your story, it's like, you know, they're you know, as word spreads about the value created around this positive social endeavour, philanthropy at local businesses, investors want to participate in further common cause essentially, potentially turn a profit that's crucial you have 1000 more trash euro coins are purchased. You know, for some, I have done my calculation here to go with your numbers, which is like, you know, maybe $1,500 Right? And so what I'm trying to get get here is I'm trying to understand now there's now sorry, there's there's not Treasury coins, the Treasury there's now I think, a $1,500 plus this which is 290, which is 50. I'm gonna have to do $790 Not VC and Treasury. I'm trying to go to the situation and so people have bought these trashy coins, how are they going to turn a profit how you say it's like an investment. How does that happen? How I that's what I'm trying to say and how do I get my money out again? And for this not to be frankly, a pyramid scheme or a Ponzi scheme because how do I get How does everyone get their money out? Here? That's what I'm trying to understand. If we spent money on the beach cleanup, that just seems to be like, like kinda like something doesn't add up for me, you know, if everyone received their money that they put in again, and we spent money on beach cleanup, how is that possible? It's like magic.

Jeff Emmett 43:48

Sure, so I guess a couple of a couple of points there. One everything is a Ponzi scheme if you if everyone sold their their Tesla stock right now we would see 10s of billions hundreds of billions of dollars of value quote unquote disappear from the face of the earth there's there's not enough collateral or reserve backing all of the value that exists so so just just to like start out that that essentially if you sell everything you know even even the US dollar if everyone sold every US dollar they had you would see a massive slide in the value of the US dollar you like this is this is the invisible with the market cap illusion was was a nice coin by Griff green talking about how you know if if everyone sold anything like all houses imagine all houses went up on the market at once you would see a massive destruction of value. So I think to say,

Rufus Pollock 44:51

Whenever Whenever Whenever that's first of all, is very because we're doing something here that I see in this community, like sometimes happen, which is we're using words in subtly different ways at different moments. So yes and no. So the word value, economists would use it, quite specifically, there'd be a vast array of destruction in price, like in prices, and in in, like what you could call monetary, like, what people have measured, but not necessarily in any value. Like, just to be clear, and this is a very important thing. There are things which have us value and things that don't, Bitcoin has no use value in that sense. Also, the US dollar has no us value, it is the US dollar at least is a currency, it's a medium of exchange, potentially store of value very something Bitcoin, you know, we could come to the currencies or not, but just to be really distinct here, when normally we invest in Tesla, while Tesla's market cap could massively diminish, ultimately, Tesla are making cars, there shouldn't be some residue or value, why Tesla wouldn't go to complete zero. I mean, it could do it could go bankrupt and things, but at least it equity has, or the value of the enterprise has some lower bound is because they're building freakin cars that people can drive around and use. There's some use value. So just before we get me in, because I triggered us off on Ponzi. Let's stick here on the trashy, recoin. Yes, how do people How does everyone because we say at some point, in this blog, here we say people and potentially turn a profit. As word spreads about it, people turn a profit, even the people you said you initially invested one of the reasons Millennials might be interested, they can do good, and they can make money. So how does that work? Yet? How do parent get their money out? What means this, this

Jeff Emmett 46:34

is a really good distinction use value and exchange value. So I think there's a couple of interesting things to explore here. Because the the use value of a clean beach is not zero, our current economy treats it like it's zero. But actually, you know, environmental services are a massive and up and coming industry. So you know, I'm not sure if you've come across social impact bonds and outcomes payment. I'm

Rufus Pollock 46:59

very familiar with social impact bonds. Yes. But we're not yet question though. How do we get our money out? Like, I'm trying to understand that tell me take me through it like here? How do I get my money out from the trashy record? I want to understand that for a moment.

Jeff Emmett 47:16

So So Well, the simple answer to that is you sell it back to the bonding curve. So if you bought in, if you bought in early, and a lot of people bought and after. And I know I'm discussing just simple Ponzi dynamics. So there's, there's more coming after this. But if you were on the initial founding group of Trasher, coin, and you worked hard, and you turn this into an international sensation, which has happened, by the way, without without a token at all, but the growth of value production in this community has grown massively. What would happen if there were a token at the beginning, the value of the token would likely have appreciated massively, and people who bought earlier can sell and earn a profit. So this is the bear symbol, this this

Rufus Pollock 47:58

is just on this curve here. It's like I bought here on the blue curve, and then I'm gonna sell here later on the red curve. That's basically what we're doing. Okay. Got it. Okay, great.

Jeff Emmett 48:09

So this is this is one way? Of course you could you you do have multiple uses for the token. So what we talked about just now was the exchange value, right, I can set that back at that amount. But the token also has a second value, and it's actually a use value. It's a governance value, because all of the tokens govern the shared treasury. So let's pretend there's nothing

Rufus Pollock 48:32

that isn't youth value in the technical meaning of use. I what I get it they have another use, which is they give you vote summed up a particular situation in the voting control of this enterprise. But this enterprise isn't making money, right? It's cleaning up beaches.

Jeff Emmett 48:46

But it has money from the people who have contributed. So it's us.

Rufus Pollock 48:50

But wait, wait, am I they don't have any amount that went in must be the no more. How is money increasing in the enterprise? Because we're paying money out for the projects?

Jeff Emmett 49:00

Well, you have a difference between the buy curve and the sell curve. So essentially, within the within the commons, we call it the commons market maker the augmented bonding curve. You have you have a reserve pool. So this is the hard assets that are available for withdrawal. So whenever anyone's self

Rufus Pollock 49:21

cashes out if everyone wants to sell their tokens in the end, how can they get their money back?

Jeff Emmett 49:27

Because well there would be there would be diminishing people here

Rufus Pollock 49:30

at some point the last person to buy let's just walk this through the last person let's say the last purchase happened here on this bonding curve. Right? Then they're never this this bought this the cell COVID They can sell back at is way below the price they bought out. So they're out of pocket, I get their money can pay off these people, but that's why I'm saying How did these people let's say this is the last person after this. No one buys more tokens. How do they get their money back?

Jeff Emmett 50:00

Okay, so let's let's walk through a couple of scenarios. Yeah. Well, one if you're the last person holding tokens, so let's say let's say there were 50 people in this community, and 49 have sold their tokens, and I'm the only one left. So the tokens that I hold, govern the entire treasury of the project. So even though my tokens exchange value is maybe 10 cents on the dollar for what I paid for it, the tokens that I hold govern the entire treasury of that community, and everyone as

Rufus Pollock 50:32

they sold when the Treasury rolled out,

Jeff Emmett 50:36

no, the reserve is empty, but the Treasury so this is an actually, maybe this is worth building, I'm

Rufus Pollock 50:42

gonna walk you through this mathematic. Let's pick it here. Let's just pick it here. Let's just do the actual numbers for a second here. I don't know why I have my annotation seem to still be going, I need to clear them. Let me clear, little drawers just for a second, let's walk this route. So let's call this as, like, Amy. I purchased for eg 1500. By by Amy. So there's four people in this project? Right. roofers, Bob Allison a, I should call her Deirdre or something, I should call her something beginning with D. So how does Deirdre let's just walk this through, let's say out Rufus, Bob and Alice have got their money back like that. Their three, in this case, $330 are taken out, right? If they even more, they're paid more out than they put it, let's say right, they're paid $500. So let's say at some point, let's just just the moment or now. So let's say I withdraw, I just, I'm just trying to get this year, I'm doing the withdrawal step. So let's say, let's just put it here, like Rufus was like Alice and Bob, withdraw their tokens. They're there or sell their tokens, right? Like that 300 tokens for, let's say, $500? Yeah, that's more than they put in. That implies in the treasury, there are now $1,290 left in the treasury.

Jeff Emmett 52:08

So we're making a we're conflating two things here. There's the reserve, and there's the Treasury or the common pool. So do you want me to share my screen? I think we're missing a mechanism. For my, I think we're missing an important mechanism of because we're actually proposing beyond bonding curves, we're talking about what you might call the augmented bonding curve, or the common maker.

Rufus Pollock 52:32

I read about that, too. But I still just don't get the the mathematical accounting here.

Jeff Emmett 52:39

Yeah. So I mean, perhaps what you're trying to get at is, you know, is it possible for everyone to enter this community and exit with more money than they started? No, that's like, there's no, I'll be straight up? No. It especially if you're looking at something that begins and ends and there's no other money coming in other than people's money, right? No. Okay. Can you can so, so there's a couple of things here. One, I mean, you could have revenue coming from the outside, for example, if the treasurer or community worked with the Thai government and said, Hey, we're going to clean up 100% of your beaches, 100%, free of trash. And if we do that, can we have an outcomes payment of $500,000, because it's actually saving you a million dollars, and like, you know, dead fish and, you know, aquatic damage, and blah, blah, blah. And the Thai government might say, hey, we save $500,000 By giving you $500,000, if you complete this great, there's revenue.

Rufus Pollock 53:40

So Jeff, there's something really important that moment to emphasise and also for listeners, but at that moment, you have great, but you shifted from basically talking about public goods funding to kind of in your diagram, and if I don't want to, I don't want to, I don't have to, I don't want to stop your screen. But we've moved from funding excludable non excludable things to either a someone funding the public goods, some other entity funding public goods, so you've moved the public goods funding to the Thai government, which is you've moved out of trashy trash who is not solving a public goods problem anymore. The Thai government is and it's happy to give money, which is an angel thing. The government's give money to all kinds of people to deliver services that they want public good service, for sure. Doesn't mean those entities do and delivering the public service are solving the public goods problem. It's the government solving the public goods problem.

Jeff Emmett 54:34

I would disagree. Actually, I think this is a Union of Concerned Citizens who come together and crowdfund their own money. This is a new part, the new part is not the outcomes payment. This already exists with social impact bonds. So a lot of I want to caveat here. There's a lot of new things here that are combinations or blurring lines of old things. So there's it's not saying this is an entirely new thing. It's saying hey, how Can we use interesting incentive mechanisms to crowdfund money? And give Democratic local participatory budgeting over those funds? And how can we tie in other revenue sources? Because ultimately, right, if you're putting in money and then spending that money, and then you want to get that money back, it's not there anymore. It's gone. So how do we,

Rufus Pollock 55:24

the thing I'm trying to get out here that just for me is I spent like quite a long time examining how to solve public goods problem, this topic I'm really fascinating is the hot climate crisis. But what I'm trying to get at is how, like, the essence of the public goods problem is the free rider problem. And I'm trying to stay on how whether the tools are common stack or otherwise, or the bunk of Soviet because what you're telling me is, there are people who basically give money and they don't get it back. And I'm like, great. But the traditional logic, which you told me even only in the cool is that donations don't really cut it, there's a great limit to donation. And the solution to that is that people have this incentive, they can make money, but then we're just saying, but they, somebody at least can't make money. You know, like, as a net overall, it's got to be a net negative game.

Jeff Emmett 56:06

It is let's look at let's look at some assumptions here, though. Like some some further assumptions are to make money from the system, I have to sell all my tokens. That's not necessarily true. Like I can I can hold Tesla for 10 years or 20 years, why can't I hold THC Tashiro coin for 10 years or 20 years or even the rest of my life, maybe you know, this, this could be an asset that I could borrow against in another currency without even selling my trash. euro coin is only

Rufus Pollock 56:35

an asset. But Jeff, we got to be strict here, it's only an asset, because someone believes that it's worth it, we've got so much mathematically has to be a zero sum, like there's two ways it can either go, either it is a net, either zero sum or negative sum game, where what I take out has to be less than what was put in overall by everyone at least up so someone has to be left holding, or it's able to generate revenue. Now, if it's able to generate revenue, that's great. The thing, of course, is the traditionally public goods provision, it's very hard to generate revenue, I, myself have run an open source software company, I am very present to how difficult it has been to make money from providing open source software. So I'm just trying to get out, which is you can't have one's cake and eat it. Either. It's a negative sum game, or zero sum game, which looks like donations, which we know are the limits to the scaling of that because people don't scale it. Oh, it has a revenue model. Now, if it has a revenue model, you're going to ask, it has a revenue model and the revenue, like when you say about Tesla, I have people hold Tesla, or sell it because they anticipate there's going to continue making money or whatever. If there is a revenue model, the question for public goods is how what is your revenue model? What is trashier tokens model? And you've mentioned that the what one option is the the Thai government pays for it, or other philanthropists pay money to it? Sure. But that's just moving the public goods question somewhere else, I'm really in search of something that genuinely smells to me. And I'm being like, I'm so interested and excited about a by the goodwill of people like yourself, and also by the possibility, there is something there, but I've got to, like, be like, show me the money a bit like, metaphorically, like, where do we solve the free rider problem here? Sure. Of, and I know, I'm just really like, Ah,

Jeff Emmett 58:17

so I think you might be stuck in some false dichotomies. They're saying it has to be this or this, I actually think this technology is something that blurs the lines between this or that, and allows us to have potentially the best of both, or maybe the worst of both, and probably both, as it were. So So I want to come back to this because outcomes payments aside, I think this is a very interesting technology that can create new types or payment rails for public goods. So and I think that lowering the barriers to essentially running local impact social impact bonds, without comes payments at a local level, this is already game changing. But we don't even have to go into delivering that external revenue, because you're proposing that moves us into a different game. Cool, let's just let's just keep it with the original token economics. So going back to this point earlier, we've got the reserve, and we've got the Treasury. So those are two different things within the augmented bonding curve. So the reserve is what you can reclaim your money against. So this is the hard assets. If I sell my tokens back to the bonding curve, I'm pulling out of the reserve. However, whenever anyone leaves they or joins, they pay a tax, and that tax is essentially it doesn't go back to the community member, it goes into the treasury. So we have a treasury that is being filled every time someone leaves, let's say. So let's walk back through the scenario that you said everyone is leaving, and I'm the last person there. I'm the I'm the sucker right? Well, a first like look at this scenario. It looks kind of like a donation. I put in $100 Everyone left and I was the last person holding I get back five bucks. I'm like Oh man, I totally got ripped off yet I'm still $5 better off than if I had just donated. So first of all, the worst case in this token bonding curve scenario is the best case in the donation scenario. It's

Rufus Pollock 1:00:14

a wait, in the best case here. I wait a month, it's a bit of say that I contributed $95 donation and be the way to look at it. I mean, it's not sure. I mean, I just don't understand. Okay, but okay, but the thing is in that logical so how can I, if I, that means in total, given that everyone got their money back or more, and I got, I, that means that the project, the only money that project actually had was the difference between, like, all the project houses, what I then donated, which is $95, you know, obviously, you can't have our cake and eat it. If we want to fund public goods at scale, then the amount people have to donate has to be a lot. And no one's ever donated, like philanthropy is is a fraction today, first was dominated by the rich and powerful, but it's also a fraction of what states contribute. So I'm just I'm just trying to go back is to, to a little bit to be like, what and what stopped this before, like, I could have set up a company before and just been like, Hey, we're gonna go and do this, like not a philanthropic endeavour, you're going to put money in some of it will go to do solve the solution. And some, I just don't understand why giving people the money back makes any difference. That's why I'm also trying to intrigued by Why'd why invent all this elaborate financial stuff, basically, to wrap up a donation? Why not just have people today?

Jeff Emmett 1:01:32

Well, I think there's another assumption that we're jumping to here is that that everyone will sell. Because like in this scenario, we can see there's there's competing pressures within this ecosystem, because these tokens have multiple use cases. One is exchange value. So for example, when the price is really high, you might see sell pressure, right? If you bought this token at $1. And now it's 100, you might sell some. So there's sell pressure, which is meaning there's, there's more and more people leaving the price of the token decreases, but also the Treasury is filling up because the more people leave, now, let's move away from like, a 50, person Commons to a 50,000 or 500,000, person commons, perhaps in some Sunday. Now this treasure is filled up, maybe with $50,000 $500,000 and million dollars. And let's pretend that we go back to everyone had sold except me. So the the tokens that I hold, are 100% of the Treasury allocation power. So anyone who sees value in allocating a million dollars earmarked for trash cleanup, is going to potentially buy back into this community. So we have some sell pressure, because people want to capitalise on the exchange value. But we also have by pressure because people want to capitalise on the use value. And I know you mentioned this, this wasn't necessarily use value. But I would, I would actually argue that in this new type of digital public good, where we all stand around a table, we put money on the table, we receive tokens, which then steer those funds, that the use value of that token is the steering. So when you use that token, if there's a million dollars on the table, and I'm the only one steering, that I can steer that towards whatever I like,

Rufus Pollock 1:03:10

Jeff, you can't have to keep me I'm just going to push you, if there's only only one left that aren't a million dollars on the table, the only ways that they don't go together, we end up with a lot of money left, and I'm the only one left. I have to pay it out. Or at least either people. My question here is either people haven't got their money back, the people who've sold out, didn't get their money back, which means there is a lot of money left, or you're conflating

Jeff Emmett 1:03:37

the Reserve and the Treasury again,

Rufus Pollock 1:03:41

I'm not sure. But wait a second, let's go through it. Let's say a million dollars came into this. And let's say 90% of it, let's call it 50 5050 50% went to the reserve in your diagram here, I don't know if you can draw it, the reserve, you die, and 50% of it went to the common pool. That means if everyone withdrew their money from the reserve, they could only get 50% of their money back. So either either or either people don't get most of their money back, in which case, it looks like a donation setup. Like they contributed 50% of whatever they put into this project into the common pool. Or they they did get most of their money back in which case very little money is the common pool. What I'm saying is you can't have once cake and eat it. This idea just for me, I'm just struggling with to be like how normal is like, yeah, I could have set up organisations for years where I say, like even impact investments look like that your investors, we're going to do good and you're gonna get a load of money back like they are back to investors because they're going to do some revenue model and so on. But here, let's just go into pure there's no zero sum, what set up. Either money went into the common pool, in which case it's not in the reserve to pay people back, or it stayed in the reserves to pay people back. You can't make sure both an investor pool for sure.

Jeff Emmett 1:04:52

So again, I think we have this fallacy of what happens when everyone sells I mean if you look In any real world asset and presume that Everyone sells this, this, the end result is going to be disaster. If everyone sold Tesla, if everyone sold their house if everyone sold anything, and this is

Rufus Pollock 1:05:13

a bit confusing two things here, then again, there's a sleight of hand and we want to walk you through for ourselves. There's a difference between what happens if people did and what would happen to the market price, and what would actually happen to the economic what would be called economic value in the company. So if everyone tomorrow it's like the famous story of Buffett or whatever, like all of most invest in literature, there's, there's there's like the there's like, there's the weighing in the voting machine. Tesla's value changes nothing. When its share price changes. The value of Tesla is the value of isn't enterprise producing cars to people, that value does not change when the share price changes. If you mean, what does it share price change? Or does the the price that you can sell your shares for change? Well, of course, it changes by definition. Now, the question is, you're asking is what happens in unravelling, I'm putting out you have a circumstance here, where it's known that the amount of money you're getting out is less than it's being put in at least must be at the end, that kind of system tends to unravel, because they're called Ponzi or pyramid schemes, because at some point, they should recurse back. They don't always, sometimes they stay up, it is true. But normally, though, the reason that Tesla doesn't unravel is not because everyone is just in some belief equilibrium today, it's because even if everyone sold all that sold their shares today, that would be remaining a call company with billions of dollars of value, it might not be worth it.

Jeff Emmett 1:06:36

I actually, I just want to challenge that a moment, because I have a feeling if everyone sold every stock of Tesla, even Elon Musk, there would be massive deleveraging. I mean, the company is, you know, borrowing billions, all of this, you know, we can say, oh, it comes down to car production. But I honestly believe that these companies are supported more by corporate welfare, by being able to launch an equity, etc, I really think it would not just be status quo tomorrow at the Tesla factory, if the value of Tesla stock was suddenly zero, of course, I don't think that would that will continue to

Rufus Pollock 1:07:13

both. When you make the 7.1 your ability to raise money, it's the point that's been made about mean stocks, finally, which is the variability of your mean store allows you to raise money that can allow you to pay off your debts, like Gamestop would have gone bankrupt. But the thing is, as an economy wide level, you can't keep doing that there can be a few Tesla's there can be a few speculative bubbles. But the level of economy when you do that you're burning a huge amount of value on things you shouldn't, you know, for example, you're giving lots of money to Elon Musk, do things that probably aren't useful, maybe in the long run, for example, so I'm just gonna be a little bit. So one, is we confusing something again, then we'll just say, I think, Why does it not recurse? backwards, you ask the question, why does the schema unravel? All like all stocks are pyramid schemes? I think no, not because there's this underlying there is an underlying use value, there's an underlying economic value. It's true that we have speculative bubbles. The question I'm also asking here is our pick up bubbles, something to be like welcomed in our society, or something to be like suppressed, the traditional view has been, and there has been an argument like spective, Bubbles allowed for the railway investment in the 20s. The 19th century is this kind of story. But in general, there's a sense that spective bubbles lead to capital mis allocation, ie people spend money on things they shouldn't do. And that's bad. And then normally, they also end in credit crunches, and like deleveraging, and lots of pain later. And then if we in general, one of the reasons we have huge amounts of developed securities regulation over the last 100 100 100 years, is to build public trust, reduce the risk of like, at least kind of scared, speculative bubbles that go badly, because that reduces the trust in public capital markets, and then reduces money for the next Tesla. So it's right Tesla money now. But if Tesla abuses that trust, or anyone else abused that trust, they are have less money. Well, I agree on that one. But the question I'm trying to get out here is you and I are fascinated and committed to how we can better address the public good forms. How can we fund public goods problems? I think is the question we just share. And I'm just pressing to say, hey, because I want to any, there's alternative, there's a lot of work that goes into, like token engineering or doing this stuff, that work could be spent being on the streets with extinction rebellion, it could be spent being on the streets like trying to change hearts and minds, it could be spent starting new political parties. I had this discussion with keema Tao, there's a tendency that we've that when we there's like, it's like a kind of it's costless to go do this stuff. And so my question is, if we're not we really want to be sure for ourselves that there really is something at the end of the rainbow here in terms of sign that's going to address probably because from it's why I'm pressing you, I hope, lightning in general.

Jeff Emmett 1:09:55

Absolutely. For sure.

Rufus Pollock 1:09:57

So maybe last words to you In this one, but what is it? That what how is it that this magic happens? How is it that we can both? Maybe? How do we go beyond donations, which mean are limited in scope, but something which isn't compulsory like the state? Because that seems to be the dream here. We can have something that's participatory, voluntary, democratic. But yeah, it scales beyond what is traditionally donations. For sure. What to you on that?

Jeff Emmett 1:10:25

Yeah. I think, you know, coming to one of the one of the comments you made, how does everybody leave? Or if everyone leaves and takes more than they, you know, if everyone profits, you know, how is that possible? There's no claim that everyone in these systems profits, there's no claim in the stock market, either that, you know, by buying stocks, you profit that's not a rule, you know, and yet, it's still an effective way for for capital allocation. So the the claim of these tools is not, you know, come in here fun public goods, everybody wins. It's let's create an economic game, where first and foremost we fund public goods use value is the beaches are clean, or the carbon is drawn down, or this the open source software is produced. That's that's the, that's the use value. Now, people may profit from this if they because speculation is a funny thing. It's not it's not one thing. There's no speculation is bad or speculation is good. Risk is a real thing. Over overindulgence in that risk, maybe we can call it speculation. So if I'm going around picking all the new unicorns, I want to find the next Facebook before it's big, right, or I'm gonna find the trash cleanup initiative that's really going to clean up this world, and I want to invest in that before, it's huge. This is risk and that and that's actually a healthy signal to the market. You know, if there is an up and coming company, that's, that's stock valuation is going up, and it's producing really valuable projects, people are going to start looking at that. So this isn't necessarily a signal, it's when it's when that growth becomes cancerous, and growth for growth's sake, is when it becomes a harmful effect. So I think in these tools, we ultimately face the same challenges. So it's not about creating something where everybody wins, or it only goes up, it's about creating economic games that a are better than donations, because maybe some people got out at a profit. And hey, they were their first funding that initiative on the ground before it was a thing when there was high risk, they probably deserved some profit for that. Some people may have broken even some people may have sold at a loss. But keep in mind that selling at a loss is still better than a donation. Because if you put in 100 bucks, and you got to 20 and beaches got cleaned up, great, it's still better than donating 100 bucks, because you're 20 bucks up on that. So even a loss is better than today's current system. So first of all, I'd like to get away from the idea that everybody wins. That's that's not the point of these that everybody profits. The point is to create interesting new mechanisms that a or investable, B have multiple uses. So I don't think we went through this quite enough. But the fact that there are different pressures for selling and different pressures for buying creates, you know, some potential volatility and price and the volatility and price contributes to the Treasury because every time people buy or people sell, we're funding the project. So it's kind of like create its market design, essentially, it's commons based market design. So we can put capital in service to real value, as opposed to capital running the show and real value, you know, today we have the dog wagging or the tail wagging the dog or the cart before the horse, it's it's capital first, and labour and value. Second, if at all, a distant distant second, what these tools offer us is a new design space. And I know we've gone over this Trasher example. This is very out of date, it's several years old. So I apologise for the simplicity of the of the, you know, numbers chosen and whatnot. It's definitely not not to be taken, you know, mathematically, as I see, you've tried to work through which is great. But there's much more advanced simulations of that and examples going on, you know, with Apple experimenting with these tools that I would love to chat with you further about. And we didn't even get into, you know, novel forms of voting. The way that we can vote with these tokens is very interesting as well, it doesn't have to be discrete voting where you know, we only vote once every four years and say, Okay, who's gonna make all the decisions? This is kind of how we think of voting, at least in modern day. But with blockchains, we have rich temporal data streams, and we have tokens that we can continually assert our preferences. So I think this also opens up a whole new area for participatory budgeting and localised democracy in that we can continuously if you think of society as a signal processing system, where tokens can be used You know, in, you know, it's not also not about one token ecosystem, it's about a token mesh, where we can have, you know, trash Euro token, you could have plant a tree token, you could have global 100 Hunger token, you could have carbon drawdown and token. And all of these aren't zero sum in that, you know, I'm going to buy it and then sell it and try to make a profit. Maybe I want to hold those in my portfolio for the long term. And this is where it comes back down to, you know, are these zero sum? Well, if everybody sells after every beach cleanup, yes, you're going to have some winners and some losers. But if you have an enduring economy, and if there's other use for those tokens as well, for example, maybe subway wants to give you 10% off a sub, if you hold 10,000 Trash Euro tokens, or maybe the municipal government will give me a break on my taxes if I hold carbon drawdown tokens. So it's essentially creating an open infrastructure or piping for all of these potential other revenue sources also to feed in. So it's not just, you know, the mechanism is this magic, money creation or not? It's how do we create composable systems that deliver Win Win Win benefits to multiple sectors in society?

Rufus Pollock 1:16:12

That's great, Jeff, thank you so much. And it sounds like we should have a follow up. So there might be a part two to this where we can do the things you just share the mesh. So really, thank you so much your time your energy, and the commitment I think we all shared or a radically wiser Well, a world. Tune in for the next episode. I think there will be if this sounds like all the best to our listeners, you can find out more about this project at web three dot life And the show notes will be up there soon. And more discussions like this. Thank you so much, and all the best