- Token Ledger
- Token Pricing
- Token Ledger
- Token Pricing
AraCred Token Overview
What we see here is an overview of the world of the AraCred token. The job of AraCred is to create a token that accurately recognizes and represents value creation in a community. Tokens are derived from the productivity of the community, regulated by the governance of the AraCred DAO, and (likely) priced by on-chain markets. The separation of labor, goverance, and pricing is very important. In this way each mechanism can be optimized for it's own purpose. Of course all of these mechanisms are related and interdependent, but from a mechanism design perspective separating them out and composing them is what allows us to design, build, and model the system.
By separating these mechanisms you can use any type of tool/process to measure the value creation (productivity) of the community, any tool/process to govern the minting of tokens based on that value creation, and any tool/process to then allocate tokens to the community. From there, token holders can freely use their tokens however they want in the World of Ethreum. Depdending on your DAO design these tokens may or may not be trade-able. If they are trade-able the market will price the tokens based on it's subjective view of the value creation of the community (as well as the token's representation of that value).
- The community uses metrics to expresses what they view to be valuable.
- From the perspective of the token minting process these metrics are a subjective oracle into the calculation of supply.
- The DAO uses token supply to express an opinion of how much value is being created.
- From the perspective of the market token minting acts as a subjective oracle into the calculation of price.
- The token market uses price to express it's opinion on the value of the tokens being produced by the DAO.
- From the perspective of the community price acts as a subjective oracle into the calculation of what is valuable.
In a perfect world:
- The community has a clear opinion on what is valuable.
- Tools exist to measure that value in a concrete way.
- The community is producing work that creates value.
- The minting mechanism mints tokens in proportion to value creation.
- The market and the community agree on a shared sense of value.
- The market is effecient and liquid enough to clearly express it's view on value.
Some or all of the above states of the world may or may not be in play at any given time. As a result, your results may vary.
The Community Economy
If the AraCred mechanisms are correct, then this should be the most important part of the system. If the community is creating real value the token price should reflect that. This is the goal.
The community is free to express what they feel is valuable, how they want to measure that value, and the tools they want to do so. We, obviously, recommend using SourceCred to measure contributions to code repos and chats, but it's up to you.
The most important part is that this process of measuring value creation happens here. It has to happen before the token minting process. This way the minting process can take into consideration all the different value measurements a community might choose to create, and then tokens can be representative of that process as a whole. If you arbitrarily mint tokens outside of this system (say via a random vote in the DAO) you will likely disrupt the link between token supply and value creation.
The Minting Process
The governance mechanism that approves the minting of tokens could be completely automated, trust but verify (via a vote, council, or court), or require an explicit approval from token holders. The quality of the token minting policy will affects the market's perception of the value of the token. This creates a natural interplay between the governance/management of the off-chain game and the on-chain token holders:
- If the off-chain game makes a request for too many tokens and/or changes the issuance policy to something unreasonable on-chain token holders can vote against the minting.
- If the on-chain token holders become too much of a bother the off-chain system can change the supply algorithm and/or fork the on-chain token supply to cut-out obnoxious token holders.
The Ethereum Market
The market price for tokens is entirely dependent on the context of each AraCred instance. The DAO design you use for this will greatly affect the pricing mechanisms that the market uses to express it's opinion of the token's value. Beyond this, however, AraCred will work without a market. You can simply use it to recognize contributors and reward them with governance rights in the DAO. This allows communities to DAOify without the pressure of monetization. Then, if/when ready, the DAO can bring monetary mechanisms into play to provide contributors with economic rewards.