People love lists. They represent a simple and efficient format for organizing data that is conveniently aligned with our ever decreasing attention spans as we are flooded with information on a daily basis. Traditional lists of higher quality are typically curated by companies or groups that either specialize in doing so or work in a related field to be able to accurately curate a list.
While lists are an important method of organizing data and presenting it in a digestible format, there are some inherent problems with the current iteration of list creation and curation. Lists are often subjected to biases, manipulation, and outright misinformation.
A popular concept that has arisen lately is the idea of Token Curated Registries (TCRs). Essentially, these are lists that apply an intrinsic token in combination with an incentive mechanism to drive proper and accurate list (registry) curation.
The Concept of TCRs
The concept of TCRs is very interesting and can be applied to a wide range of scenarios. From honest curation of top universities to creation of curated regulatory standards within the cryptocurrency industry, TCRs represent a decentralized system where the value of the intrinsic token directly reflects the demand to be on the list.
The basic idea for a TCR to work is for there to be a market where honest and effective registry curation is needed to provide consumers with accurate and useful information that is not subjected to the typical problems associated with curated lists today. The format follows a staking model between 3 types of users:
- Token Holders
Candidates are those that wish to be on the list, so for example, a university that wants to be on a registry of the “Top 10 Business Schools in America”. Consumers are the average users perusing the Internet for information to help guide their decision making into the right direction. In the case of the “The Top 10 Business Schools in America”, the consumers would be parents or students looking to find an authentic list of potential colleges for their children or themselves, respectively. Token holders are either the speculative holders of the token who are purely participating in holding tokens for financial gain or active participants of the voting system that can profit off of their honest curation of the entry or rejection of potential candidates to the list.
TCRs represent an effective form of registry curation through a concept known as the Wisdom of the Crowd. This is the underlying concept behind decentralized prediction markets such as Augur and it has some tangible effects on registry curation. Rather than relying on a centralized entity or small group to curate a list, TCRs create a distributed network of participants driven by an effective framework of incentives. Benefits range from removal of bias and bribery potential of the list curators to the ability to have a constantly updating representation of an important subset of data within a specific market or an amalgamation of related metrics.
How Do TCRs Work?
As mentioned earlier, the basic structure of TCRs essentially comes down to three components derived from the pool of users. The candidates, consumers, and token holders, are the players in the system whose rules are defined by a set of parameters that allows the TCR to be self-sustaining with a mitigated ability to influence the list by a third party or group of parties.
These are the users (people, institutions, restaurants, etc) that desire to be placed on the list in order to get their brand in front of consumers as an authentically validated member of a hard to join list. In the “Top 10 Business Schools in America” example, this would be business schools that are vying for placement on the list to demonstrate their academic excellence to potential students. As a result, placement on this list can lead to the academic institution having increased enrollment numbers from hopeful business students. Higher enrollment numbers means the luxury of being able to pick from a larger pool of students where better students can be plucked, further increasing the reputation of the business school in a positive feedback loop. Not to mention, more students, more tuition money.
In the prototypical TCR, candidates would need to deposit a set minimum of the intrinsic token of the TCR to be able to considered as a candidate for the list. In turn, the token holders, with their voting power directly proportional to their stake, vote on whether to accept or reject the candidate into the registry. If the candidate is accepted, they get to keep their deposit and it can be withdrawn at any point, which also removes them from the registry. If denied, the candidate loses their deposit and it is distributed among the token holders that voted with the majority to reject the candidate.
As you can see, the minimum deposit creates a barrier to entry for candidates that discourages those that know they have a high chance of rejection (i.e. bad business schools) from applying to the TCR.
The list would not exist without the demand for the information being sought out by the consumers. What’s interesting is that the consumers, although driving the demand for the list, do not actively participate in the incentive structure. However, their demand for the information is directly correlated to the price of the TCR’s intrinsic token. If a significant amount of people are searching for the top business schools, and the information from traditional lists across the Internet is plagued with misinformation and clearly manipulated lists, then the demand for the business school TCR will be high (if correctly implemented), driving candidates to aspire to join the list. The cascading effect is increased demand for the token from both candidates who purchase tokens to apply for the registry and token holders looking to profit off of curating the list.
Applying the concept of TCRs to more complex and critical markets where a significant amount of value in terms of time, effort, or finances reside, is where the concept can really become interesting. In these types of markets, consumers become much more aware of the implications of the quality of the data contained within the list and in turn fixate more on the accuracy and authenticity of the TCR. Consumers then are not just limited to more primitive examples of college seekers but can be extended to professionals looking for a trusted source of data curation within their respective industry.
The Token Holders
Ah the hodlers. They play the most important role in maintaining the incentive structure but containing their self-interests and attempts at gaming the system are notoriously difficult to implement in the real-world. Within a TCR, it is in the best interests of the token holders to keep the demand of the token they are holding high. They achieve this by simply curating the registry as well as possible, while also striking a realistic balance between entry and denial of candidates into the registry.
If consumers do not trust the list, or find it to be inaccurate, they will not use it, candidates will not aspire to be on it, and the value of the token will drop. This is the major incentive driving the structure of the TCR in this form. Token holders do not even need to be interested in the list they are curating necessarily, they can just be participants in the voting system in order to make the list as high-quality as possible. Their actions are proportional to their increased or decreased stake value.
Token holders vote on which candidates become listees on the registry or which are denied. By tactically voting in the system, token holders can make profits based off of their voting patterns if they end up voting with the winning majority that denies certain candidates. While tempting to constantly deny candidates, if the list is too hard to get on, the value will eventually decrease as candidates will not be as interested if they know there is a very high chance of rejection, even if they are qualified to make the list.
Anyone can become a token holder by purchasing the tokens on an exchange and token holders even have the ability to vote out listees currently on the registry. This has important implications as it allows the list to update consistently and remain viable in the longer term. The future implications of this structure within more complex TCRs that are sure to eventually arise will be interesting to watch.
The Future of TCRs
Token Curated Registries are still a nascent concept that face some legitimate questions regarding their implementation and long-term viability of their authenticity. Their potential application to a vast array of markets and contexts will continue to generate excitement as a novel form of registry curation.
Registry curation is not simply limited to binary decisions, however, as seen with the simple “Yes/No” mechanism of entry into the “Top 10 Business Schools in America” list. Eventually, complex registries with rankings and curation of large data pools may come to dominate public data curation structures that exist as public utilities.
Some ideas that have been generated in this regard involve the concept of framework-based TCRs as well as the implementation of the Civil platform’s incentive structure. Further, a fascinating concept of a collective self-regulating TCR framework for cryptoassets was proposed by the company Messari earlier this year.
While these concepts may seem far fetched, they do represent an advancement in the industry in terms of making tokens truly utility tokens with a specific function within the network that is tied in value directly to the TCR’s success or demise. Implementing the proper incentive structures for these decentralized systems will assuredly be very difficult. If the cryptocurrency industry has shown us anything, it is that practically applying concepts to real world problems is much easier said than done.
As TCRs continue to develop into more refined systems, their practical utility within markets will become much more apparent. There has been some meaningful progress with them already, however, there is still a notable amount of parameter logic that still needs to be worked out for these registries to function as hoped.
If you’re interested in innovations within the field of cryptoeconomics and their integration within distributed networks, then diving into TCRs is definitely worth your time.