The limitations of the monetary incentives
2022-02-16
I really enjoyed this interview between Casey Newton of the Platformer and Molly White of Web3 is going just great.
In it, Molly made a point I’ve thought about before but not been able to fully articulate, which is that in an effort to align incentives financially, many web3 projects undermine their own effectiveness:
There also aren't really intrinsic monetary incentives for people to contribute to Wikipedia, which I think is a very good thing. Where people are paid to edit Wikipedia by outside parties, it warps the incentive to contribute into one that's very different from (and sometimes at odds with) the incentives for most community members, and is often a very negative thing.
She references Everipedia, a blockchain-based wikipedia alternative:
If you look at their recent blog posts, it's all about how many tokens their editors have supposedly earned, and it even brags about the fact that "Over 70% of stakers have locked their IQ up for over 3.5 years to earn max APR". This is the same token that people are supposed to be spending to edit and vote on the quality of edits, but they're excited that people are locking them up on staking platforms? The goal is not to create a reference work, it's to make money off the token.
Speaking more broadly, monetizing things just shifts the dynamics in enormous ways. We've seen this same thing happen with play-to-earn gaming, where people start doing things really differently when monetary incentives are added.
I think this is a really smart point and poses problems for Web3 projects.
Financial incentives aren’t always the best way to get people to do what you want (see the daycare that started charing parents for being late and then saw an increase in tardiness), except that it’s worse than that for Web3 projects because it makes it harder for them to tell if they have product market fit. Because there isn’t a great way to distinguish the speculators from the true believers, it feels like the project has true momentum, when all it has are people trying to make a quick buck.