Why Tokens?

Thomas Wendling is an advisor to the Integrated Engineering Blockchain Consortium, a professional systems engineer at Jacobs Engineering, and a cofounder of CoEngineers.io, a blockchain engineering platform cooperative.

High above the Sahara after a wind storm has kicked the finest dust into the lower stratosphere, moisture carried by a cold front begins to condense on microscopic particles at an atomic scale that does not even, at first, leave any visible evidence of water. But the clouds come soon enough as condensation accelerates, and they are laden with so much water that they begin the complex dynamics of thunderstorms with twelve-mile-high convection currents, which begin to subtly yield to the influence of Coriolis forces acting on the dense flows, because they are, after all, taking place on a rotating, spherical surface. No-one yet understands exactly how the dust causally connects whole groups of thunderstorms, but the low pressure inside the rotating fluid field increases the rate of evaporation of water on the Earth's surface which increases the size of the system, which in turn increases the rate of evaporation, and so the system feeds on itself in an amplification loop until it becomes a heat engine can produce from 50 to 200 terawatts of mechanical output.

The hurricane bootstraps itself from nothing. When the dust particles are still hanging there in the sky, the hurricane is just math. It is just an idea. You cannot start a hurricane in the middle of the Atlantic by setting up a giant circle of wind turbine sized fans and shooting water into the air with a thousand fire hoses. You need the dust to serve as nucleation points for moisture to begin that (at first) subtle amplification loop that feeds on itself. Ever-increasing evaporation chasing and feeding an ever-increasing evaporation engine.

Just as dust particles are nucleation points for moisture, cryptographic tokens on blockchains are nucleation points for value. In proof-of-work, ever-increasing computing power (a surrogate for data security) chases an ever-increasing token value, which increases disproportionately in response to the computing power, and there you have your amplification loop. In proof-of-brain, a method of rewarding knowledge work with tokens, the initial knowledge work quality may be poor, but an ever-increasing quality of work (of intrinsic value to someone) could chase and feed an ever-increasing token value, which reacts disproportionately to the quality of work, and again you have an amplification loop that could eventually grow and encompass a large part of the knowledge economy. This latter example has not yet been demonstrated, but it is an enticing idea, and one the author has absolute faith in.

In the design of a successful tokenized ecosystem, you need the conditions for an amplification loop, and you need tokens to serve as nucleation points for the accumulation of value, however humble in the beginning. What fascinates us about blockchain is the unexpected miracle of Bitcoin, which like a hurricane, bootstrapped itself from nothing. We still do not recognize that it was the historical start-up dynamics of Bitcoin that we should be studying, not what it has become today.

There is no reason why similar but unique phenomena cannot be purposely designed by replicating these fundamental principles to produce value creating engines that produce useful work as their output. We have not even begun to scratch the surface of the incredible applications that can be only started up this way. Successful blockchain start-ups depend on subtle ideas that feed autonomously on themselves, which is why consortia of powerful companies and billion dollar ICOs will not, by themselves start a hurricane any more than giant fans and fire hoses over the Atlantic Ocean.