{ "@context": "https://schema.org", "@type": "DefinedTerm", "@id": "https://wulfkaal.github.io/entities/incentive-design", "identifier": "kaal:entity:incentive-design", "name": "Incentive design", "termCode": "incentive-design", "inDefinedTermSet": { "@id": "https://wulfkaal.github.io/entities/index.json" }, "author": { "@type": "Person", "name": "Wulf A. Kaal", "identifier": "https://orcid.org/0000-0003-0757-275X" }, "dateModified": "2026-07-29", "canonicalForm": "https://wulfkaal.github.io/entities/incentive-design.md", "sha256": "eb445b5844261c9920b56f6b5792c0c3f126abd54d838dd6455a303ab8a9866d", "additionalProperty": [ { "@type": "PropertyValue", "name": "status", "value": "derived" }, { "@type": "PropertyValue", "name": "claim_count", "value": 99 }, { "@type": "PropertyValue", "name": "work_count", "value": 43 }, { "@type": "PropertyValue", "name": "year_span", "value": [ "2012", "2024" ] }, { "@type": "PropertyValue", "name": "non_current_claims", "value": 0 } ], "subjectOf": [ { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2097160-003", "identifier": "kaal:claim:2097160-003", "text": "Contingent convertible bonds placed in executive compensation serve a different purpose than those sold to investors: the point is not capital infusion during a crisis but governance-improving design that optimizes management incentives.", "abstract": "bonds issued to investors, the emphasis for contingent convertible bonds in executive compensation is not on a capital infusion when the Systematically Important Financial Institution (SIFI) is in a crisis,13 but rather on governance-improving designs to help optimize management's incentives.14", "citation": "Wulf A. Kaal, Contingent Capital in Executive Compensation (2012). SSRN: https://ssrn.com/abstract=2097160", "datePublished": "2012", "claim_type": "definitional", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "contingent convertible bonds held by executives rather than outside investors" ], "source_pdf_sha256": "1e1f8aa246bce19f4658dbceb455c7c2a272aa5d63a9e9bdaa46a3a5a87680fc", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2273857-065", "identifier": "kaal:claim:2273857-065", "text": "The threat of heightened scrutiny under a deferred prosecution or corporate integrity agreement optimizes incentives because increased government monitoring attaches only after a first time offense, giving institutions a reason to comply and self-regulate in order to avoid it.", "abstract": "The threat of heightened scrutiny for institutions subject to a DPA/CIA may help optimize incentives because financial institutions would be subjected to increased monitoring by government regulators only after a first time offense had occurred.", "citation": "Wulf A. Kaal, Dynamic Regulation of the Financial Services Industry (2013). SSRN: https://ssrn.com/abstract=2273857", "datePublished": "2013", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "DPAs and CIAs applied broadly to financial institutions" ], "source_pdf_sha256": "e7cb3dea40593135acc99a9b00690138fe01020514ebf388f5140e1b0e59e82a", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2992962-035", "identifier": "kaal:claim:2992962-035", "text": "The economic incentive for Aragon judges to follow the more popular vote, since judges keep their bond only if they voted with the majority, calls into question whether the mechanism delivers effective, non arbitrary, and fair dispute resolution.", "abstract": "the economic incentives for judges to follow a more popular vote (in the Aragon system judges keep their bond if they voted with the majority), despite the overall anonymity of the voting, may call required notions of effective, non- arbitrary, and fair dispute resolution mechanisms into question.", "citation": "Wulf A. Kaal, Craig Calcaterra, Crypto Transaction Dispute Resolution (2017). SSRN: https://ssrn.com/abstract=2992962", "datePublished": "2017", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "the Aragon bond and majority reward mechanism, despite anonymous voting" ], "source_pdf_sha256": "80b92e67594394e38af41b769327936833de8e25d6cf3def966a6ba13bc83d17", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2998033-022", "identifier": "kaal:claim:2998033-022", "text": "Requiring data scientists to stake a cryptocurrency on their own predictions converts private confidence into a public signal, which enables the fund to select the optimal model and improve fund performance.", "abstract": "The staking process, in turn, enables Numerai to choose the optimal model and in the process improve the performance of its hedge fund.", "citation": "Wulf A. Kaal, Blockchain Innovation for Private Investment Funds (2017). SSRN: https://ssrn.com/abstract=2998033", "datePublished": "2017", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "describes Numerai's use of the Numeraire token as a staking mechanism" ], "source_pdf_sha256": "aafb1be3c25cd33da477d759df9ca2f856f0a8fe133d6396da2e75d0af573dbd", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3125822-004", "identifier": "kaal:claim:3125822-004", "text": "The novel element of the architecture is a dynamical evolutionary feedback system that ties an expert's reputation to their proof of ability and productive contributions, verified by validation pools that are generated by public fees sent to the system.", "abstract": "properly incentivizes productive cooperation by tying an expert's reputation to their proof of ability and productive contributions as verified by validation pools generated by public fees sent to the system.", "citation": "Craig Calcaterra, Wulf A. Kaal, Vlad Andrei, Blockchain Infrastructure for Measuring Domain Specific Reputation in Autonomous Decentralized and A (2018). SSRN: https://ssrn.com/abstract=3125822", "datePublished": "2018", "claim_type": "mechanism", "confidence": "asserted", "is_failure_mode": false, "scope_conditions": [ "reputation is only created by fee bearing validation requests" ], "source_pdf_sha256": "d4d0bbaa3260968226186131d60e6d64a53e904d94e4295c61fd17042f1191ef", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3125822-010", "identifier": "kaal:claim:3125822-010", "text": "The chosen expert is deliberately not paid directly out of the fee but only indirectly in newly minted tokens, because the architecture secures itself by making reputation more valuable than any one time payment.", "abstract": "One counterintuitive element is that the chosen expert is not paid directly in fees, only indirectly in newly minted tokens. The platform was designed to ensure security, and encourage maximal productive cooperation, by valuing reputation over all else.", "citation": "Craig Calcaterra, Wulf A. Kaal, Vlad Andrei, Blockchain Infrastructure for Measuring Domain Specific Reputation in Autonomous Decentralized and A (2018). SSRN: https://ssrn.com/abstract=3125822", "datePublished": "2018", "claim_type": "design", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "applies to off-platform work engaged through the platform" ], "source_pdf_sha256": "d4d0bbaa3260968226186131d60e6d64a53e904d94e4295c61fd17042f1191ef", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3125822-013", "identifier": "kaal:claim:3125822-013", "text": "The tragedy of the commons arises in any system lacking a well designed incentive structure; in blockchain proof of stake design this is the nothing at stake problem, where unregulated systems lead pseudonymous users to abuse the system.", "abstract": "Similarly, the tragedy of the commons occurs in any system which does not have well designed incentive structure. This is called the \"nothing at stake\" problem in blockchain proof of stake design, where unregulated systems lead pseudonymous users to abuse the system.", "citation": "Craig Calcaterra, Wulf A. Kaal, Vlad Andrei, Blockchain Infrastructure for Measuring Domain Specific Reputation in Autonomous Decentralized and A (2018). SSRN: https://ssrn.com/abstract=3125822", "datePublished": "2018", "claim_type": "failure", "confidence": "asserted", "is_failure_mode": true, "scope_conditions": [ "systems without well designed incentive structures", "pseudonymous participation" ], "source_pdf_sha256": "d4d0bbaa3260968226186131d60e6d64a53e904d94e4295c61fd17042f1191ef", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3125827-003", "identifier": "kaal:claim:3125827-003", "text": "A secure proof of stake protocol requires an incentive structure that perpetually motivates users to do three things at once: produce valuable blocks, police blocks that violate protocol, and improve the production protocols in response to gaming. Incentivizing only block production is insufficient.", "abstract": "A secure PoS protocol requires a proper incentive structure which perpetually motivates users to produce valuable blocks, to police the production of blocks which violate protocols, and to improve block production protocols in response to gaming.", "citation": "Craig Calcaterra, Wulf A. Kaal, Secure Proof of Stake Protocol (2018). SSRN: https://ssrn.com/abstract=3125827", "datePublished": "2018", "claim_type": "condition", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "decentralized systems without a central enforcement authority" ], "source_pdf_sha256": "598d9bd95e4af7a0a35328677c6bfc069f69f2e32c30c720b3a0be98a23a40cb", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3125827-004", "identifier": "kaal:claim:3125827-004", "text": "Because all block creation fees are shared with the whole group as a reputation weighted salary, SPoS removes the direct monetary reward for forming mining pools or block production cartels, which the authors identify as a decentralization threat that raises the likelihood of 51% attacks.", "abstract": "Therefore, unlike every other implemented platform, there is no direct monetary reward incentive for creating mining pools or block production cartels, which are a threat to decentralization which increases the likelihood of 51% attacks.", "citation": "Craig Calcaterra, Wulf A. Kaal, Secure Proof of Stake Protocol (2018). SSRN: https://ssrn.com/abstract=3125827", "datePublished": "2018", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "fees distributed as a reputation weighted salary rather than paid to the producer" ], "source_pdf_sha256": "598d9bd95e4af7a0a35328677c6bfc069f69f2e32c30c720b3a0be98a23a40cb", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3125827-020", "identifier": "kaal:claim:3125827-020", "text": "The current dominance of altruists in the crypto space will not persist: once the crypto economy matures, an influx of hedgers and rent seekers can be anticipated with certainty, and they will exploit any weakness in the system for profit.", "abstract": "However, once the crypto economy is mature, we cannot assume users will continue to behave altruistically. We can anticipate, with certainty, an influx of hedgers and rent seekers who will quite naturally exploit any weakness in the system for profit.", "citation": "Craig Calcaterra, Wulf A. Kaal, Secure Proof of Stake Protocol (2018). SSRN: https://ssrn.com/abstract=3125827", "datePublished": "2018", "claim_type": "predictive", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "maturation of the crypto economy beyond its emerging industry phase" ], "source_pdf_sha256": "598d9bd95e4af7a0a35328677c6bfc069f69f2e32c30c720b3a0be98a23a40cb", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3125827-021", "identifier": "kaal:claim:3125827-021", "text": "Successful proof of stake experiments running today cannot be used to infer that their protocols are truly secure, because the current participant population is atypically altruistic; confidence must instead come from sound reasoning about incentives.", "abstract": "Therefore we cannot use any successful experiments at this time to infer protocols are truly secure. We must rely on sound reasoning in order to obtain any confidence that our projects will continue to succeed.", "citation": "Craig Calcaterra, Wulf A. Kaal, Secure Proof of Stake Protocol (2018). SSRN: https://ssrn.com/abstract=3125827", "datePublished": "2018", "claim_type": "normative", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "nascent crypto economy dominated by altruists" ], "source_pdf_sha256": "598d9bd95e4af7a0a35328677c6bfc069f69f2e32c30c720b3a0be98a23a40cb", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3128900-019", "identifier": "kaal:claim:3128900-019", "text": "The protocol architecture together with its incentive structure is what produces enhanced 51 percent attack resistance, which the author claims exceeds prior reputation verification attempts in both decentralized and centralized networks.", "abstract": "The Semada Protocol architecture and its incentive structure facilitates enhanced 51% attack resistance unlike any previous reputation verification attempts in decentralized and centralized networks.", "citation": "Wulf A. Kaal, Decentralized Mechanical Turk Through Verified Reputation (2018). SSRN: https://ssrn.com/abstract=3128900", "datePublished": "2018", "claim_type": "mechanism", "confidence": "asserted", "is_failure_mode": false, "scope_conditions": [ "reputation verification networks" ], "source_pdf_sha256": "381d72e85d976e2af852e8ec3bba87bc6a05ccb3349a2c3dd6f9e64de96ab4b0", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3128900-024", "identifier": "kaal:claim:3128900-024", "text": "Staking creates disincentives for malicious actors, and it is this disincentive structure that makes the network both more efficient and attack resistant.", "abstract": "Semada staking mechanism creates disincentives for malicious actors, enhancing the efficiency of the Semada Network and making it attack resistant.", "citation": "Wulf A. Kaal, Decentralized Mechanical Turk Through Verified Reputation (2018). SSRN: https://ssrn.com/abstract=3128900", "datePublished": "2018", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "workers and verifiers who have reputation tokens at stake" ], "source_pdf_sha256": "381d72e85d976e2af852e8ec3bba87bc6a05ccb3349a2c3dd6f9e64de96ab4b0", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3128900-025", "identifier": "kaal:claim:3128900-025", "text": "Verifiers stake proportionally smaller amounts of reputation tokens than workers, because their higher reputation scores make them less likely to be malicious actors.", "abstract": "Similarly, verifiers stake (a proportionally smaller) amount of reputation tokens because verifiers have a higher reputation score and are therefore less likely to be malicious actors.", "citation": "Wulf A. Kaal, Decentralized Mechanical Turk Through Verified Reputation (2018). SSRN: https://ssrn.com/abstract=3128900", "datePublished": "2018", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "verifiers with higher reputation scores than the workers they verify" ], "source_pdf_sha256": "381d72e85d976e2af852e8ec3bba87bc6a05ccb3349a2c3dd6f9e64de96ab4b0", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3128900-026", "identifier": "kaal:claim:3128900-026", "text": "Reputation scores clear the market on both sides: a low requester score makes workers less likely to accept that requester's offers, and a low worker score reduces the worker's likelihood of retention.", "abstract": "If requesters have a lower reputation score, workers become less likely to accept requesters' offers. In turn, low reputation scores for micro task workers result in a lower likelihood of retention for micro task work on the Semada Network.", "citation": "Wulf A. Kaal, Decentralized Mechanical Turk Through Verified Reputation (2018). SSRN: https://ssrn.com/abstract=3128900", "datePublished": "2018", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "two sided reputation scoring visible to both parties" ], "source_pdf_sha256": "381d72e85d976e2af852e8ec3bba87bc6a05ccb3349a2c3dd6f9e64de96ab4b0", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3128900-029", "identifier": "kaal:claim:3128900-029", "text": "Sharing all work fees with the expertise creates a positive feedback loop: the more fees flow to the platform, the more reputation is worth, and the more workers prefer reputation tokens to one time fees.", "abstract": "Choosing to enforce a protocol where all fees are shared with the expertise creates a successful positive feedback loop: The more fees are sent to the platform, the more the reputation is worth; which means the reputation tokens will be more desirable to workers than one-time fees.", "citation": "Wulf A. Kaal, Decentralized Mechanical Turk Through Verified Reputation (2018). SSRN: https://ssrn.com/abstract=3128900", "datePublished": "2018", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "protocol enforces that users seeking validation send all work fees to the platform" ], "source_pdf_sha256": "381d72e85d976e2af852e8ec3bba87bc6a05ccb3349a2c3dd6f9e64de96ab4b0", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3227967-035", "identifier": "kaal:claim:3227967-035", "text": "A reputation verification platform matters because trust created through an eternal reputational record would be open to review and driven by proper incentives.", "abstract": "This was considered to be important because if the trust were to be created through an eternal reputational record, it would be open to review and driven by proper incentives.", "citation": "Mark Fenwick, Wulf A. Kaal, Erik P.M. Vermeulen, Legal Education in a Digital Age Why 'Coding for Lawyers' Matters (2018). SSRN: https://ssrn.com/abstract=3227967", "datePublished": "2018", "claim_type": "design", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "blockchain based reputation systems that reward trustful parties and punish bad actors" ], "source_pdf_sha256": "f6e13b956f864ab32ec3305d095a35a127770327d75b3688f785cefc437d369f", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3249860-001", "identifier": "kaal:claim:3249860-001", "text": "Crypto-economic incentive design is only limitedly successful at shaping future human behavior, because the designer must speculate about future human mental states and belief systems that may turn out entirely different from what was anticipated.", "abstract": "Shaping future human behavior through incentive design is limitedly successful7 because the social engineer speculates about human future mental states and corresponding belief systems.", "citation": "Wulf A. Kaal, Crypto Economics - The Top 100 Token Models Compared (2018). SSRN: https://ssrn.com/abstract=3249860", "datePublished": "2018", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "designs that rely on assumptions about human reactions to economic incentives" ], "source_pdf_sha256": "72b13f11002ba26206cd53e74c324b913d1830c642bfa024da6bac0d3af3a7b0", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3266953-016", "identifier": "kaal:claim:3266953-016", "text": "Putting the counterparties' reputation at stake reverses smart contracting's degeneration, because the opportunity to earn new valuable reputation tokens makes members act in ways that improve the platform over the long term rather than exploit short term arbitrage.", "abstract": "This effect changes if reputation of the counterparties is at stake. With the opportunity to create new valuable reputation tokens, members strive to act in ways which improve the platform for the long term instead of exploiting short-term arbitrage opportunities.", "citation": "Craig Calcaterra, Wulf A. Kaal, Gopinath Sivalingam, Reputation Protocol for the Internet of Trust - Conceptual Whitepaper (2018). SSRN: https://ssrn.com/abstract=3266953", "datePublished": "2018", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "reputation tokens that can be earned and lost" ], "source_pdf_sha256": "781758dea356e55d79c73ad7f1debe7c83de398bd1cd9e0a9a6c2802f276b4c0", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3266953-023", "identifier": "kaal:claim:3266953-023", "text": "A successful Semada block producer wins half of the newly minted reputation tokens for a block while the remaining members share the other half for policing the block in the validation pool.", "abstract": "they win the lottery of half of a great deal of new reputation tokens if they are chosen while the rest of the members share the other half of newly minted reputation tokens for policing the block in the validation pool.", "citation": "Craig Calcaterra, Wulf A. Kaal, Gopinath Sivalingam, Reputation Protocol for the Internet of Trust - Conceptual Whitepaper (2018). SSRN: https://ssrn.com/abstract=3266953", "datePublished": "2018", "claim_type": "mechanism", "confidence": "asserted", "is_failure_mode": false, "scope_conditions": [ "each produced and validated block" ], "source_pdf_sha256": "781758dea356e55d79c73ad7f1debe7c83de398bd1cd9e0a9a6c2802f276b4c0", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3266953-024", "identifier": "kaal:claim:3266953-024", "text": "Because all fungible fees are already shared in proper proportion among Anchor holders, participants have less reason to join a mining pool, which makes the system more decentralized.", "abstract": "is less reason to join a mining pool, since all fungible fees are already shared in proper proportion, so it is more decentralized).", "citation": "Craig Calcaterra, Wulf A. Kaal, Gopinath Sivalingam, Reputation Protocol for the Internet of Trust - Conceptual Whitepaper (2018). SSRN: https://ssrn.com/abstract=3266953", "datePublished": "2018", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "fee distribution proportional to Anchor token holdings" ], "source_pdf_sha256": "781758dea356e55d79c73ad7f1debe7c83de398bd1cd9e0a9a6c2802f276b4c0", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3266953-034", "identifier": "kaal:claim:3266953-034", "text": "Semada's voting algorithm is designed so that gaming the system is not economically feasible without contributing genuinely valuable improvements, because value is proven through the fees added to the system and every fee is subject to a fair validation pool.", "abstract": "The voting algorithm of Semada core is designed to combat that very system, so that it is not economically feasible to game the system without adding genuinely valuable improvements, as proven with the fees that are added to the system and the fair validation pool that every fee is subject to.", "citation": "Craig Calcaterra, Wulf A. Kaal, Gopinath Sivalingam, Reputation Protocol for the Internet of Trust - Conceptual Whitepaper (2018). SSRN: https://ssrn.com/abstract=3266953", "datePublished": "2018", "claim_type": "design", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "fees attached to each contribution", "validation pool review of every fee" ], "source_pdf_sha256": "781758dea356e55d79c73ad7f1debe7c83de398bd1cd9e0a9a6c2802f276b4c0", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3396522-038", "identifier": "kaal:claim:3396522-038", "text": "Merchant adoption of stable cryptocurrencies turns on a concrete threshold: merchants pay 2.9 percent to credit card companies on non cash transactions, so any medium of exchange costing less than 2.9 percent benefits merchants, who can pass the saving to consumers as a discount.", "abstract": "In the existing digital commerce, merchants pay 2.9% to the credit card company for any transaction involving non-cash transfer with credit cards. Merchants would benefit from any medium of exchange that requires them to pay less than that 2.9%.", "citation": "Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, Stable Cryptocurrencies (2019). SSRN: https://ssrn.com/abstract=3396522", "datePublished": "2019", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "assumes exchange rate risk for the consumer stays below the 2.9 percent threshold" ], "source_pdf_sha256": "ef5031b16aa53476ed618f0bdf92601cd4affb893692c701134bd9cba3ea8acf", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3396542-005", "identifier": "kaal:claim:3396542-005", "text": "Tokens in the proposed DAO function as reputation because an agent's proportional token holdings will grow over time only if that agent follows sound and successful underwriting practices.", "abstract": "We will refer to these tokens on occasion as reputation tokens as an agent's proportional holdings of these tokens is likely to increase over time only if the agent were to follow sound and successful underwriting practices.", "citation": "Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, Decentralized Underwriting (2019). SSRN: https://ssrn.com/abstract=3396542", "datePublished": "2019", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "tokens are minted as rewards for staking on underwritten policies" ], "source_pdf_sha256": "ce2bda03a0b788ea3e7747f02c3c351ef7c808a41150d5cda34767bbe98800c0", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3396542-007", "identifier": "kaal:claim:3396542-007", "text": "Insurance premia are treated as revenue of the entire DAO rather than of the underwriters who wrote the policy, and are shared among DAO participants; consequently the value of a token is a function of the DAO's expected future cash flows.", "abstract": "Instead, the premia are treated as the revenue of the entire DAO and shared among the DAO participants. Thus, the value of the tokens is a function of the expected future cash flows of the DAO.", "citation": "Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, Decentralized Underwriting (2019). SSRN: https://ssrn.com/abstract=3396542", "datePublished": "2019", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [], "source_pdf_sha256": "ce2bda03a0b788ea3e7747f02c3c351ef7c808a41150d5cda34767bbe98800c0", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3396542-008", "identifier": "kaal:claim:3396542-008", "text": "Because newly minted reward tokens go only to agents who stake tokens on policies, passive holders are diluted over time, which pushes agents toward active underwriting while still permitting passive investment.", "abstract": "Thus, the total number of tokens grows over time. This implies that \"passive\" agents who hold the tokens purely to receive a share of future premia will find their proportional ownership in the DAO decrease over time.", "citation": "Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, Decentralized Underwriting (2019). SSRN: https://ssrn.com/abstract=3396542", "datePublished": "2019", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "reward tokens minted per policy underwritten" ], "source_pdf_sha256": "ce2bda03a0b788ea3e7747f02c3c351ef7c808a41150d5cda34767bbe98800c0", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3396542-016", "identifier": "kaal:claim:3396542-016", "text": "Unlike prior token research, the purpose of issuing tokens here is not only to raise capital but also to give owners the opportunity and incentive to develop the DAO's business.", "abstract": "Another key difference is that in our study, the purpose of issuing tokens is not only to raise capital but also to provide the owners the opportunity and incentive to develop the business of the DAO.", "citation": "Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, Decentralized Underwriting (2019). SSRN: https://ssrn.com/abstract=3396542", "datePublished": "2019", "claim_type": "design", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [], "source_pdf_sha256": "ce2bda03a0b788ea3e7747f02c3c351ef7c808a41150d5cda34767bbe98800c0", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3396542-034", "identifier": "kaal:claim:3396542-034", "text": "Trust requirements in the DAO are minimized by appropriately designed economic incentives rather than by intermediary reputation or regulation.", "abstract": "The need to trust is minimized by appropriately designed economic incentives.", "citation": "Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, Decentralized Underwriting (2019). SSRN: https://ssrn.com/abstract=3396542", "datePublished": "2019", "claim_type": "mechanism", "confidence": "asserted", "is_failure_mode": false, "scope_conditions": [], "source_pdf_sha256": "ce2bda03a0b788ea3e7747f02c3c351ef7c808a41150d5cda34767bbe98800c0", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3402701-010", "identifier": "kaal:claim:3402701-010", "text": "Distributing newly minted coins to shareholders, as Basis planned, is exploitable: shareholders can collude to hold their new money and drive the price up, which triggers further minting that benefits the colluders.", "abstract": "However, it is possible the shareholders would collude to drive the price up by holding their new money", "citation": "Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, Stable Cryptocurrencies - First Order Principles (2019). SSRN: https://ssrn.com/abstract=3402701", "datePublished": "2019", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "new supply distributed to an identifiable shareholder group" ], "source_pdf_sha256": "72ed2581b4cac2bd18a5b2640be959487a3cbc34c86ab5e5664924bcdb53c8e0", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3402701-040", "identifier": "kaal:claim:3402701-040", "text": "The authors recommend an SDAO governance design coordinated through reputation-weighted democratic governance, whose core objective is to create incentives that lead independent and selfish actors to collaborate productively toward a common goal.", "abstract": "In that paper we recommend an SDAO design coordinated through reputation-weighted democratic governance", "citation": "Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, Stable Cryptocurrencies - First Order Principles (2019). SSRN: https://ssrn.com/abstract=3402701", "datePublished": "2019", "claim_type": "design", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [], "source_pdf_sha256": "72ed2581b4cac2bd18a5b2640be959487a3cbc34c86ab5e5664924bcdb53c8e0", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3405401-024", "identifier": "kaal:claim:3405401-024", "text": "Reputation used as a metric and store of value does not lead to centralization because it must be earned, it can be lost, and it cannot be converted into a fungible store of value exchangeable for goods.", "abstract": "Reputation as a metric and store of value does not suffer the same consequences and does not lead to centralization because it must be earned, it can be lost, yet it cannot be turned into a fungible store of value that allows the exchange for goods etc.", "citation": "Wulf A. Kaal, Decentralized Commerce – A Primer on Why Decentralized Reputation Verification Systems Are Needed (2019). SSRN: https://ssrn.com/abstract=3405401", "datePublished": "2019", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "reputation is non fungible and non transferable" ], "source_pdf_sha256": "bc2d6f0ddc0852fb4085c4543c7c1dec19aaf8745eb67e3acc637e552bd7fb7d", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3406323-010", "identifier": "kaal:claim:3406323-010", "text": "In decentralized systems profit generation rests less on capitalistic economies of scale and more on open source volunteer contributions and greater good perspectives, with profits arising only if and when the solutions become mainstream.", "abstract": "The profit generation is less based on capitalistic notions of economies of scale but rather revolves around notions of open source volunteer contributions and greater good perspectives for society.", "citation": "Wulf A. Kaal, Decentralization - A Primer on the New Economy (2019). SSRN: https://ssrn.com/abstract=3406323", "datePublished": "2019", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "emerging decentralized solutions for commerce and society" ], "source_pdf_sha256": "6293780b57a1ae1de17ec00f99cc94295d4f72ea4d08b17a5c08c44772b221db", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3406323-039", "identifier": "kaal:claim:3406323-039", "text": "A DAO's profit distribution weights across present workers, past workers, protocol designers, and governance designers should match the DAO's current values, since a greater share for new workers attracts new workers, a greater share for older workers signals long term stability, and a greater share for protocol designers attracts innovation.", "abstract": "A greater share for new workers will attract new workers, a greater share for the older workers will signal long-term stability, while a greater share for the protocol designers will attract more innovation.", "citation": "Wulf A. Kaal, Decentralization - A Primer on the New Economy (2019). SSRN: https://ssrn.com/abstract=3406323", "datePublished": "2019", "claim_type": "design", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "algorithmic token design in a DAO" ], "source_pdf_sha256": "6293780b57a1ae1de17ec00f99cc94295d4f72ea4d08b17a5c08c44772b221db", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3406323-041", "identifier": "kaal:claim:3406323-041", "text": "A dynamic, changing set of governance rules can address the problem that any static rule set is gameable, and can establish the incentives necessary to stop such abuses.", "abstract": "A dynamic, changing set of governance rules can address the conundrum, and can set up the incentives necessary to stop the abuses.", "citation": "Wulf A. Kaal, Decentralization - A Primer on the New Economy (2019). SSRN: https://ssrn.com/abstract=3406323", "datePublished": "2019", "claim_type": "design", "confidence": "asserted", "is_failure_mode": false, "scope_conditions": [ "decentralized governance systems exposed to strategic attack" ], "source_pdf_sha256": "6293780b57a1ae1de17ec00f99cc94295d4f72ea4d08b17a5c08c44772b221db", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3409548-010", "identifier": "kaal:claim:3409548-010", "text": "Requiring data scientists to stake a cryptocurrency on their own predictions is a workable remedy for overfitting, because the stake expresses confidence in live performance and lets the fund select the optimal model.", "abstract": "The staking process, in turn, enables Numerai to choose the optimal model and in the process improve the performance of its hedge fund.", "citation": "Kaal, Financial Technology and Hedge Funds (2019). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3409548", "datePublished": "2019", "claim_type": "design", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "crowdsourced modeling competition with a stakeable token" ], "source_pdf_sha256": "74227ab2656b06bfe4a29c942fc2ba26df9f476917e0a9f85ec038b8c3402c40", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3411897-040", "identifier": "kaal:claim:3411897-040", "text": "For any static set of rules in an infinitely repeated game using reputation stakes, there is a way to subvert the rules for an individual's profit at the expense of the group, which is why static decentralized governance rules can always be gamed and only dynamic, changing rules can address the problem.", "abstract": "For any static set of rules in an infinitely repeated game using reputation (stakes), there is a way to subvert the rules for an individual's profit at the expense of the group.", "citation": "Wulf A. Kaal, Decentralization - Past, Present, and Future (2019). SSRN: https://ssrn.com/abstract=3411897", "datePublished": "2019", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "infinitely repeated games with reputation or stake based rules", "static rule sets" ], "source_pdf_sha256": "82f0aea026b3e3a526ec51bc073b3b864dc06cd9083ff9c54c550037045edaa9", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3441904-016", "identifier": "kaal:claim:3441904-016", "text": "Fungible cryptocurrencies are by their nature a corruptive element because decision makers can be influenced by power that grows with the size of fungible holdings; decentralized decision making therefore requires non fungible payout metrics combined with an indirect fungible payout structure.", "abstract": "Decentralized decision making necessitates non-fungible payouts metrics combined with an indirect fungible payout structure.", "citation": "Wulf A. Kaal, Blockchain-Based Corporate Governance (2019). SSRN: https://ssrn.com/abstract=3441904", "datePublished": "2019", "claim_type": "design", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "decentralized decision making structures", "DAO payment and voting designs" ], "source_pdf_sha256": "e6b562527f7f19accaa35491db0a0db168b6a936755e1dca424e9f30bee7a815", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3441904-017", "identifier": "kaal:claim:3441904-017", "text": "If curators and contractors are paid from a fungible currency source without a direct or indirect penalty for underperformance, such as lower token scores, DAO contractors and workers may be corrupted by external sources.", "abstract": "If curators' and contractors' payment come from a fungible currency source without a direct or indirect penalty for underperformance, such as lower token scores, DAO contractors and workers may be corrupted by external sources.", "citation": "Wulf A. Kaal, Blockchain-Based Corporate Governance (2019). SSRN: https://ssrn.com/abstract=3441904", "datePublished": "2019", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "fungible payment without an underperformance penalty" ], "source_pdf_sha256": "e6b562527f7f19accaa35491db0a0db168b6a936755e1dca424e9f30bee7a815", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3441904-043", "identifier": "kaal:claim:3441904-043", "text": "Reputation based DAO governance turns a zero sum game into a positive sum game, because members are given incentives to build lasting non fungible value through a long term record of productive cooperation that improves the DAO.", "abstract": "DAO members have incentives to create lasting non-fungible value for the institution by developing a long-term non-fungible record of productive cooperation that in effect improves the DAO.", "citation": "Wulf A. Kaal, Blockchain-Based Corporate Governance (2019). SSRN: https://ssrn.com/abstract=3441904", "datePublished": "2019", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "DAO designs using non fungible reputation rather than fungible rewards" ], "source_pdf_sha256": "e6b562527f7f19accaa35491db0a0db168b6a936755e1dca424e9f30bee7a815", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3441904-046", "identifier": "kaal:claim:3441904-046", "text": "DAO incentives are intrinsic rather than extrinsic: the core common denominator for all DAO token members is the unifying desire to optimize the DAO structure and reputation token value, whereas hierarchical organizations rely predominantly on extrinsic structures such as wages.", "abstract": "Most hierarchical organizations rely predominantly on extrinsic incentive structures, through wages etc. By contrast, the core common denominator for all DAO token members is the unifying desire to optimize the DAO structure and the DAO reputation token value.", "citation": "Wulf A. Kaal, Blockchain-Based Corporate Governance (2019). SSRN: https://ssrn.com/abstract=3441904", "datePublished": "2019", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "ideal typical DAO governance design parameters" ], "source_pdf_sha256": "e6b562527f7f19accaa35491db0a0db168b6a936755e1dca424e9f30bee7a815", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3606663-018", "identifier": "kaal:claim:3606663-018", "text": "Anonymity in decentralized networks imposes a specific design constraint: system architects need a special skillset to navigate the limits that anonymity places on system design, and that skillset remains very rare in the early 2020s.", "abstract": "The anonymity in decentralized networks requires a special skillset for system architects who know how to navigate the limitations in system design that is associated with anonymity.", "citation": "Kaal, Digital Asset Market Evolution (2020). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3606663", "datePublished": "2020", "claim_type": "condition", "confidence": "asserted", "is_failure_mode": false, "scope_conditions": [ "decentralized networks with anonymous and autonomous participants", "incentive compatible token design" ], "source_pdf_sha256": "d1d4a15a293b715bb6a5a32e689f59c3a1587915039ba9a1cf4eeb8ee2a1e57c", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3606663-022", "identifier": "kaal:claim:3606663-022", "text": "Token design must be treated as an iterative process in which data collection and flexibility in core design parameters are essential, because prior crypto economic assumptions routinely turn out to be suboptimal once the network grows and user preferences change.", "abstract": "Data collection and flexibility in core design parameters are essential because prior crypto-economic assumptions often materialize as suboptimal in the light of network growth and changing user and consumer preferences.", "citation": "Kaal, Digital Asset Market Evolution (2020). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3606663", "datePublished": "2020", "claim_type": "design", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "token and crypto economic design for growing decentralized networks" ], "source_pdf_sha256": "d1d4a15a293b715bb6a5a32e689f59c3a1587915039ba9a1cf4eeb8ee2a1e57c", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3652481-019", "identifier": "kaal:claim:3652481-019", "text": "Overcoming attempts by rational and opportunistic internal and external constituents to game a DAO's governance design requires a duality of incentives, in which actors improve their own utility while their actions simultaneously benefit the whole institution over the long run.", "abstract": "Human nature and any effective machine derivates of human engagements in institutional form require a duality of incentives in order to overcome attempts of rational and opportunistic internal and external constituents to game the governance design of a given DAO.", "citation": "Wulf A. Kaal, Decentralized Autonomous Organizations – Internal Governance and External Legal Design (2020). SSRN: https://ssrn.com/abstract=3652481", "datePublished": "2020", "claim_type": "condition", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [], "source_pdf_sha256": "530b3a40c244aeca2eb4c53f4c9b4d6b2962bd6be9f92b4ebe17139c17f4c0e0", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3652481-020", "identifier": "kaal:claim:3652481-020", "text": "DAO designs at the beginning of the 2020s did not effectively master the duality of incentives that a workable DAO governance design requires.", "abstract": "DAO designs at the beginning of the 2020s did not effectively master this duality.", "citation": "Wulf A. Kaal, Decentralized Autonomous Organizations – Internal Governance and External Legal Design (2020). SSRN: https://ssrn.com/abstract=3652481", "datePublished": "2020", "claim_type": "failure", "confidence": "asserted", "is_failure_mode": true, "scope_conditions": [ "DAO designs as of the early 2020s" ], "source_pdf_sha256": "530b3a40c244aeca2eb4c53f4c9b4d6b2962bd6be9f92b4ebe17139c17f4c0e0", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3709041-002", "identifier": "kaal:claim:3709041-002", "text": "Blockchain technology incentivizes direct transactions between creator and consumer, including compensation, which eliminates the need for intermediation.", "abstract": "The technology incentivizes direct transactions, including compensation, between the creator and consumer, eliminating the need for intermediation.", "citation": "Kaal, Blockchain Technology for Good (2020). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3709041", "datePublished": "2020", "claim_type": "mechanism", "confidence": "asserted", "is_failure_mode": false, "scope_conditions": [], "source_pdf_sha256": "5216a7bca45a48e3bef11ec524936e66af737c0fd66271e9f6866dc20a4482cc", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3709041-007", "identifier": "kaal:claim:3709041-007", "text": "Both dominant ideologies fail in symmetrical ways: capitalism produces inequity, inequality, monopolies, and other market failures, while socialism has incentive design defects in which hard work is not effectively rewarded and external costs are largely ignored.", "abstract": "Capitalism can lead to significant inequities, inequality, as well as monopolies, and other market failures. Similarly, socialism has significant incentive design issues, where hard work is not rewarded effectively and external cost are largely ignored.", "citation": "Kaal, Blockchain Technology for Good (2020). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3709041", "datePublished": "2020", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [], "source_pdf_sha256": "5216a7bca45a48e3bef11ec524936e66af737c0fd66271e9f6866dc20a4482cc", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3782193-025", "identifier": "kaal:claim:3782193-025", "text": "Giving the Apaches cattle in 1917 succeeded where military force had failed because the valuable assets created a zero-sum battle over resources between lineages, generating the internal competition necessary to produce a hierarchy of power over the disbursement of resources and property.", "abstract": "As Nevins explained, the introduction of the cattle created \"a zero-sum battle over resources between lineages\".26 The valuable assets created the internal competition necessary to generate a hierarchy of power over disbursement of resources and property.", "citation": "Craig Calcaterra, Wulf A. Kaal, Historical Sketches of Centralization vs. Decentralization (2021). SSRN: https://ssrn.com/abstract=3782193", "datePublished": "2021", "claim_type": "mechanism", "confidence": "evidenced", "is_failure_mode": true, "scope_conditions": [ "introduction of divisible valuable assets into a decentralized group" ], "source_pdf_sha256": "74df9cc9a19a098bdacd0424a4174795f6e184f7a31c8ee7541195186701ebd2", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3782193-026", "identifier": "kaal:claim:3782193-026", "text": "The authors accept Brafman and Beckstrom's thesis that the best way to convert a decentralized organization into a centralized one is to introduce the profit motive, since money supplies a focal point for internal competition.", "abstract": "The thesis of The Starfish and the Spider is that the best way to convert a decentral- ized organization to a centralized organization is to introduce the profit motive.", "citation": "Craig Calcaterra, Wulf A. Kaal, Historical Sketches of Centralization vs. Decentralization (2021). SSRN: https://ssrn.com/abstract=3782193", "datePublished": "2021", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "decentralized organizations in which profits become available to members" ], "source_pdf_sha256": "74df9cc9a19a098bdacd0424a4174795f6e184f7a31c8ee7541195186701ebd2", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3782193-029", "identifier": "kaal:claim:3782193-029", "text": "Good ideas will fail to be implemented unless the reward structure is balanced, because people rarely keep working idealistically toward group goals while rent seekers at the top split the rewards unfairly.", "abstract": "Good ideas will fail to be implemented unless the reward struc- ture is balanced.", "citation": "Craig Calcaterra, Wulf A. Kaal, Historical Sketches of Centralization vs. Decentralization (2021). SSRN: https://ssrn.com/abstract=3782193", "datePublished": "2021", "claim_type": "condition", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "projects where rewards are visibly distributed among contributors" ], "source_pdf_sha256": "74df9cc9a19a098bdacd0424a4174795f6e184f7a31c8ee7541195186701ebd2", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3782193-032", "identifier": "kaal:claim:3782193-032", "text": "Adding reputation to the contracting game converts it from a single-stage zero-sum game into a repeated positive-sum game in which the rest of the community becomes relevant, because reputation is a future-oriented commodity that pays off with the promise of future contracts.", "abstract": "By adding reputation to the game, it becomes a repeated game, and the rest of the community becomes relevant. Reputation is a future-oriented commodity, which pays off profits with the promise of future contracts. Now the game is a repeated game which is positive-sum.", "citation": "Craig Calcaterra, Wulf A. Kaal, Historical Sketches of Centralization vs. Decentralization (2021). SSRN: https://ssrn.com/abstract=3782193", "datePublished": "2021", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "networks where reputation is observable and policed by the community" ], "source_pdf_sha256": "74df9cc9a19a098bdacd0424a4174795f6e184f7a31c8ee7541195186701ebd2", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3782198-003", "identifier": "kaal:claim:3782198-003", "text": "The social media coordination function remains largely flawed and corruptible because the incentive design underlying social proof is suboptimal.", "abstract": "However, because the incentive design for social proof is suboptimal, the social media coordination function is still largely flawed and corruptible.", "citation": "Craig Calcaterra, Wulf A. Kaal, Contemporary Decentralization (2021). SSRN: https://ssrn.com/abstract=3782198", "datePublished": "2021", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "applies to platform ratings, reviews, and social proof mechanisms under centralized ownership" ], "source_pdf_sha256": "e7e1378e3eed06cace6534e7792a7307d607d18bc6beb4ac45896476280728e4", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3782198-004", "identifier": "kaal:claim:3782198-004", "text": "Rating systems on centralized marketplaces are actively gamed: new Amazon sellers are solicited by sock puppet operators offering to inflate their ratings and attack competitors.", "abstract": "For example, one of the first things that will hap- pen if you open a shop on Amazon is that you will receive several messages from ma- licious sock-puppet wranglers offering to game the rating system to improve your company's ratings while attacking your major competitor.", "citation": "Craig Calcaterra, Wulf A. Kaal, Contemporary Decentralization (2021). SSRN: https://ssrn.com/abstract=3782198", "datePublished": "2021", "claim_type": "empirical", "confidence": "asserted", "is_failure_mode": true, "scope_conditions": [ "observed on major centralized e-commerce platforms" ], "source_pdf_sha256": "e7e1378e3eed06cace6534e7792a7307d607d18bc6beb4ac45896476280728e4", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3782198-005", "identifier": "kaal:claim:3782198-005", "text": "Social networks grow exponentially more powerful through the network effect, but they are stifled by the centralized ownership and governance of the Web 2.0 companies that run them; governing decentralized information flow requires decentralized incentive designs.", "abstract": "But these networks are stifled by the centralized ownership and governance of the Web ).5 companies that run them. Governing decentralized information flow ne- cessitates decentralized incentive designs.", "citation": "Craig Calcaterra, Wulf A. Kaal, Contemporary Decentralization (2021). SSRN: https://ssrn.com/abstract=3782198", "datePublished": "2021", "claim_type": "condition", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "applies to networks whose value comes from member interaction" ], "source_pdf_sha256": "e7e1378e3eed06cace6534e7792a7307d607d18bc6beb4ac45896476280728e4", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3782198-007", "identifier": "kaal:claim:3782198-007", "text": "If a peer to peer network were decentrally owned by its users, its algorithms could be open source and still remain safe, because the network could reward members for policing exploitation instead of relying on a centralized company to keep the algorithm opaque.", "abstract": "if the P)P network were decentrally owned by the users them- selves, the algorithms can be open source and still remain safe.", "citation": "Craig Calcaterra, Wulf A. Kaal, Contemporary Decentralization (2021). SSRN: https://ssrn.com/abstract=3782198", "datePublished": "2021", "claim_type": "design", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "requires an incentive design that rewards members for defending the algorithm they own" ], "source_pdf_sha256": "e7e1378e3eed06cace6534e7792a7307d607d18bc6beb4ac45896476280728e4", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3782198-010", "identifier": "kaal:claim:3782198-010", "text": "The incentive design in which originators of TCP requests pay the bill failed to solve web hosting costs, because the Tragedy of the Commons asserted itself and porn and pirated file sharing, sometimes set up by the ISPs themselves to game the payment design, consumed available bandwidth.", "abstract": "This didn't solve the problem, as naturally the Tragedy of the Commons9 asserted itself. Porn sites and pirated file sharing (often set up by the ISPs themselves to game the payment design10) quickly used up any available bandwidth.", "citation": "Craig Calcaterra, Wulf A. Kaal, Contemporary Decentralization (2021). SSRN: https://ssrn.com/abstract=3782198", "datePublished": "2021", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "applies to the early ISP era of Web 1.0 bandwidth provision" ], "source_pdf_sha256": "e7e1378e3eed06cace6534e7792a7307d607d18bc6beb4ac45896476280728e4", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3782198-021", "identifier": "kaal:claim:3782198-021", "text": "Earlier centralized companies defeated more decentralized peer to peer platforms because of the technology of the time and the incentive design built into capitalist civilization: consumer devices could not match industrial upload speeds, centralized firms had the incentive to polish user interfaces, and economies of scale made central bureaucracy worth negotiating.", "abstract": "The reason earlier centralized companies succeeded against more decentralized P)P platforms is due to the existing technology of the time and the natural incentive design that is built into our capitalist civilization.", "citation": "Craig Calcaterra, Wulf A. Kaal, Contemporary Decentralization (2021). SSRN: https://ssrn.com/abstract=3782198", "datePublished": "2021", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "describes the competitive conditions of the early internet era" ], "source_pdf_sha256": "e7e1378e3eed06cace6534e7792a7307d607d18bc6beb4ac45896476280728e4", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3782198-022", "identifier": "kaal:claim:3782198-022", "text": "Existing decentralized filesharing networks cannot guarantee the availability of unpopular files such as personal files, whereas centralized cloud services guarantee availability for a fee.", "abstract": "One problem with most existing decentralized filesharing networks is that unpop- ular files (such as your personal files) are not guaranteed to be available, unlike cen- tralized cloud computing services which guarantee availability for a fee.", "citation": "Craig Calcaterra, Wulf A. Kaal, Contemporary Decentralization (2021). SSRN: https://ssrn.com/abstract=3782198", "datePublished": "2021", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "applies to filesharing networks without an incentive design for storing unpopular data" ], "source_pdf_sha256": "e7e1378e3eed06cace6534e7792a7307d607d18bc6beb4ac45896476280728e4", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3782198-037", "identifier": "kaal:claim:3782198-037", "text": "Anonymity should be balanced rather than absolute: a member's power to broadcast should be tied to a pseudonymous account carrying meaningful and valuable reputation that is lost when the broadcasting power is abused.", "abstract": "Therefore, anonymity should be balanced. Your power to broadcast your voice should be tempered by hav- ing that voice tied with a pseudonymous36 account with meaningful and valuable rep- utation. If you abuse your broadcasting power, then you should lose your reputation.", "citation": "Craig Calcaterra, Wulf A. Kaal, Contemporary Decentralization (2021). SSRN: https://ssrn.com/abstract=3782198", "datePublished": "2021", "claim_type": "design", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "applies to decentralized networks that permit anonymous participation" ], "source_pdf_sha256": "e7e1378e3eed06cace6534e7792a7307d607d18bc6beb4ac45896476280728e4", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3782201-009", "identifier": "kaal:claim:3782201-009", "text": "Keeping a decentralized organization aligned in pursuit of its goals requires providing something more valuable than money, namely reputation, following the Maghribi traders' example.", "abstract": "In order to keep a decentralized organization aligned in the pursuit of their goals, you must provide something more valuable than money: reputation.", "citation": "Craig Calcaterra, Wulf A. Kaal, Future of Decentralization (2021). SSRN: https://ssrn.com/abstract=3782201", "datePublished": "2021", "claim_type": "condition", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "politically decentralized networks devoted to profit" ], "source_pdf_sha256": "bedf7bcfbb7a9b0112b5848cb0d941b1d41f330dafeee0143a30ff5e8aa53700", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3782203-024", "identifier": "kaal:claim:3782203-024", "text": "If the decentralized economy is constructed as a zero-sum game, cooperation becomes impossible because the only feasible long-term strategy is maximal extraction, and participants are incentivized to play the most ruthless strategies available against their counterparties.", "abstract": "a zero-sum game, then cooperation is not possible as the only feasible long-term strat- egy is the pirate code: take anything not nailed down and leave nothing for your op- ponent. Then people are incentivized to play the most ruthless strategies available to hurt the other parties of a contract.", "citation": "Craig Calcaterra, Wulf A. Kaal, A Technical Perspective on Decentralization (2021). SSRN: https://ssrn.com/abstract=3782203", "datePublished": "2021", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "zero-sum reward structures", "especially where counterparties are anonymous" ], "source_pdf_sha256": "ab8a22d0dbb026a09212a4c85963f3c05787cf80775e8613ae3724e3883e7a56", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3782203-039", "identifier": "kaal:claim:3782203-039", "text": "Because the Folk Theorems rule out a perfect reward system, the design goal for a DAO should be reduced to making it easier for members to help the group than to hurt it, with members themselves incentivized to police bad actors to protect their own profits.", "abstract": "From the Folk Theorems, we know we cannot set up a perfect system. The best we can hope for, is to design a system which makes it easier to help the group than to hurt it.", "citation": "Craig Calcaterra, Wulf A. Kaal, A Technical Perspective on Decentralization (2021). SSRN: https://ssrn.com/abstract=3782203", "datePublished": "2021", "claim_type": "design", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "leaderless DAOs with anonymous members", "no external enforcement available" ], "source_pdf_sha256": "ab8a22d0dbb026a09212a4c85963f3c05787cf80775e8613ae3724e3883e7a56", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3782205-008", "identifier": "kaal:claim:3782205-008", "text": "Keeping decentralized networks running productively requires a dynamic design with checks and balances combined with the incentive design insights of game theory.", "abstract": "A dynamic design with checks and balances and the incentive design insights of game theory are necessary to keep these networks running productively.", "citation": "Craig Calcaterra, Wulf A. Kaal, Eight Institutions for the Evolution of Decentralization (2021). SSRN: https://ssrn.com/abstract=3782205", "datePublished": "2021", "claim_type": "condition", "confidence": "asserted", "is_failure_mode": false, "scope_conditions": [ "applies to decentralized networks intended to operate over time" ], "source_pdf_sha256": "5ba52c63e81019b6867fb29c4a50821ff574e510d79b31b8ce9f4c726a0ebc71", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3782210-006", "identifier": "kaal:claim:3782210-006", "text": "The failure of many DAOs to date is traceable to their reliance on the good will of network members rather than on engineered incentives.", "abstract": "The failure of many DAOs, so far, has been their reliance on the good will of the members of the network.", "citation": "Craig Calcaterra, Wulf A. Kaal, The Importance of Reputation for the Evolution of Decentralization (2021). SSRN: https://ssrn.com/abstract=3782210", "datePublished": "2021", "claim_type": "failure", "confidence": "asserted", "is_failure_mode": true, "scope_conditions": [ "decentralized autonomous organizations observed to date" ], "source_pdf_sha256": "9cc531ab239f6266c8aeddcc8e54f4c06029c44e825444bee137bbcc0c9d0a8e", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3782210-021", "identifier": "kaal:claim:3782210-021", "text": "DAOs are free to organize as they choose, and those that fail to find the right incentives for productive behavior will certainly go extinct, because the feedback loop that includes customers outside the DAO punishes unproductive DAOs by loss of fees.", "abstract": "DAOs have the freedom to organize any way they choose. If they fail to find the right incentives for productive behavior, they will cer- tainly go extinct. The feedback loop that includes customers outside the DAO naturally punishes any unproductive DAOs, by loss of fees.", "citation": "Craig Calcaterra, Wulf A. Kaal, The Importance of Reputation for the Evolution of Decentralization (2021). SSRN: https://ssrn.com/abstract=3782210", "datePublished": "2021", "claim_type": "predictive", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "DAOs that depend on outside customer fees", "competitive markets for DAO services" ], "source_pdf_sha256": "9cc531ab239f6266c8aeddcc8e54f4c06029c44e825444bee137bbcc0c9d0a8e", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3782214-001", "identifier": "kaal:claim:3782214-001", "text": "Reputation changes the incentive structure of a decentralized organization from a single stage, zero sum game into a repeated positive sum game, which is why the authors treat reputation as the key to effective decentralized governance.", "abstract": "Reputation changes the incentive structure from a single-stage, zero-sum game to a repeated positive-sum game.", "citation": "Craig Calcaterra, Wulf A. Kaal, Decentralized Governance (2021). SSRN: https://ssrn.com/abstract=3782214", "datePublished": "2021", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "the reputation system is formally linked to the organization's profits" ], "source_pdf_sha256": "ba892bb200c1455447c0014f5067a501a93ea9ec413c31942d95952eb3bdfd9d", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3782214-013", "identifier": "kaal:claim:3782214-013", "text": "Recording every action on a blockchain does not by itself defeat corruption, because more information does not ensure more productive collaboration; members must additionally be motivated to behave correctly and to police corrupt behavior.", "abstract": "Just because we can cite every action from a company on a blockchain, however, does not mean we have conquered corruption. More information does not ensure more productive collaboration.", "citation": "Craig Calcaterra, Wulf A. Kaal, Decentralized Governance (2021). SSRN: https://ssrn.com/abstract=3782214", "datePublished": "2021", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "transparent ledgers without aligned incentives" ], "source_pdf_sha256": "ba892bb200c1455447c0014f5067a501a93ea9ec413c31942d95952eb3bdfd9d", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3782214-014", "identifier": "kaal:claim:3782214-014", "text": "When currency is the entire proximal goal of a transaction, all participants naturally behave as selfishly as possible and exploit any opportunity for individual profit at the group's expense, which makes cash profit a bad immediate incentive for both business and government.", "abstract": "If the entire proximal goal of a transaction is currency, all participants will naturally be- have in the most selfish manner possible, exploiting any opportunity for individual profit at the expense of the group.", "citation": "Craig Calcaterra, Wulf A. Kaal, Decentralized Governance (2021). SSRN: https://ssrn.com/abstract=3782214", "datePublished": "2021", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "anonymous members staking currency on rigid smart contracts" ], "source_pdf_sha256": "ba892bb200c1455447c0014f5067a501a93ea9ec413c31942d95952eb3bdfd9d", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3782214-022", "identifier": "kaal:claim:3782214-022", "text": "The main problem with all current peer to peer governance structures is the lack of proper incentivization: participants are not motivated to improve the whole organization over the long term, so they game the system for short term personal profit.", "abstract": "The main problem with all current PCP governance structures (such as they are) is the lack of proper incentivization. In business or in government, all participants need to be motivated to improve the whole organization over the long term.", "citation": "Craig Calcaterra, Wulf A. Kaal, Decentralized Governance (2021). SSRN: https://ssrn.com/abstract=3782214", "datePublished": "2021", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "short term fungible rewards are available" ], "source_pdf_sha256": "ba892bb200c1455447c0014f5067a501a93ea9ec413c31942d95952eb3bdfd9d", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3782214-023", "identifier": "kaal:claim:3782214-023", "text": "A reputational system formally linked to profits makes members forward thinking and cooperative, counteracting the tendency of competition to separate them, and it also motivates members to self police their own past investments.", "abstract": "A reputational system that is formally linked to profits makes the members for- ward-thinking and cooperative, to combat the natural tendency of competition to sep- arate members. It also motivates members to self-police their past investments.", "citation": "Craig Calcaterra, Wulf A. Kaal, Decentralized Governance (2021). SSRN: https://ssrn.com/abstract=3782214", "datePublished": "2021", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "reputation is formally tied to the organization's profit stream" ], "source_pdf_sha256": "ba892bb200c1455447c0014f5067a501a93ea9ec413c31942d95952eb3bdfd9d", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3782214-035", "identifier": "kaal:claim:3782214-035", "text": "It does not matter what a DAO architect intends, because the resulting rules of the game are what tell players what to value; governance parameters therefore determine the organization's actual values regardless of stated intent.", "abstract": "it doesn't matter what the architects' intentions are, the resulting rules of the game tell the players what to value.", "citation": "Craig Calcaterra, Wulf A. Kaal, Decentralized Governance (2021). SSRN: https://ssrn.com/abstract=3782214", "datePublished": "2021", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "systems observed at steady state" ], "source_pdf_sha256": "ba892bb200c1455447c0014f5067a501a93ea9ec413c31942d95952eb3bdfd9d", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3782216-014", "identifier": "kaal:claim:3782216-014", "text": "Reputation must be grounded to be meaningful, so reputation tokens should be minted only when policy premia enter the group, reputation should dictate power, and fees should be shared through reputation weighted salaries.", "abstract": "Reputation needs to be grounded to be meaningful, so reputation tokens should only be minted when fees (policy premia) enter the group. Reputation should dictate power in the group. So, reputation should determine how the fees are shared, through reputation-weighted salaries.", "citation": "Craig Calcaterra, Wulf A. Kaal, Decentralized Finance (DeFi) (2021). SSRN: https://ssrn.com/abstract=3782216", "datePublished": "2021", "claim_type": "design", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "design for an Underwriting DAO" ], "source_pdf_sha256": "f1739743aa06bbc1641cd65da790d531b69d8628ea3f5cc3fcad1bf5a1242373", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3782216-015", "identifier": "kaal:claim:3782216-015", "text": "Because underwriting mints new reputation tokens, passive holders see their proportional ownership in the DAO fall over time, which is designed to incentivize agents to underwrite actively while still allowing passive investors to earn income.", "abstract": "Thus, the total number of tokens grows over time. This implies that \"passive\" agents who hold the tokens purely to receive a share of future premia will find their proportional ownership in the DAO decrease over time.", "citation": "Craig Calcaterra, Wulf A. Kaal, Decentralized Finance (DeFi) (2021). SSRN: https://ssrn.com/abstract=3782216", "datePublished": "2021", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "Underwriting DAO that rewards underwriting with newly minted tokens" ], "source_pdf_sha256": "f1739743aa06bbc1641cd65da790d531b69d8628ea3f5cc3fcad1bf5a1242373", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3782220-025", "identifier": "kaal:claim:3782220-025", "text": "Identifying a network's values is not an academic exercise: values determine goals, goals determine how rewards and punishments are set up, and that reward structure determines the network's future and whether it survives.", "abstract": "Your network's values determine your goals, which determine how your rewards and punishments are set up, which determine your net- work's future and whether it will survive.", "citation": "Craig Calcaterra, Wulf A. Kaal, The Importance of Transcendental Unifying Values for Decentralization (2021). SSRN: https://ssrn.com/abstract=3782220", "datePublished": "2021", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "any network, society, or DAO" ], "source_pdf_sha256": "f0bf1e80c6da60a6f8ba20630562bdf1dab171ccb5267f497dc0b815113cde99", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3782220-026", "identifier": "kaal:claim:3782220-026", "text": "Governance design choices must be matched to the network's values, because otherwise the reward structure will dictate the true goals and thereby determine what the network actually values.", "abstract": "you need to match your governance design choices to your values, or else the reward structure will dic- tate the true goals, which will determine what the network ultimately values.", "citation": "Craig Calcaterra, Wulf A. Kaal, The Importance of Transcendental Unifying Values for Decentralization (2021). SSRN: https://ssrn.com/abstract=3782220", "datePublished": "2021", "claim_type": "design", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "networks with explicit governance and reward structures" ], "source_pdf_sha256": "f0bf1e80c6da60a6f8ba20630562bdf1dab171ccb5267f497dc0b815113cde99", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3799320-013", "identifier": "kaal:claim:3799320-013", "text": "Effective institutional governance requires a duality of incentives, namely incentives for actors to improve their own utility while their actions simultaneously benefit the whole institution over the long run, in order to defeat rational and opportunistic attempts to game the design.", "abstract": "Human nature and any effective machine derivatives of human engagements in institutional form require a duality of incentives in order to overcome attempts of rational and opportunistic internal and external constituents to game the governance design of a given DAO.", "citation": "Wulf A. Kaal, A Decentralized Autonomous Organization (DAO) of DAOs (2021). SSRN: https://ssrn.com/abstract=3799320", "datePublished": "2021", "claim_type": "condition", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "institutions with rational, opportunistic internal and external constituents" ], "source_pdf_sha256": "c3dff852f2d3f04718c829a24189309a7db4d92d84f6045d3d4f562d87c03e63", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3799320-014", "identifier": "kaal:claim:3799320-014", "text": "When fungible assets are the dominant incentive design in the governance of a DAO with identifiable actors, rational and opportunistic internal and external participants will typically attempt to corrupt that governance design for their own gain.", "abstract": "When fungible assets are used as the dominant incentive design in the governance of DAOs with identifiable actors, rational and opportunistic internal constituents and external participants will typically attempt to corrupt the governance design of the DAO for their own gain.", "citation": "Wulf A. Kaal, A Decentralized Autonomous Organization (DAO) of DAOs (2021). SSRN: https://ssrn.com/abstract=3799320", "datePublished": "2021", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "fungible assets used as the dominant governance incentive", "actors who are identifiable" ], "source_pdf_sha256": "c3dff852f2d3f04718c829a24189309a7db4d92d84f6045d3d4f562d87c03e63", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3808852-019", "identifier": "kaal:claim:3808852-019", "text": "At the beginning of the 2020s no forum existed that could support truly decentralized software development with a sufficient incentive design.", "abstract": "At the beginning of the 2020s, no forum existed that could support truly decentralized software development with a sufficient incentive design.", "citation": "Wulf A. Kaal, Decentralization and Feedback Effects (2021). SSRN: https://ssrn.com/abstract=3808852", "datePublished": "2021", "claim_type": "empirical", "confidence": "asserted", "is_failure_mode": true, "scope_conditions": [ "as of the beginning of the 2020s" ], "source_pdf_sha256": "31e91158fdeefebc2f0be54ebf89751f7cdd4c89ecea932888f5ba9be6b1caba", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3808859-008", "identifier": "kaal:claim:3808859-008", "text": "The social media coordination function is still largely flawed because the incentive design underlying social proof is suboptimal; decentralized technology solutions can take over that coordination function and improve it.", "abstract": "Because the incentive design for social proof is suboptimal, the social media coordination function is still largely flawed. Decentralized technology solutions, however, can tap into the coordination function that was inaugurated by social media and improve it.", "citation": "Wulf A. Kaal, Decentralization – Why We Need Technology Infrastructure Upgrades (2021). SSRN: https://ssrn.com/abstract=3808859", "datePublished": "2021", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "applies to social proof metrics such as share counts used as quality proxies" ], "source_pdf_sha256": "304ad25d43b5ecea3158e3a2ca04e6e1e3bd2958e2134e2dcefbfedf3b6f3ab7", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3808859-021", "identifier": "kaal:claim:3808859-021", "text": "An optimally incentivized democratic decision-making tool would make separation movements in open source less likely, because voters who know the process rewards truth-seeking are more likely to accept an adverse outcome; emerging decentralization technology makes such a tool theoretically feasible.", "abstract": "Perhaps if the open source movement had an optimally incentivized democratic decision-making tool, such separation of interests and development would become less likely.", "citation": "Wulf A. Kaal, Decentralization – Why We Need Technology Infrastructure Upgrades (2021). SSRN: https://ssrn.com/abstract=3808859", "datePublished": "2021", "claim_type": "design", "confidence": "speculative", "is_failure_mode": false, "scope_conditions": [ "conditional on incentive-optimal voting mechanisms being buildable" ], "source_pdf_sha256": "304ad25d43b5ecea3158e3a2ca04e6e1e3bd2958e2134e2dcefbfedf3b6f3ab7", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3808867-002", "identifier": "kaal:claim:3808867-002", "text": "Decentralized systems invert the collectivist tradeoff: rather than demanding that individuals sacrifice personal fulfilment for the group, they prioritize personal fulfilment because it produces the unique inputs and innovation that raise the collective wisdom of the group.", "abstract": "Where collectivism would demand a sacrifice of personal fulfilment for the group, decentralized systems would prioritize personal fulfilment as it enhances unique inputs and innovation that increase the collective wisdom of the group.", "citation": "Wulf A. Kaal, How Decentralized Systems Can Upgrade AI (2021). SSRN: https://ssrn.com/abstract=3808867", "datePublished": "2021", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "decentralized computing networks", "contrasted with collectivism as a political philosophy" ], "source_pdf_sha256": "eeccf6d0587bd278a96ce6ac8ec5003e26d161c245f6c94b4144d84f374802eb", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3808867-004", "identifier": "kaal:claim:3808867-004", "text": "Capitalism and socialism each fail in characteristic ways: capitalism produces inequities, monopolies, and other market failures, while socialism suffers incentive design failures in which hard work is not effectively rewarded and external costs are largely ignored.", "abstract": "Capitalism can lead to significant inequities, inequality, as well as monopolies, and other market failures. Similarly, socialism has significant incentive design issues, where hard work is not rewarded effectively and external costs are largely ignored.", "citation": "Wulf A. Kaal, How Decentralized Systems Can Upgrade AI (2021). SSRN: https://ssrn.com/abstract=3808867", "datePublished": "2021", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [], "source_pdf_sha256": "eeccf6d0587bd278a96ce6ac8ec5003e26d161c245f6c94b4144d84f374802eb", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3808867-013", "identifier": "kaal:claim:3808867-013", "text": "Elected representatives are incentivized to maintain their own power of office rather than to vote for outcomes reflecting the presumptive wishes and needs of their constituents.", "abstract": "Voted representatives are not incentivized to vote for outcomes that reflect the presumptive wishes and needs of their constituents but for maintaining their own power of office.", "citation": "Wulf A. Kaal, How Decentralized Systems Can Upgrade AI (2021). SSRN: https://ssrn.com/abstract=3808867", "datePublished": "2021", "claim_type": "failure", "confidence": "asserted", "is_failure_mode": true, "scope_conditions": [ "representative democracies" ], "source_pdf_sha256": "eeccf6d0587bd278a96ce6ac8ec5003e26d161c245f6c94b4144d84f374802eb", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3808867-019", "identifier": "kaal:claim:3808867-019", "text": "Unlike their centralized predecessors, decentralized technologies enable, for the first time in history, improved incentive designs that help overcome the insufficiencies in the voting outcomes of representative democracies.", "abstract": "Unlike their centralized predecessors, decentralized technologies, for the first time in history, enable improved incentive designs that help overcome the insufficiencies in voting outcomes of representative democracies.", "citation": "Wulf A. Kaal, How Decentralized Systems Can Upgrade AI (2021). SSRN: https://ssrn.com/abstract=3808867", "datePublished": "2021", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "decentralized voting pools that increase, deepen, and proliferate" ], "source_pdf_sha256": "eeccf6d0587bd278a96ce6ac8ec5003e26d161c245f6c94b4144d84f374802eb", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3808873-001", "identifier": "kaal:claim:3808873-001", "text": "Improved incentive design is necessary but not sufficient for decentralization: better decentralized incentive designs can accelerate adoption, yet design alone will not produce the decentralization of business and society, because adoption depends on society's acceptance and use of the technology.", "abstract": "While improved decentralized incentive designs can accelerate adoption, design alone will not suffice in promoting the decentralization of business and society.", "citation": "Wulf A. Kaal, Decentralization Neutralizers (2021). SSRN: https://ssrn.com/abstract=3808873", "datePublished": "2021", "claim_type": "condition", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "decentralized technology adoption at the level of business and society" ], "source_pdf_sha256": "f11493915e6b8c266d421510b5546816e33defb5650aac9d09b20d78549da727", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3808873-037", "identifier": "kaal:claim:3808873-037", "text": "Effective institutional governance, human or machine, requires a duality of incentives in which actors improve their own utility while their actions benefit the whole institution over the long run, and without that duality rational and opportunistic constituents will game the governance design.", "abstract": "Human nature and any effective machine derivates of human engagements in institutional form require a duality of incentives in order to overcome attempts of rational and opportunistic internal and external constituents to game the governance design of a given DAO.", "citation": "Wulf A. Kaal, Decentralization Neutralizers (2021). SSRN: https://ssrn.com/abstract=3808873", "datePublished": "2021", "claim_type": "condition", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "DAO governance designs facing internal and external opportunistic actors" ], "source_pdf_sha256": "f11493915e6b8c266d421510b5546816e33defb5650aac9d09b20d78549da727", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3931933-012", "identifier": "kaal:claim:3931933-012", "text": "Validators who learned they would receive no reward shut down their nodes rather than waiting for the incentivization phase to end, so a reward scheme that visibly excludes participants loses their contribution immediately.", "abstract": "Other validators shut down their nodes instead of waiting for the end of the incentivization phase when they realized that there was no reward for them.", "citation": "Wulf A. Kaal, Hybrid Secure Proof of Stake (2021). SSRN: https://ssrn.com/abstract=3931933", "datePublished": "2021", "claim_type": "failure", "confidence": "evidenced", "is_failure_mode": true, "scope_conditions": [ "2021 Casper testnet incentivization phase" ], "source_pdf_sha256": "55a71cdfceb96fadefba1f2fed9563b588825378c91aff644ee7faaccdf31204", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3931933-016", "identifier": "kaal:claim:3931933-016", "text": "Uptime based reward policies invite Sybil style abuse: on the original Casper testnet single persons ran fifteen or more validator nodes to exploit cloud provider promotions and the DEVxDAO rewards policy, extracting rewards without contributing to the validator group.", "abstract": "The original Casper Testnet was also afflicted by cases of single persons running 15+ validator nodes in an effort to abuse the welcome promotions of certain cloud providers and the rewards policy of the DEVxDAO.", "citation": "Wulf A. Kaal, Hybrid Secure Proof of Stake (2021). SSRN: https://ssrn.com/abstract=3931933", "datePublished": "2021", "claim_type": "failure", "confidence": "evidenced", "is_failure_mode": true, "scope_conditions": [ "original Casper testnet under a uptime only rewards policy" ], "source_pdf_sha256": "55a71cdfceb96fadefba1f2fed9563b588825378c91aff644ee7faaccdf31204", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3931933-036", "identifier": "kaal:claim:3931933-036", "text": "HSPoS earns validator node reputation through a mechanism that is decoupled from the ordinary monetary system of incentive rewards.", "abstract": "HSPoS emphasizes validator node reputation, which is earned via a reputation-based mechanism that decouples the normal monetary system of incentive rewards.", "citation": "Wulf A. Kaal, Hybrid Secure Proof of Stake (2021). SSRN: https://ssrn.com/abstract=3931933", "datePublished": "2021", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "HSPoS reputation layer" ], "source_pdf_sha256": "55a71cdfceb96fadefba1f2fed9563b588825378c91aff644ee7faaccdf31204", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3962614-036", "identifier": "kaal:claim:3962614-036", "text": "The incentives that undermine long term success of the hybrid model can be mitigated by mandating that staking on deals requires capital commitments, while allowing VCs to lower their capital commitments and increase their staking over time.", "abstract": "It is possible to mitigate these incentives that undermine the long-term success of the system. For example, it is conceivable that staking on deals by VCs mandates capital commitments to the deals but that VCs can over time lower their capital commitments and increase their staking.", "citation": "Wulf A. Kaal, REPUTATION AS CAPITAL – How Decentralized Autonomous Organizations Address Shortcomings in the Ventu (2021). SSRN: https://ssrn.com/abstract=3962614", "datePublished": "2021", "claim_type": "design", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "hybrid VC DAO models transitioning away from capital" ], "source_pdf_sha256": "c6e202e77fd08db801f932774026458b94e5d103abf30cb1189fe6a1c5edf391", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3962614-037", "identifier": "kaal:claim:3962614-037", "text": "A better system emphasizes reputation by prohibiting capital investment into portfolio companies after an initial minting of reputation in proportion to incoming capital.", "abstract": "A better system would avoid this scenario by emphasizing the reputation in the system by prohibiting capital investment into portfolio companies after an initial minting of reputation in proportion to incoming capital.", "citation": "Wulf A. Kaal, REPUTATION AS CAPITAL – How Decentralized Autonomous Organizations Address Shortcomings in the Ventu (2021). SSRN: https://ssrn.com/abstract=3962614", "datePublished": "2021", "claim_type": "design", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "the incentive optimized reputation model with smart contracts" ], "source_pdf_sha256": "c6e202e77fd08db801f932774026458b94e5d103abf30cb1189fe6a1c5edf391", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3981021-020", "identifier": "kaal:claim:3981021-020", "text": "In contrast to existing legacy structures that incentivize delay and hoarding, and depending on the respective DAO design, DAOs are incentivized to release the endowed assets immediately once the work for the donation has been finished.", "abstract": "In contrast to the existing legacy structures, and depending on the respective DAO design, DAOs are incentivized to immediately release the endowed assets if and when the work for the donation has been finished.", "citation": "Wulf A. Kaal, How Decentralized Autonomous Organizations Optimize Charitable Giving (2021). SSRN: https://ssrn.com/abstract=3981021", "datePublished": "2021", "claim_type": "design", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "DAO designs where community governance sets release policies" ], "source_pdf_sha256": "9d8bc78d119c780c96c89ce3e820f4ac8b037d39b3ade59feb4e40d46b048288", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3981021-025", "identifier": "kaal:claim:3981021-025", "text": "Voting associate salaries are paid in fungible tokens pro rata to each associate's non fungible reputation score at the point of payment, which creates second order economic effects and indirect economic incentives in the DAO.", "abstract": "In other words, the reputation salary is paid out in fungible tokens pro rata to reputation score of each VA at the point of payment. This design ensures second order economic effects and indirect economic incentives in the", "citation": "Wulf A. Kaal, How Decentralized Autonomous Organizations Optimize Charitable Giving (2021). SSRN: https://ssrn.com/abstract=3981021", "datePublished": "2021", "claim_type": "design", "confidence": "asserted", "is_failure_mode": false, "scope_conditions": [ "CHARITYxDAO salary design" ], "source_pdf_sha256": "9d8bc78d119c780c96c89ce3e820f4ac8b037d39b3ade59feb4e40d46b048288", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/4067783-019", "identifier": "kaal:claim:4067783-019", "text": "Reputation in a DAO should be generated only for long term valuable work and for the policing of work, and never for business development work.", "abstract": "3. Reputation generated ONLY for long term valuable work and policing of work NOT for business development work", "citation": "Wulf A. Kaal, DAO Fallacies (2022). SSRN: https://ssrn.com/abstract=4067783", "datePublished": "2022", "claim_type": "design", "confidence": "asserted", "is_failure_mode": false, "scope_conditions": [], "source_pdf_sha256": "48f1e307cdbbe28c7843f7744d0ba8cf01662f257a53f2066a7a6c7e03a5acec", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/4529715-034", "identifier": "kaal:claim:4529715-034", "text": "Short-term incentives in a decentralized insurance mutual would motivate decision-makers never to pay a claim in order to maximize current profit; incentivizing long-term alignment instead motivates them to pay genuine claims because of the value of the resulting reputation.", "abstract": "Short-term focus would motivate decision-makers to never pay out any claim to maximize current profit. However, incentivizing long-term alignment motivates decision-makers to pay out genuine claims because of the significant value of the resulting positive reputation.", "citation": "Wulf A. Kaal, Josh Bykowski, Decentralized Autonomous Organizations (DAO) – A Market Meta Analysis (2023). SSRN: https://ssrn.com/abstract=4529715", "datePublished": "2023", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "discretionary mutual where members decide claims" ], "source_pdf_sha256": "2d71961e8c449afbeaf45ca4f53de8a575d45c77d6960b767d3d1d0874f296b5", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/4755632-040", "identifier": "kaal:claim:4755632-040", "text": "Paying workers a share of incoming compensation pro rata to their reputation scores makes rigor self-enforcing, because workers who do not engage with the required care lose their spot in the reputation rankings and thereby lose their share of the job fee distribution.", "abstract": "they sacrifice their spot in the rankings of reputation scores which affects their participation in the job fee distribution, which is paid out pro rata to the respective reputation scores.", "citation": "Wulf A. Kaal, AI Learning - Decentralized Governance to Optimize Human Output Datasets for AI Learning (2024). SSRN: https://ssrn.com/abstract=4755632", "datePublished": "2024", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "applies to the ALE Platform fee distribution design" ], "source_pdf_sha256": "972ccebf0c06ac1767a9e443bb95942b7670e806a63c25ee817c368a64c8eca8", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/4796714-019", "identifier": "kaal:claim:4796714-019", "text": "Mandatory AI use reporting fails as a transparency mechanism because it assumes accurate and complete disclosure, while regulated entities have incentives to underreport or misreport in order to avoid scrutiny and regulatory burdens.", "abstract": "However, this approach assumes that entities will accurately and fully disclose their AI applications and potential issues. There may be incentives for underreporting or misreporting to avoid scrutiny or regulatory burdens, which could undermine the effectiveness of the regulations.", "citation": "Wulf A. Kaal, AI Governance (2024). SSRN: https://ssrn.com/abstract=4796714", "datePublished": "2024", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "applies to self reporting mandates such as the White House AI reporting proposals", "holds where disclosure is unverified" ], "source_pdf_sha256": "59fa63bae179e8f9b6b8efbdf90cee28400276512a1b04f9f579a48641305c93", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/4796714-021", "identifier": "kaal:claim:4796714-021", "text": "Until the known attack vectors on decentralized autonomous organizations are solved, DAO based AI governance solutions remain suboptimal; these include Sybil attacks, tyranny of the majority, Arrow's impossibility theorem, sockpuppet attacks, and tragedy of the commons.", "abstract": "Without solving these attack vectors, DAO related AI governance solutions remain suboptimal.", "citation": "Wulf A. Kaal, AI Governance (2024). SSRN: https://ssrn.com/abstract=4796714", "datePublished": "2024", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "describes DAOs as set up and governed in the majority of cases in 2024", "conditional on the attack vectors remaining unsolved" ], "source_pdf_sha256": "59fa63bae179e8f9b6b8efbdf90cee28400276512a1b04f9f579a48641305c93", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/4900878-021", "identifier": "kaal:claim:4900878-021", "text": "Economic incentive designs are the core of tokenomics: they govern issuance, distribution, and use of tokens by emulating traditional monetary and fiscal policy and adapting it to the distinctive features of blockchain networks.", "abstract": "These designs emulate traditional monetary and fiscal policies, adapting them to the distinctive features of blockchain networks.", "citation": "Wulf A. Kaal, Quantum Economy and Tokenomics (2024). SSRN: https://ssrn.com/abstract=4900878", "datePublished": "2024", "claim_type": "definitional", "confidence": "asserted", "is_failure_mode": false, "scope_conditions": [ "decentralized blockchain systems" ], "source_pdf_sha256": "75bf96d3b751b4ad0a6ca4a32591cf026094f113e3a372aa6c61790941b391f7", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/4900878-022", "identifier": "kaal:claim:4900878-022", "text": "Supply side mechanisms such as token burns, which permanently remove tokens from circulation, and staking, which locks tokens up in exchange for rewards, let a token economy balance supply and demand and thereby sustain stable growth.", "abstract": "By carefully designing these incentives, token economies can balance supply and demand, ensuring stable and sustainable growth.", "citation": "Wulf A. Kaal, Quantum Economy and Tokenomics (2024). SSRN: https://ssrn.com/abstract=4900878", "datePublished": "2024", "claim_type": "design", "confidence": "asserted", "is_failure_mode": false, "scope_conditions": [ "requires deliberate calibration of the incentive parameters" ], "source_pdf_sha256": "75bf96d3b751b4ad0a6ca4a32591cf026094f113e3a372aa6c61790941b391f7", "status": "current" } ], "description": "99 claims in the published works of Wulf A. Kaal carry the concept tag 'incentive-design'. Derived node: a roster, not an adjudicated definition." }