Introduction into Token Curated Registries
The key characteristic of the modern economy is the high efficiency of productive forces in conjunction with a high level of availability of capital goods. This is especially relevant for some industries (IT, digital content creation). This fact leads to supply becoming persistently higher than demand in most of the known consumer markets. PR, as well as customer acquisition and retention strategy, has become a part of critical importance for business today: a fight for each customer is hard and surging in each and every industry. It leads to various methods in order to influence customers’ decisions. One of the most prominent and widely used is the set of pre-defined decisions or merely the list. It can be seen all around us: on the radio charts of “top hot songs,” to the selection of best whiskey, beers, universities, movies – and it seems to be endless. However, if the context is removed, each of these “selections” is no more than a list of predefined decisions aimed at guiding the customer. The principal issue is that such lists are normally created by a narrow centralized group of people primarily representing their interests in managing customers’ attention and decision-making. These lists are not representing the interests of customers whatsoever.
Why does such a situation exist? It is quite simple:
- List creators do not have any economic incentives besides motivation to sell something or through bribery of the list participants.
- Feedback loop mechanics that theoretically exist in any list concept (if the content of the list is not in line with the interest of users, they stop to use it and as a result the content of the list is altered) practically do not work in the majority of cases.
This problem of corrupted lists with pre-defined decisions is spanning across all the areas of the economy. A possible solution lies in carefully crafted mechanics of technical operation and economic incentives for list creators, participants, and users. This would make the list management following the users’ interests evidently profitable and economically rational.
At the moment, the concept of Token Curated Registry (TCR), that technically meets the aforementioned requirements, is being researched along with attempts to practical implementation. This concept was first introduced in pioneering Mike Goldin’s work and subsequently developed into more complicated TCR-based systems like graded TCRs, layered TCRs and others. A TCR is an example of the Curation Markets concept that was introduced by Simon de la Rouviere, and consists of the model of economic incentives for collective curation of information presented in lists. The principal design of the TCR is referred to be one of the most important cryptoeconomic primtives, or elementary building blocks of the crypto-economic systems and token engineering.
Token Curated Registries (TCR) concepts
The basics of a TCR
A TCR concept can be described as a simple economic game that has a purpose to create and maintain an “honest” list that serves the interests of list users. TCR, in itself, is a list that contains some elements. Elements can be presented by virtually anything: service providers, songs, movies, websites and other objects. The main goal of list creation is to include “good” elements into the list and reject “bad’ ones. This, therefore, proposes to the list users a set of “good” pre-defined decisions about selecting something for their use. The TCR operation mechanics in this part would be described by using the most simple example of binary membership TCR. This means, that there are only two states for any element: “in the list” and “outside the list”. In the real world is works as follows: if a product, service or something else is presented in a list, it is exposed to customers, and they will potentially buy or use it. If a product is not presented in a list, it is like to be “out of the game” – customers will not see it as an option of their choice at all.
How does it work exactly?
Before we dive in TCR operation mechanics, it is important to point out that the concept itself is highly-theoretical and therefore contains some open issues that we will not address in-depth in this introduction piece. The primary goal of this article is to provide a basic understanding of a new kind of market, related relationship mechanics, and highlight some actual challenges. The discussion on challenges can be found in the “Discussion” part.
TCR mechanics is a simple behavioural economics system designed to make correct collective behaviour profitable. Primarily, it is achieved through the existence of a set of feedback loops that are connected with the actions of each type of actor. The principal feature of the TCR operation mechanics is that all decisions regarding inclusions and removals from the list are taken collectively by a set of list managers or curators. Everyone can become a curator as the system is permissionless.
The 2 Actors in a basic TCR model are presented by four roles:
- A Candidate – a person who wants to be listed in the TCR. They will make an application to the registry to stake some TCR tokens.
- A Participant – a person who is currently listed in the TCR. They will have to fulfil the Users need (service or something that they are selling using their presence in the registry)
- A Curator – a person who will participate in the list curation. Participation is based on token holdings.
- A User – anyone who will use the list for decision-making
Simple operation cycle of the TCR mechanics
A simple working cycle of TCR can be described as follows. Candidates will be submitting applications to be included in the list staking a certain number of tokens. Curators will be processing the applications and vote for inclusion or rejection of every candidate. Application rejection leads to transfer of staked tokens to curators who voted “to reject.” In case the application is accepted, a candidate will become a participant and save his token stake.
Users (or “list customers”) will be using the list for decision-making. If the quality of list-provided services does not meet their standards, it is expected that they will stop using it.
The TCR token is introduced to the system with two main goals:
- To limit the access to the significant functions of the system (curating, applications submission) as well as protect the system from attacks
- To provide a clear economic motivation to the curators using the token, which value has a strong correlation with the quality of list management.