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Based on KPI measurement, we can support repeatable best practices between projects, thereby further accelerating the iteration speed.
Written by: Jesse Walden, founder of Variant Fund, a crypto venture capital firm, and former partner of a16z
In the field of encryption, user ownership mechanism can promote network growth faster than any growth technique of the second-generation Internet Web 2
However, determining effective ownership distribution is the team’s biggest challenge (and opportunity).
Best practices are still vague.
Can we solve this problem? Let me explain.
Take a step back and clarify the definition first, and clarify that ownership distribution is a task in mechanism design:
“In the field of economics and game theory, ownership distribution is to design economic mechanisms or incentives in a goal-first manner to achieve expected goals…”
The mechanism design assumes that the behavior is reasonable, and the easiest to reason about when the determined target can be accurately verified.
Miner rewards in BTC and ETH are examples of mechanism design for verifiable work: PoW + transaction sequencing.
In DeFi and other encryption applications, the goal of the reward design mechanism is much more complicated, the stakeholders are more diverse, and the type of work is also more subjective, which makes verification difficult.
Every time an application runs an ownership allocation program (whether through ICO, liquidity mining or fund governance projects), there will be data that needs to be learned and iterated.
This learning happens faster and faster.
To help speed up this process, we need a data-driven approach to measure what works and what does not work.
There needs to be a KPI for this measurement.
Based on the measurement of these KPIs, we can support repeatable best practices between projects, thereby further accelerating the iteration speed.
I joined forces with Eddy Lazzarin, a data scientist at the a16z crypto fund, to compile a list of trade-offs.
The plan is to give back data-driven insights to help builders make better choices!
So when considering the effectiveness of ownership distribution, what are the trade-offs and metrics worth paying attention to?
Regarding user engagement:
-Median capital balance / Gini coefficient
-Customer acquisition cost CAC and customer lifetime value LTV (contributed by Dmitriy Berenzon, research partner of Bo11inger Investment Group)
-Liquidity vs. Fund Withdrawal Mechanism / Locking
-Yield vs. Token Burning vs. Pure Governance?
-Flat governance vs. delegated governance
Regarding governance participation:
- Continuous (MKR) vs. Isolated (UNI/COMP)
- Mandatory (YFI) vs. Optional
- High Arbitration (UNI) vs. Low Arbitration (AAVE)
- Foundation vs. on-chain
There is no doubt that there is more. Hope to hear more ideas!
I also want to form a small Telegram group and start to provide help to people who are interested in this rigorous analysis, so that we can push our ideas faster with each other. Privately invite me!
I am confident that we can improve our learning in this area here. When this happens, we will see the ownership economy enter other exciting vertical fields from the L1 public chain and DeFi, making the encryption economy more colorful.