On passive income and value discovery on Fractal democracy systems (improved)

The efficient discovery of value in Fractal Democracy (FD) systems is a major thing to optimize. As mentioned in previous articles in this series, effective valuation and discovery of contributions may be a determining factor in the viability of any community that chooses to govern itself via this new protocol.

If we are to learn from massively successful content creation platforms, the whole value discovery should be performed, as much as possible, in real time; and only a minimal part of this discovery should require any form of in-person interaction. That is, whenever any member gets in touch with any contribution from any other member, he should be able to subjectively appraise it right at that moment. This should apply to Steem-like social posts, YouTube-like videos and also to code repositories and pretty much anything that yields itself to on-interaction assessment. All kinds of web and mobile apps and even random services such as providing free lunch for a local community could be subject to this form of subjective valuations. Also, because the deepest implications of any contribution can only be seen in the long run, these valuations should not be limited to any short time window. Finally, they should be modifiable over time.

To better understand each of these points. Let's consider them separately.

Permanent passive income from content creation

Regarding referrals, under current FD protocol, if someone, let's say Karol, invites someone else, let's say Bob, the protocol entitles Karol with a permanent flux of respect which is proportional to Bob's contributions, forever. It should be no different with other types of contributions besides referrals.

According to the Fractally white paper:

Posts, but not comments, qualify to receive likes for 24 hours after posting

However, creating a quality post may take much longer than inviting a friend. There are some posts that require several days of continuous work to be terminated. Some, such as software releases or research reports, even represent the culmination of long periods of intense work. So, from my perspective, it is contrary to justice to limit the earned Respect for every post to only 24 hours while, at the same time, allowing eternal revenue to inviters from invitees.

Additionally, 24 hours is an excessively short interval for most practical value assessments. Furthermore, in some technical fields, the higher the quality of the contribution the longer it needs for its value to be fully appraised.

One practical way to guide oneself when dealing with complex situations is to examine the limit cases. Sound analyses will always hold in the limit cases; fallacies will crumble. This way of thinking is frequently used in hard sciences such as physics and mathematics. As a limit case of the current analysis, consider the General Theory of Relativity, published by A. Einstein in 1915. During its first years of existence, the theory remained mostly a mathematical curiosity. It was only 4 years later, during the solar eclipse of 1919, that General Relativity obtained some experimental validation. This was done by showing that, in accordance to the theory, light from distant stars is actually deflected by solar gravity.

Even after this breakthrough, it took General Relativity around 50 years to get incorporated into mainstream physics. And, to the readers astonishment, it took 100 years, until 2015, for the first gravitational waves to be experimentally observed. The existence of gravitational waves is one of the deepest implications of General Relativity.

Now, to go to the point, suppose for a second that General Relativity was initially published in a scientific community journal that operated under the current FD protocol. Then Mr Einstein would maybe have received the amount of Respect generated by the journal editor who read the manuscript during the first 24 hours of publication, only. That would have been one of the most unfair possible treatments for a contribution that happens to be at the pinnacle of human intellectual endeavor. What would have ended to be the reputation of such a journal in the long run? What quality of contributors will it attract?

-You are being an extremist!- The reader may say. -You are taking the most improbable case as an example!- Well, as said before, limit cases are useful to gain insight into complex situations; which we have. Now, let's consider a more quotidian example: let's make a comparison between two currently existing social platforms.

Let's take a look at YouTube and Hive. Both YouTube and Hive are social platforms in which content creators can earn from their publications. There are many differences between these platforms; one of them being the level of success YouTube has. Another being the possibility YouTube brings for its contributors to create passive income. Such a possibility isn't present on Hive. On YouTube, videos published 10 years ago are still generating revenue to their creators, even to this day. On Hive on the contrary, the time window to receive inflation from the network is limited to just a few days. I'll dare to suggest that the second difference is a cause for the first one; perhaps not the only cause, but certainly a contributing one. Now, further limit those few days to just a 24 hours interval and, to the best of my analysis, you will end up with a far from competitive platform.

The possibility of converting a really good contribution into passive income via a permanent flux of respect promotes quality. This, at its turn, has a whole lot of implications such as disincentivizing planned obsolescence, a phenomenon that has pestered capitalism for decades. This alone can have consequences in entire industries outside blockchain such as music, health, education and many others.

Real-time contribution assessment.

In parallel to allowing permanent passive income from contributions, it would be ideal to get opinions from beneficiaries of those contributions in real time. Human memory is something uncertain. If, at any given Sunday, You were to ask a random person to list all YouTube videos he watched during the last week and to order them from best to worst, you would obtain a very noisy signal. The person would remember probably 20% of the videos he saw and, of those videos, he would probably remember 20% of the actual content details. Furthermore, due to the limited nature of human memory, the more videos the person saw, the greater the fraction of content he will forget. If, instead of only YouTube videos, you were to ask him to rank YouTube videos and posts from Medium, both mixed in one list, then this 20% would probably fall further. And, once again, the more videos he saw and the more posts he read, the smaller the fraction of accurate information he will recall. So, this polling method would be far from accurate at assessing real value of YouTube videos and, more importantly, it would not be scalable. The lack of scalability comes from the fact that the more content is created during any given week, the greater the fraction of forgotten details by humans. Thence, the more noise added to the system and the worse the quality of the grading.

What if, instead of asking the person to rank the videos he saw last week out of physiological memory, he could grade them from 0 to 100 right at the moment of seeing them? What if this grading gets recorded on a blockchain? In order to avoid Sybil attacks only wallets from registered community members would count for respect allocation and reception; but non registered wallets could do the grading too. This system could work not only for videos but also for Hive/Medium like posts, software repositories and many other public good products and services. Also, grading on real time has the advantage of making the system more scalable because then, the more content is created, the more effective information is gathered with minimal addition of noise. Having noise under control allows for statistical emergent properties to be leveraged upon.

Many measures can be taken to avoid ill intentional grading. For starters, no person can read more than a certain number of words per day, nor watch a certain number of minutes of video, nor evaluate a certain number of lines of code. So, in order to avoid spamming, each wallet could be allowed to grade a maximum amount of each category per unit time.

One big advantage of real time and adjustable valuation is that it really approaches us to the ideal of the Fractally motto: "Value the contribution, not the person". It's easier to fall into ranking the person when that person is in front of us during a breakout session. Also, it is easier to rank a contribution right at the very moment when we are interacting with it.

Another advantage of this proposed path is that it allows for content to be classified within different categories from the start. This, at its turn, can be used to address one of the main sources of criticism that currently FD faces: Asking people from any random background to grade contributions far beyond their area of expertise or, even worse, allowing people with no expertise at all to rank the work of experts.

Real-time grading is not equivalent to real-time Respect allocation. Weekly meetings would still be needed by the community but they would not be required from individual members. They would become just another way of receiving respect and they could be used much more effectively. They could serve as validation points for the real-time grading obtained during the week. They could be used to highlight flaws in the process, to dispute results, to assign Respect to contributions outside of established categories; they could let the community express the direction new contributions would be appreciated to take and, very importantly, they would serve for community bonding.

Modifiability of Respect allocation

Now consider Brenda: a very convincing proponent of some very auspicious smart contract. Because Brenda is really charismatic and knows how to market herself, she got some serious budget from the community. The expectation she created was so high that she was given a lot of respect initially. However, after several months of fanfare, Brenda didn't deliver as expected. Shouldn't everyone in the community have the right to adjust respect accordingly?

Currently, there are only two mechanisms to punish bad behavior within FD systems: either to expel the committing agent from the community or to reduce his Respect inflow. However, none of these methods effectively repairs already done damage. If a scammer gets away with 1 million dollars worth of Respect, it makes no big difference to him if the community expels him. He wasn't coming back in the first place. Fortunately, Fractally white paper touches upon this subject. The actual mechanism of restitution is not clear though.

One last example and final words

Let's now introduce Steve, who we'll assume is one of the core developers of the platform. Steve's ideas are profound, and his code is impeccable. This has been recognized by the community by bestowing generous respect on him, consistently. Unfortunately, Steve is facing right now some serious personal difficulties: He is getting through a divorce, he went into a car crash and a Hurricane devastated his house in Florida. Naturally, Steve won't be able to make it to the weekly meetings for quite some time. Should it not be fair that the community continues to give respect to him every time someone interacts with the current version of the platform which he helped to create?

What if, instead of going through calamitous events, Steve just happens to be way too timid and shy to express himself with sufficient eloquence in the breakout rooms he participates? Think about Brenda vs Steve in a room; add to that the inherent difficulty in transmitting complex concepts in a really short time interval to a group of non-experts; mix that with Steve shyness and you will most likely have an inaccurate respect allocation. Okay, I get it: Given enough meetings Steve's average ranking should improve. But, remember, we are talking here about optimizing the value discovery process. So, we must not rely on averages, we must look for the actual best.

The point with this example (and pretty much this whole article) is that every time a member of the community interacts with the work of any other member, some form of grading could take place and these grades should be used to allocate Respect. Furthermore, this allocation should be inherent to that interaction only. It should not be constrained by time, presenter's charisma, shyness or any other factor that obfuscates true value discovery. From my perspective, as much as fractal democracy seems a better form of governance than DPoS, so permanent transfer of respect seems a better form of passive income than simply staking.

Many professional analysts have independently identified similarities between the current crypto space and the dot-com era. Some of them even manifest a sense of dejavu when observing crypto markets. If those analysts happen to be right and the top projects of cryptoland are destined to have an impact similar to what Amazon had during the last 20 years, then our minds and efforts should be into creating better user experiences than what mega corporations such as Amazon or YouTube have to offer. But, contrary to the dot-com era, we are not building the internet; we are building the internet of value. Thence, it makes perfect sense that our passive income proposal happens to be of the highest possible quality. Then, maybe we will have a chance of being called the best Daopreneurs of the 21st century.