[Guest Post] Unlocking Incentives With Blockchain
by Yong He
Every time you eat from a can of food you may thank two people: Nicolas Appert, the 19th-century French confectioner who invented the canning process, and Napoleon Bonaparte. Appert famously devised his novel method of food preservation in response to a reward, 12,000 francs, offered by Napoleon, who needed a better way to store food for his army. Canning is sometimes called “appertisation” in Appert’s honor.
Appert’s example is illustrative of the immense power of incentives, which have been the backbone of society since its formation. If a person works hard, they usually get a nice job & salary. If they don’t, they will likely feel the consequences. Economically, incentives inherent in market forces continually push supply and demand to equilibrium because each side – the supplier and the consumer – has an incentive to seek out a favorable price. Humanity has organized itself through this beautiful, decentralized system for which blockchain is perfectly suited.
At a technical level, incentives are the basis of any decentralized protocol, such as by rewarding miners to verify transactions in return for cryptocurrency. But on a more fundamental level, blockchain unlocks latent real-world incentives that elude traditional, centralized systems. An example of the latter is cloud providers like Amazon Web Services (AWS). On the one hand, AWS has birthed several internet giants, most famously Netflix but also Tinder, Uber, and more.
On the other hand, centralized systems will always struggle with cost and security. When AWS goes down, the above companies dependent on AWS have a major problem. And the prices cloud providers charge are injurious; costs have not fallen nearly as much as these companies would have you believe, and unsurprisingly, cloud revenues are skyrocketing. In essence, cloud providers, like other centralized systems, have minimal need to focus on incentives because these companies are able to extract rents from users with few realistic alternatives.
On the blockchain, however, incentives can be arranged to enable a decentralized system that is both more secure, and also cuts out the middleman. For example, Filecoin is a decentralized computer storage network on which individual users can offer their spare storage space in return for Filecoin tokens – no server farms needed. Filecoin miners have a powerful incentive to amass as much storage space for users as they can because, in a clever twist, Filecoin mining power is proportional to active storage. No single entity oversees the network, and yet it’s thriving because the community has been compelled by incentives to work together.
Numerous other projects have deployed similarly thoughtful incentives, such as the Brave Browser’s token, which is paid to users when they engage with advertisements as they surf the Web through Brave. This incentivizes users to engage with advertising, as opposed to the tricks and other methods centralized internet browsing relies on. My company, DeepBrain Chain, incentivizes the sharing & purchase of spare AI computing power all over the world through the use of our token. The list of smart protocols goes on and on, and is growing fast.
Blockchains are incentivization machines because they have to be. They allow us to unlock, then scale incentives, in a manner that centralized systems either can’t or won’t. Although there are many technical reasons why I’m so excited about this technology, the most exciting aspects are philosophical. Blockchain has taken Adam Smith’s famed “invisible hand” and given it a can opener.
Yong He is the CEO of DeepBrain Chain, the world’s first AI computing platform powered by the blockchain, and was one of the first entrepreneurs in the field of artificial intelligence in China. Among other accomplishments, Yong He presided over the research and development of the first Chinese voice assistant, Smart 360, which has more than 17 million registered users.