The tragedy of the commons is a well-established socio-economic theory developed by William Forster Lloyd. The theory refers to the hypothetical example of shared grazing land, or "the commons." Lloyd argues that people act in their self-interest leading to the depletion or spoiling of the common. Ecological "tragedy" scenarios such as overfishing often reference this theory.
Two primary solutions to this theory are regulation and private ownership. Regulation provides rules, checks, and measures on the resource. Private ownership gives one party self-interest in maintaining the resource.
Both approaches have their limitations. Regulation can never be perfect. Whole mini-economies can spring up around loopholes and manipulate the system. Examples are often called "perverse incentives."1
Private ownership, on the other hand, simplifies things but also restricts the scope of protection. The private owner will act against spoiling the "common," but could also levy a cost to cross the land. The private owner could also repurpose the land for personal gain but against the interests of the broader area.
In a previous article, I discussed the possibility of token price manipulation. Token ownership makes you self-interested in the success of the token. In many ways, this is both a bug and a feature.
Nothing is original. These shared-ownership models exist in the guise of clubs, co-ops, and other sharing models, even in the form of time-shares, open source2 and Tenancy in Common (TIC).
Tokens present a new way to codify and scale these shared-ownership models. Tokens are a versatile instrument. A token could represent everything from a piece of land and a bit of compute time to a piece of gold and ownership of community infrastructure.
In the most novel forms, a token could represent some unique combination of these. Some of the more promising concrete include liquidity, arbitrage, and providing hedge opportunities at a fine-grain.
Whilst versatile, the Blockchain is strict in being quasi-immutable3. It has one of the same core issues as regulation; getting the rules right requires a lot of foresight.
A fishery is an oft-cited example of the tragedy of the commons. Environmental impact studies often cite the productive loss of fisheries due to overfishing. In some cases, the fisheries were subject to systemic collapses.
Turning the fishery into a token allows broader benefit. You can own some level of output as a fisher, or as a consumer. The token holders can benefit infrastructure such as ports or markets. All parties can invest (or hedge) against the token and profit from its sustainable use. The trick is structuring the token for the broadest, shared benefit.
That was a simple example. More complex implementations could combine tokens from distinct fisheries or primary producers, or you could include broader parts of the supply chain.
To the "you're reinventing money" pundits - you're right. These concepts of collective ownership are well-established in systems of company ownership, bonds, futures or insurance. However, tokens can be more versatile. In this case, tokens atomize these concepts and recombine them.
This recombination is quite complex, and possibly quite naive. It's true it will take a while for these token collective ownership models to shake out. If at all. I remain a skeptic, deep down.
That said, the potential upside is significant. Shared ownership has the potential to impact how we operate fishieries, through to our own cities. The downside? Well, we go back to the ways we've always done it.
Many token applications today mirror or augment existing ownership models. So we've not started to experiment and test the limits of tokens. Tokens have a potential to fund and maintain complex infrastructure, research, communities, and even cities. Perhaps even creative arts, social media.
There is a whole raft of new token yet to emerge. The question today is how we spot the good ones.