The Economics of Matters Town

Blockchain makes it possible to design economic models for decentralized networks, and with the proliferation of DeFi protocols and the success of NFT collectibles, it is becoming more plausible to build a better economy for decentralized social networks.

Many have argued that the online attention economy is the major force behind surveillance capitalism, incentivizing violating our privacy and manipulating our attention. So when Matters started, the first direction we took was using cryptocurrency to facilitate direct support of content creators, from subscriptions to one-time donations, to NFTs.

Cryptocurrency does make direct payments, especially international ones, much easier. But in the past few years, we also learned about the limitations of direct payment. The subscription model works well for professional creators with consistent output and willingness to engage with a supporter community (think successful Substack and Patreon creator), and disproportionately favors financial and adult content. For other cases, especially for content that should be public, only donations or one-time NFT purchases (collection of articles, etc.) are practical but still rare for most content types and creators.

At the same time, we realized that problems such as surveillance capitalism are not due to advertisement in general, but the way it works online currently. In platforms like Google or Facebook, our attention is directly controlled and sold to buyers, making it necessary to track our behavior closely. It is also the same entity that hosts the content and matches us to the advertisers, eliminating market competition that could potentially optimize advertisement quality, matching, and privacy protection. In contrast, advertisements in the physical world are at least benign most of the time, and turn into fascinating spectacles when competition intensifies, for example in places like Time Square in New York, Shibuya in Tokyo, and Mong Kok in Hong Kong.

With digital assets in our toolkit, we can now reimagine online advertisements to be more similar to billboards in the physical world. In the cases of community spaces, they can be collectively owned by the community who brought attention to them. Currently, many independent websites and communities rent out advertisement space to Google AdSense and earn a portion of the revenue. What if they can allow advertisers to directly bid on the advertisement spaces they create, using an open, privacy-preserving, blockchain-based protocol? What if the owner, an individual, or a community, can decide to offer discounts to certain advertisers for better quality or value alignment, just like in the physical world? This is now made possible with various finance and governance protocols on blockchains, opening a new design space.

So for Matters Lab, one of the next steps is to design and integrate an on-chain advertisement protocol. The revenue will be used to match the user’s donation with quadratic funding. This on the one hand attracts more donations from readers, and on the other hand, incentivizes content based on the conscious choices of community members. What kind of content worth rewarding is then not a mechanistic definition based on attention or engagement, but a collective decision that is constantly debated and evolving.

This is only one example of combining advertisement revenue and direct payment. Once we introduce advertisement revenue on-chain, we can build different incentive mechanisms on top, opening a new design space for digital public spaces.