Musing on Incentive Design: A Journey Into Systems Thinking| Bankless Africa Newsletter
Stay up to date with Web3 alpha, insights, news and opinion in and around Africa and the Diaspora. Subscribe Now
Hello, Bankless fam!
Our entire family continues to be unrelenting this season, including our devoted subscribers. We are sending out a heartfelt thank you as well as a shout out to everyone who continues to support us. Even as the season comes to a close, we will continue to smash previous records and set new, greater ones.
Mark Lawrence, the founder of the Carbon Collectible NFT project, joined us for this week’s podcast episode to talk to us about carbon emissions and the consequences they have on society. These negative effects have prompted the development of carbon offset programs as a way to mitigate these problems; please have a listen and leave a review.
When one hears the word ‘incentives’, it elicits a variety of responses in the listeners' minds. In this week's issue, Trewkat takes us on a voyage through the concept of a reward system. Here, she looks at the factors that might influence an incentive structure’s success or failure, along with what needs to be taken into account while creating incentive plans for DAOs. The reading really is extremely intriguing, we hope you can learn from it too.
This week we also saw a significant achievement for Rwanda as they have been chosen for Polygon's Continental Tech BootCamp, which is an eight-week mentoring and hackathon that will continue until December. Additionally, their tech startups have a chance to win up to $10,000 in the final contest.
Kena ka khotso! (Welcome).
Contributors: Trewkat, Vibrantty Oge, Paulito, angelspeaks, Miss Purple, Yofi A.
🏴 Inside Bankless Africa
Listen To The Newest Episode Of The Bankless Africa Podcast
Like, Share, Retweet, and Subscribe to our podcast.
📰 News & Opinion In and Around Africa
Rwanda Selected for Polygon's Continental Tech Boot-Camp
Author: Hudson Kuteesa
At a continental tech boot camp organized by Polygon and Xend Finance - which is a Nigerian fintech company that intends to assist credit unions, cooperatives, and people to save in stable currencies - Rwandan digital startups had the opportunity to earn up to $10,000.
The Polygon Bootcamp Africa Program 2022 is an eight-week mentoring and hackathon that was announced in late September and will go through December. More than 2,000 developers who work for various developer organizations in nations including Rwanda, Nigeria, Kenya, South Africa, and Egypt will be gathered there.
Two tracks will be available during the hackathon: a masters track and a beginners' track. Developers with no prior Web3 experience are welcome to enroll in the beginners' track, while those with some prior Web3 knowledge are encouraged to enroll in the mastery track, which will focus on advanced Web3 learning.
Ghana: Invest in Creative Arts Sector to Drive Wealth
Author: Abigail Arthur
The creative artwork of Ghana suffers due to lack of investments. Mr Oni Onochie, popularly recognized as 'The African Artist', has called out the stakeholders in the creative arts industry to invest in the art, thus driving the wealth creating power of the creative industry as a whole.
At his four-day web3 themed exhibition, a broad variety of artworks were on display representing different concepts. Despite that, Mr Onochie lamented on the poor recognition that artworks get and he urges Ghanians to appreciate art more, as well as consider investing it.
‘The African Artist’ used the exhibition as a channel to generate revenue. He says co-owning artwork is a way to give patrons value as the value of art does not inherently depreciate but tends to increase over time.
African Crypto Exchange Yellow Card Seeks Major Expansion
Author: NICK MARINOFF
Yellow Card, an African cryptocurrency exchange, aspires to grow significantly. The firm claims that it is aiming to become the first African cryptocurrency "unicorn" ever seen after obtaining an enormous $40 million in a series B fundraising round.
In order to achieve this aim, the company plans to collaborate with all businesses operating in the continent's wide financial sector, including those that move money from or to Africa, in addition to cryptocurrency exchanges.
Chris Maurice, the CEO of Yellow Card, demonstrated unwavering confidence when he said: It's actually a struggle to be able to hook in natively to these financial systems because, as you know, crypto is still not widely recognized as part of the larger financial system.
Bitmart unveils South Africa’s first utility-backed NFT
Author: Partner
South Africa’s first utility-based NFT has been launched by Bitmart. It is a fun card game played on a virtual board with each card having an attack/defense value. A game is won when a player’s card rating is higher than his opponent's.
When yield tokens are purchased, a portion of the money is re-invested in other crypto activities that generate return. These investments are done by cryptocurrency experts and the returns get claimed by NFT owners each month.
An advantage of the Bitmart yield system is the way it replenishes its capital pool. With returns gotten from mining, Bitmart replenishes its pool thus providing holders with a higher percentage income.
South African Author Releases First Ever NFT Sculpture For A Book Cover
Author: NEWSWIRE
Tisetso Maloma, a South African businessman and author of eight books, has unveiled an NFT sculpture for his most recent book.
It's the first time a sculpture has been made specifically for a book cover, and it's not even on the actual book cover.
The latest trend in the cryptocurrency market is called NFTs (Non-Fungible Tokens). They are one-of-a-kind digital assets, similar to works of art or photographs, that the public can purchase, auction, and use for personal use.
Interledger Protocol (ILP) Foundation Announces 2022 Grantees
Author: CryptoGuru
Interledger Protocol is an open protocol that allows frictionless micropayments and payments across different currencies and ledgers, which allows for a much broader and more intentional approach to financial inclusion.
They have officially announced the 12 grantees who will receive funds to conduct 6 months worth of research; this grant falls within their financial services research and development grants of 2022. From the 12 grantees, 5 of them are African projects with interests ranging from micro-credit solutions to wallet consolidation.
The African countries featured in the list of grant recipients include Uganda, Cote d’Ivoire, South Africa and Kenya. The other 7 grantees also include communities considered to be lacking in access to opportunities.
🥷🏾 Airdrops Hunter
Musing on Incentive Design: A Journey Into Systems Thinking
Author: Trewkat
I think I have opened a can of worms, or perhaps a can of cobras, by choosing this topic. My planned focus for this piece was examination of the factors which can influence the success or failure of incentives, so that these can be taken into account when designing incentive programs for DAOs. However, the reading I have done in preparation suggests that this is a huge topic, with multiple strands, so I may just take a peak and put the lid back on for now.
An incentive, in my view, is a reward, identified beforehand, to encourage a certain behaviour. I intentionally held off searching for a definition of incentive before I wrote that sentence, so let’s see now whether I came close.
The Cambridge Dictionary Online defines incentive as “something that encourages a person to do something”. The Oxford Learner Dictionary has a similar definition, noting that incentive could be both “countable or uncountable”, and also gives the origin of the word as “late Middle English: from Latin incentivum ‘something that sets the tune or incites’, from incantare ‘to chant or charm’.” Was that what I meant by cobras? No, keep reading.
The dictionary definition of incentive might be fairly straightforward, but designing an effective incentive, something that will elicit the desired behaviour, can be complex. That’s because humans are complex creatures. While it may be possible to come up with an incentive that appears to work as intended, the tricky part is to examine what the unintended effects of such an inducement might be. A perverse incentive is one that produces an undesirable, in fact negative, consequence, and the cobra effect is named for one anecdotal example of this, although there are many others.
The cobra effect describes an attempt by British officials in colonial India to reduce the local cobra population by committing to pay a reward for dead cobras. This worked well for a time, but eventually backfired when people began breeding cobras purely to acquire the bounty payment. Once this became evident, the reward was discontinued. The unintended negative outcome was that the breeders, having no use for them, then released all their cobras back into the wild, and this caused the cobra population to increase.
The attempt to simply identify a desired outcome (dead cobras) and then base the reward on that was a huge mistake. While dead snakes may have appeared to be serving the officials’ end goal — to reduce the wild Cobra population — they did not think through the fact that they would be creating a market for the snakes, which sellers would pursue without regard for the original intention.
Clearly, coming up with an effective incentive must involve careful consideration of the actual end goal and what the implications of each proposed pathway to that goal are. It strikes me that incentivising certain behaviours or steps along that pathway could be more effective than pinning the reward to the results, but I think the most important takeaway is that brainstorming, consultation, feedback loops, and holistic thinking are integral in the incentive design process.
For incentives that involve an element of competition, i.e. that the outcome for an individual depends on the actions of all the other involved individuals, I’m sure that there is also a need to understand game theory, but not today. There’s a whole body of literature on the interplay between incentives and intrinsic or extrinsic motivation too, which I think warrants attention, but here I’m focusing on the relevance of systems thinking to the process of incentive design. In particular, I’m inspired by the way this approach could contribute to the creation of continuous, positive loops: that ‘flywheel’ that you read so much about in Web3 material.
In their work to develop an agreed definition of systems thinking, the authors of this article provide a great overview of the concept. They refer to “an increasingly complex, globalized, system of systems future” and note that we must be able to identify and prepare for the “ripple effects” of our actions. I learned that two of the key ideas behind a systems approach are attention to the various parts of a system and the relationships between them, and the importance of feedback loops in understanding, connecting, and predicting the outcomes of different actions within the system. The article quotes Barry Richmond, the person who originally coined the term, as saying that “people embracing Systems Thinking position themselves such that they can see both the forest and the trees; one eye on each” (1994).
We can look to permaculture principles as an example of a holistic approach which emphasises care for the entire system and its constituent parts within the design process. According to the Permaculture Research Institute,
“The philosophy behind permaculture is one of working with, rather than against, nature; of protracted and thoughtful observation rather than protracted and thoughtless action; of looking at systems in all their functions, rather than asking only one yield of them; and allowing systems to demonstrate their own evolutions.”
The Permaculture Wheel, representing the three Ethics and seven Domains of permaculture, along with the twelve Principles. This work is licensed under the Creative Commons Attribution-ShareAlike 4.0 License.
Working in a DAO, it can sometimes be difficult to keep an eye on the forest; we tend to focus on our little stand of trees. The nature of a decentralised organisation is that small groups of individuals within the whole are often discussing, testing, implementing, or discarding incentivisation ideas without very much consideration of how they might influence the entire DAO’s productivity.
It’s worth regularly taking a step back to evaluate the growth and health of the organisation, and to ensure that there are mechanisms in place to care for the whole. In pursuit of that virtuous cycle, that flywheel effect, we should ensure that those mechanisms are designed to incentivise positive contribution and progress, to reward behaviours that create beneficial ripples, and to keep the snakes from our door.
I know that I have raised more questions than provided answers through this short piece of writing. One question I tried to find an answer for is whether a better solution was eventually found for the cobras. Although the anecdote is all over the web, the story neglects that particular aspect. I did find one site, called Unintended Consequences, on which author Paul Orlando lists some potential approaches to improving the efficacy of the bounty. Before you go and look, I challenge you to think about it for yourself — see what you can come up with!
This essay was written as part of the BanklessDAO Writers Cohort, and is reproduced here with permission of the author, Trewkat.
📚 Learning Centre
DEX Aggregators
Decentralized Exchanges (DEXs) cut out the intermediates and lower the cost of asset trading for Explorers. By using DEX aggregators, you may analyze all potential transactions across different DEX platforms and execute the optimum trading route all at once. Gain experience and gain knowledge about DEX Aggregators, liquidity, and the trade-offs associated with using various exchange types.
Ghana Crypto & DeFi Summit 2022 is a two-day DeFi conference that will take place in Accra, Ghana, from November 3-4, 2022. BanklessDAO and Bankless Africa are pleased to be media sponsors of this event.
The main goal of this initiative is to create a common platform for all stakeholders, including the government and other institutions in and around Africa, to discuss ways in which blockchain technology, cryptocurrencies, and distributed financial protocols can help in building Africa's future economy.
The summit, supported by Uniswap Grants, explores the limitless possibilities of blockchain technology and its applications in finance, government, social good, and other sectors.
Follow DeFi Africa on Twitter for more information, and join the bDAO folks in the GCD Telegram group.
😂 Meme Humour
Thank you for subscribing to the Bankless Africa Newsletter.
Follow Bankless Africa: Website, Twitter, Instagram, YouTube, Telegram, and LinkedIn.
Was this email forwarded to you? Subscribe on Substack.