Do you find any one of the following situations familiar?
- At work, a colleague is incompetent.
BUT because he knows how to talk his way out of anything, he grossly inflates his actual contribution to the company and gets promoted faster than anybody else.
- In school during project work, a team-member does nothing.
BUT because everyone in the group want to appear as “nice”, they let him get away with this bad behavior. In the end the freeloader gets the same grade as the team in spite of not doing anything.
- You are the genius who comes up with a brilliant idea.
BUT because you are slow in execution, Person B stole your idea wholesale and executes it. Because there is no prior public and immutable record, B says she is the one who came up with the idea and gives you zero credit. People end up thinking that B is the genius.
If you find any one of the above scenarios familiar, you most likely have had the experience of being ripped off by a freeloader.
Don’t we all detest freeloaders?
Solving The Freeloader’s Problem The Economic Way
At Katalyst, we are big about economics and the alignment of incentives. So let’s take a moment to appreciate the freeloader’s problem from the economic perspective.
According to Economics, the problem of freeloading can occur when the conditions of (A) Non-rivalry and/or (B) Non-excludability are met.
- A “non-rivalrous” good or service is defined as a “good or service that may be consumed by one consumer without preventing simultaneous consumption by others”.
Most examples of non-rival goods are intangible. A street lamp is an example of a non-rival good.
if a consumer A turns on a street lamp, this does not prevent consumer B from getting light from the street lamp. Light here is the intangible benefit enjoyed by both A and B, even though A pays for the street lamp.
After some thought, consumer A will not pay for this street lamp because he will think– “why should I pay 100% for this street lamp when consumer B pays nothing, and get exactly the same benefit as me”?
As a result, the market fails when it could have otherwise succeeded if there is a way to split the bill equally amongst the people who would have enjoyed the benefits brought about by the streetlamp.
- A good or service is non-excludable if non-paying consumers cannot be prevented from accessing it.
An example here would be an architecturally pleasing building, which can be enjoyed by anyone who happens to look at it.
Because of this nature of being aesthetically pleasing, no single individual will be willing to pay for “good scenery”. The market therefore fails unless there is a solution to make most/all people who will enjoy this scenery pay an equal share to create or preserve it.
How Katalyst Solves The Problem Of Freeloading
The Katalyst Blockchain is all about recording and rewarding economic behavior. We have received questions so far about the function of recording, such as:
- “What’s the big deal about recording stuff?”
- “What are the stuff to record?”
- “What problems can recording solve?”
Now, we are really glad you asked! Let’s consider the economic benefits of recording things:
- Recording who-does-what publicly resolves the condition of “non-rivalry”.
Consider the case when you can record how many times person A, B or C walks down the street with that particular streetlamp at night.
You can then make this data public. It would then be fair to suggest that the person who uses the street most pay a larger portion for the streetlamp since he enjoys the most utility.
This contribution to the streetlamp can in turn be recorded on blockchain, so that there is no doubt from any party that their payment is proportionate to usage. There will also not be any doubt from anyone that this record is biased or rigged, since data is imputed transparently, transparently, and in an immutable manner.
Therefore, recording who-does-what resolves the problem of non-rivalry.
- Recording who-contributes-what publicly also resolves the condition of “non-excludability”.
Consider the case of the beautiful architecture.
Previously without blockchain technology, it is only possible to build beautiful architecture
- (I) If there are select elite rich sponsors providing capital to build them; or
- (II) the government provides the funding to build these beautiful architecture.
In the event of (I), this will likely worsen social and political inequality because it suggests that only the rich and elite can contribute to beautiful things in society.
In the event of (II), government still have to answer to tax payers because they are using tax payers’ money. Also, why should the government decide on behalf of tax payers whether they should be building something beautiful?
Katalyst blockchain can solve this problem by recording who-contributes-what.
Now, this is powerful because everyone can now contribute, regardless of social, political or economic status.
- Even if you are poor and cannot contribute capital/money, you can contribute your time into the building of this beautiful architecture. Katalyst blockchain records this and imputes your name onto a public, immutable and transparent blockchain.
- Even if you are not a politician, you can influence the type of beautiful architecture through voting–a function that Katalyst blockchain also provides. Your name will then be permanently recorded by Katalyst as one of the persons who voted and made this beautiful architecture happen.
- All feedback, critiques and suggestions towards this beautiful building can also be recorded, and everyone can play a role in creating an architecture of beauty and significance. This contributes to a more engaged and equal society because everyone feels that their voice matters and that they are heard.
Therefore Katalyst blockchain resolves the problem posed by “non-excludability”.
Takeaway: Recording Contribution IS Important If We Want To Honour People
Making snippets of reality verifiable is important because we want to honour contributors in accordance to their actual contribution. And the way we make snippets of reality verifiable is to record them down. This is also how we get rid of freeloaders.
You see, there are so many reasons why people cannot see reality as is.
Sometimes people have cognitive biases, sometimes people are deluded, sometimes people can smoke, sometimes people cannot be trusted, and sometimes people forget. Most importantly, nobody is perfect. Sometimes we also lie out of fear or greed.
This is why referring back to verifiable data is important. We want to honour and bring glory to contributors who have put in their time and effort in doing something, and we want to discourage behavior of people who inflate their work. We want to get rid of freeloaders because we believe strongly in fairness.
And this is the grand significance of the Katalyst recording function– It is to build a greater, better and more beautiful world together. No contribution is too small and anybody can contribute regardless of economic, political and social status.
What do you think? Won’t you join us in creating a fairer and more beautiful world for all? Leave a comment or share this post! 🙂