By combining the incentives of patronage, profit & collectibles, we can create a new tradable asset class that supports the funding of the commons. In addition to supporting artists and open source communities, this idea can be utilized to save our fragile planet from the ongoing effects of climate change.
Through the usage of Radical Markets’ designed “Common Ownership Self-Assessed Tax” (COST) on virtual, collectible assets of patronage, participants can simultaneously:
- support their favourite projects.
- collect & earn status of patronage.
- earn a potential profit from trading their support.
It works as follows:
A virtual, collectible asset (think something similar to a baseball card) that supports a specific project is issued on a blockchain, where-upon its owner must always specify a sale price. Anyone can, at any time, buy this collectible asset from its current owner at this self-specified sale price.
The owner cannot readily set an exorbitantly high-price, because they must pay patronage according to a percentage rate (say 5%) of their self-specified sale price towards the project that the virtual collectible supports.
If they cannot pay this patronage fee, then the virtual collectible is destroyed or foreclosed, the latter which allows a new owner to take ownership of the collectible at a price of zero.
For example, if someone owns a virtual, collectible water-bottle that funds a water charity, and prices it at $100, they have to pay $5 per year to this water charity. This is all automated through the blockchain. If they hold it for only for one day before it gets bought by a new owner, then the total they would have paid is only $0.013. The blockchain automatically records the amount of time the owners supported the project, alongside the total they gave to it whilst they were an owner.
This creates a leaderboard & global market for patronage, where supporters can rank themselves through their current & previous support for projects.
Today, patronage can be found in various parts of society. Traditionally, you can find patrons adorned in hallways of theatres: doing it not only to support something dear to them, but also for social status. In the digital era, many creators are funded through services like Patreon, paid monthly by fans, just to allow them to create.
By extending patronage into an asset class, not only would you be able to support projects & earn social status, but also earn a potential profit from trading it. Since these collectibles are tradable at any price, traders can make a profit whilst supporting their favourite projects. If they make a loss from trading the asset, they at least supported a project whilst accumulating social status.
I will give some examples: from supporting the arts to saving the planet.
Supporting The Arts
In order to experiment with this new design, I launched my own version: an artwork that is always on sale. This virtual, collectible, blockchain artwork itself is a meta reference to the fact it is always on sale.
It launched at the end of March 2019 for a price of zero dollars. It was bought and sold at $40, $16,000 and is now priced at roughly $60,000 (after a high of $120,000). The current owner has held it for more than 2 months.
During this period, as the artist, I have earned 5.8 ETH as patronage (currently valued at roughly $1,500).
Anyone can currently buy this artwork from the current owner with ETH.
Through this, the owner:
- supports me as an artist.
- records their ownership and status as owner.
- can still sell at a profit at the current self-specified price.
In this scenario, the artwork itself is the virtual collectible. However, it does not have to be restricted to artwork alone. It can be extended to other virtual collectibles surrounding the experience of the artist, such as a virtual, signed paint-brush or virtual, signed easel.
This can be extended to all other form of arts & creativity:
- supporting an author through virtual collectibles from their fantasy writing (eg a virtual Orc axe).
- supporting a musician through a virtual, collectible badge or virtual, collectible melody.
- supporting a game developer through a virtual collectible from the game (that could even potentially have an aura in the game itself, showing patronage).
- supporting an open source project through virtual, collectibles that represent popular releases (eg, a version 2.0.0 collectible).
Throughout all of this support, individuals can earn potential profits by trading their support that they collect.
Patrons of Notre Dame
In the aftermath of the tragic Notre Dame fire, a few extremely wealthy patrons donated towards its restoration, including the Arnault, Bettencourt & Pinault families to the tune of over 1 billion euro. Patronage to this extent is substantially weighted towards leaving a legacy for these families, alongside a status game.
What are they paying for?
- Supporting an institution they support, the beautiful & historic legacy of the Notre Dame (support).
- Their names etched as supporters of its restoration (status).
As one might expect, access to an opportunity like this isn’t exactly available to anyone. A Patronage Market for the Notre Dame could include thousands of collectible assets that represent it: from collecting the virtual spire, to collecting a virtual candle. Not only would more people be able to support, collect & have their names etched as supporters, the people that would’ve supported the Notre Dame before it burned down would likely have been able to sell their support at a profit (if they priced it correctly).
This latter component of adding profit/trade to patronage is what makes a market for patronage substantially more liquid & participatory.
Saving The Planet
Commons often collapse because individually rational incentives supersede the collective benefits of the people: resulting in a classic tragedy of the commons. We leave the world with our negative externalities strewn all over it. Climate change is an impending problem already reshaping out planet. We are at a critical point where there are ways we can mitigate this. We can improve the situation by adding better incentives to cooperate.
In smaller communities, we self-regulate. Elinor Ostrom won a Nobel Prize for describing how this works in practice. Beyond self-regulation, we rely on nation states. In between these extremes, and beyond, we suffer from the ability to coordinate effectively.
Previously, I mentioned solving this problem by allowing markets to develop around the production and curation of reputation. It would make it individually rational (profitable) to protect the commons as it got more and more exploited. This would self-regulate the sustainable usage of commons: cycling between exploitation & protection. Individuals can profit by participating, with skin in the game, to accrue valuable reputation.
A cornerstone of these designs is the creation of incentives that are individually beneficial, whilst also being collectively beneficial: saving the commons by making it profitable to trade the protection of the commons.
By turning patronage into an asset class we can create more of this mutually beneficial behaviour. We can use it to support many conservation projects around the world that isn’t covered by corporations, non-profits, altruism, global bodies or nation states.
For example, ”Wild Cards”, a winner of the ETHCapeTown Hackathon, took my code for “This Artwork Is Always On Sale” and created a version for the conversation of endangered rhinos. You collect virtual rhinos whose patronage revenue goes directly towards the protection of these animals.
Building Patronage Markets
Since the first version has proven successful, the next steps are building this towards generic forms of patronage on Ethereum: seeing if the incentives hold for other forms of virtual collectibles besides artwork.
Along with Celeste Zumwalt, we are exploring partners who want to test this for patronage of conversation: ideally protecting future sources of water.
Throughout this development, I’m aiming to turn this into a generic smart contract architecture that would allow anyone to create such a patronage collectible:
- Setting its name.
- Setting the image of the collectible.
- Setting the patron/s.
- Setting the patronage rate.
If managed appropriately, this would allow a global market for patronage to exist along with a global leaderboard. It would be an open platform where anyone would be able to support their favourite projects, collect & display their past & current patronage, & trade their support.
In the next few months, parts of it will increasingly be open-sourced. There’s still outstanding questions around the design of some the parameters (such as the effective rate of patronage: 5%? 50%?) which we will aim to answer.
By encapsulating patronage into a virtual, tradable collectible asset that follows a self-assessed pricing scheme (COST/Harberger Tax), many people would be able to support their favourite projects, earn status, & earn potential profit. This would open a new market for supporting projects not necessarily covered by existing corporations, non-profits or nation states.
Thanks to Louis for the tagline, “Patronage as an asset class” after discussions of this idea at the Rare Arts Festival in Brooklyn.
Thanks to Celeste Zumwalt for feedback on the article.