Perhaps the biggest issue with the notorious ICO wave of 2017 was the lack of tangible utility surrounding the tokens many users purchased.
What resulted was a large amount of speculation and a very select few projects which garnered usage from the very designs they raised on.
Now, what happens when token sales become network launches and are paired with an intuitive dashboard to make network participation easy and informative?
In the article, we’ll be diving into Activate – a new platform by Consensys to drive true adoption of token projects through vetted use-cases like staking and governance.
Our conversation with strategy leads Collin Myers and Mara Schmeidt shines light on the current state of token usage, along with what users can expect from Activate’s first launch partner – SKALE – in the coming months.
SKALE just released its first explainer video!
See how SKALE's elastic sidechains make #ethereum an order of magnitude faster, while not sacrificing security and decentralization. Watch now 👇🔴 #Ethereum #Blockchain #Crypto pic.twitter.com/vBOTugy0hI
— SKALE Network (@SkaleNetwork) January 28, 2020
Without further ado, let’s dive right in!
What’s the goal of Activate?
Activate helps projects garner traction from their user base in the way(s) they were originally designed to. Our network launch and token activations will always be less than 28 days apart, placing a strong emphasis on utility immediately after the token distribution takes place.
As it stands today, we feel there are very few projects engaging with their communities in a long term manner. Many projects reward their communities for participation but it’s misguided, meaning these tokens aren’t being used for what they really should be.
We take a different approach. First, we seek to get more adoption and conversion across the funnel by working directly with protocols to build incentive mechanisms which encourage and support true network growth. Once we’ve successfully enabled a network with the proper incentive designs, we offer a suite of tools for users – both technical and nontechnical – to take advantage of them and put their tokens to work in their intended manner.
What are some of the best utility use-cases you’ve seen in recent years?
It’s important to highlight the difference between displayed use and designed hope for use.
In the context of Ethereum based projects – work tokens are far and few. Most network-level participation is competitive. We see a lot of layer 2 tokens seeking to gain adoption with high returns – rather than filling their users in on why they’re staking in the first place.
This is why more workable models, like the recent 0x tokenomics which introduce live staking and governance, are quite exciting to us.
Similarly, we’re big fans of Kyber and their upcoming token design upgrade – Katalyst – as we’re seeing strong use in the network today while the native token – Kyber Network Crystals (KNC) – introduces a frictionless alternative to other DEXs like Uniswap.
Most payment tokens were nonsense (in our eyes) as they were mainly for transactional means. Without value-added use, there is really no need for the vast majority of them to exist.
On the flip side, we have Matic and Loom. Staking is active on both networks which is driving important factors like security forward.
We see projects like UMA and The Graph with planned ecosystem design mechanisms that we’re excited about as they make a lot of sense and add tangible value.
In the case of Matic, Loom or SKALE, designs can vary. Staking is ultimately used to strengthen the network and you need to establish that security properly from day one.
What should projects focus on once their designs are set in stone?
When it comes to the next phase of driving use on the demand side – it becomes a lot trickier. The ecosystem as a whole is trying to cater to that by asking:
“How do we encourage usage and demand?”
That was the issue we saw with a lot of the networks in the early days. Teams would focus so heavily on the bootstrapping phase while totally missing out on the demand side of the equation.
This is part of the reason we’re so excited about SKALE. They’ve teed up demand in tandem with supply – effectively working with roughly 35 dapps to launch in parallel with the network which is far more synergetic than the networks of yesterday.
By using this model, hopefully projects can steer away from relying on inflation to sustain demand as there will be fee generation occurring from the start.
How should projects be thinking about the first phase of launch?
First and foremost it’s important to ask – Is 100% staking participation the right model?
Kyber is an interesting example because they’re pivoting to active governance participation. They recognized that not everyone can or has the willingness to vote, so why don’t we introduce delegated structures like the democracies we see today?
What emerges is delegation in which the people who make sound decisions receive support while smaller users remain an active part of the governance process.
— Kyber Network (@KyberNetwork) February 20, 2020
When it comes to governance, we look into how to enable token holders and delegate work entities to grow together in tandem. In most systems, there are representatives responsible for providing input on verifiable information. It’s extremely important to make sure those ecosystem actors are carefully selected and incentivized from the start and that token holders wishing to be self-sovereign have the ability to do so.
At the end of the day, these are all incentive systems. We’re enabling pseudo-anonymous coordination, meaning there will almost always be some degree of financial reward which is ok.
What’s more important is the evolution of finding effective governance when we started with proof of work which had no capability for onchain governance at all. Governance designs are improving over time and Activate hopes to be a value driver in those conversations.
Walk us through the protocol rollout strategy – How should a protocol approach its launch?
There are three steps to a successful launch.
- Design incentives to secure the network
- Get people to use the network by building a real community
- Introduce governance to coordinate within that community
What we’ve found is infrastructure providers and network users are two completely different humans. They can work in harmony using incentives, but if you want to build a robust system, those first two steps need to be done perfectly.
Governance is a critical function for a decentralized network to gain mass adoption, but only when done right. Everyone wants governance to begin from day 0 but it’s tough to do it that way. Instead, it’s far more plausible to start centralized and gradually distribute power over time.
Decentralization is a scale. Ask yourself – Is this project mature enough for governance to be effective?
Looking at the Graph as an example, they established the network market demand first. This allowed them to devise what the right token model will look like before trying to push it on anyone.
Did the Graph need a token a year ago? Probably not – it would have added more friction. Now that they have an ecosystem with more network players, layering in an incentive mechanism to take it to the next level is fascinating.
It's been almost 2 years since we started working on The Graph & today we're excited to share more about the decentralized network!
Read about The Graph Network's architecture, roles & query market design.https://t.co/9Z3PSnXUGp
— The Graph (@graphprotocol) October 21, 2019
Tell us a bit about Activate’s roots – How did it come about?
Activate has been a multi-year initiative predicated around the distribution of tokens to early supporters and eventual network launch that most token projects encounter. It’s great if projects have a successful initial distribution but if they don’t provide users with tools to stay engaged, a high drop off rate is inevitable.
When we came together to focus on how to solve this – it was fairly simple. If we’re going to support a network launch, we’ll provide all the right tools to do that. After all, a project’s mainnet launch is one of the most important events they will experience. We’re here to make sure that goes smoothly and soundly.
What we’ve built at Activate is a platform which can take and support a network throughout its life cycle.
We consider the best ways to launch compliantly – given the project’s incentives – while facilitating a compelling launch and providing support after the initial token distribution is said and done.
Here at Activate, we strive to support sound incentives and mature technology.
What makes you the right team to get this done?
We’ve been launching tokens for close to 4 years. We finally feel like the industry has reached a maturity level to launch networks, not just tokens. In doing so, we’re confident that we can enable a full network launch by bringing everyone together and allowing all participants to use it at the very beginning.
It’s a diverse process and I like to think of us as the network glue by providing an end-to-end network usage service which is truly the first of its kind.
Let’s talk about the product – What can users expect from Activate?
Activate offers a participation portal that helps give insight on what’s going on with any of our supported networks. For example:
What’s the status of the network?
What’s the utilization rate?
How do I make an informed decision within this network?
We offer access to anything network native-like staking and voting – while providing the user with network-level protocol data to make better decisions about their participation.
This allows people to say hey, I support SKALE. Because I support SKALE, Activate is my home to know what’s going on and participate in that network.
We’ve talked a lot about governance in this interview – How does that tie in with the larger DAO trend?
It seems like DAOs are following a general onramp in which they’re nascent in their innovations within them. We’re in this period of discovering what’s viable and what makes sense which will likely take a lot of trial and error to figure out.
We’ll almost definitely have to fall before we can run, but 2020 will likely see a big proliferation of DAO’s launching across the board.
What we’re looking for is where they make sense and how they should be conducted in different ecosystems. Kyber is a fantastic example of this.
From a regulatory perspective, projects will have to evaluate the degree of decentralization that they depict. Governance is a huge part of that – whoever has keys to the castle and makes major decisions will largely influence what real decentralization means.
Overall, we plan to engage and keep an eye on the DAO trend. There will be an overlap of protocol design and governance with projects like Kyber experimenting with how to roll out both.
Going back to our participation portal, whatever we see emerging for the networks we support, we’re happy to adapt and allow them to play a big role.
What are some examples of where DAOs have either been effective or need to improve?
The DigixDAO call to action was pretty fascinating. I envision that DAOs will become more effective at the later stages in a project’s life.
Throughout 2020 it’ll be interesting to compare the number of DAOs launched to the level of collective participation.
Right now, it’s a new trend that’s easier to spin up than ever before. However, it seems like there are very few people making it easier to participate in or follow up which is where the true value lies.
Without that, we’re still stuck with fragmentation. There’s a lot of bad UI/UXs which introduce friction and unfortunately, a lot of DAOs will get launched with no improvement to those flows.
With all that being said, DAOs are undoubtedly less abstract than what people thought they would look like. I’m very impressed by the number of minds working on innovative DAO structures.
They still need research but it’s refreshing to know there are highly knowledgeable people you can reach out to on these topics. Ultimately, it’s the design and understanding that’s more important than anything else.
And how do these structures compare to the legacy world?
There seems to be a ton of overlap. DAOs – and governance in general – is moving shareholder discussions online. Seeing as a lot of this still happens in boardrooms, we’ll start to find ways of coordinating which are more conducive to others.
While all these conversations will slowly evolve online, private governance – with tools like Carta – provide frameworks for digital voting functions to streamline the process.
I’ve noticed an inherent desire for everything to be onchain. Instead, it’s important to take those innovative conversation decisions online and post what’s necessary onchain when consensus has been reached.
Let’s touch on the power of community – What’s important to consider?
Community engagement is critical. If there’s friction to participation, it’s less likely for people to be active in those conversations. That’s why communication design is so critical. We’re entering a stage in which facilitating remote working humans in a digital way enables discovery processes in a scalable format.
For the first time in history, we have the opportunity to use digital tools to our advantage for greater coordination.
Let’s talk about Activate’s first launch – SKALE – what should people know?
We’re gearing up for Q2 launch date. We’ll be rolling out a series of content drips that are going to share the timeline, launch details and in-depth economic discussions.
At the end of the day, we want to make it easy for people to participate by allowing them to figure out what SKALE is in a playful manner.
Listen to the #Ethereal Podcast 🎧: Episode 2 – How to Scale #Ethereum dApps with #SKALE's Christine Perry, featuring @christineRPM and @DeFi_Dad, @ConsenSys, @ConsenSysCodefi, @SkaleNetwork by @EtherealSummithttps://t.co/G6fKb6gmbl
— ConsenSys News (@ConsensysNews) March 13, 2020
Be on the lookout for interactive content which demonstrates an entirely new process that we’ve been working really hard on for months.
Any closing thoughts?
Across the globe, there are roughly a million people interacting with blockchain and crypto. Everyone has the same ideas and is fighting for the same market.
It’s our goal to create onramps for new users by playing our own game and we believe SKALE is the perfect network for us to do that with.
For those still with us, we hope this interview could shine some light on the positive direction projects like Activate is swaying the ecosystem’s focus.
While we may not have touched on many DeFi primitives, it’s important to recognize that tools like Activate are the perfect onramp for new users to stumble into DeFi – thus further expanding the capacity for future growth.
In the coming weeks, we recommend staying up on all things Activate by signing up here.
For those interested in learning more about SKALE, head on over to their official Twitter here.
Cooper is the Editor of DeFi Rate and an active contributor to leading DeFi media outlets like The Defiant, DeFi Pulse, and Bankless. He works with early-stage teams through Fire Eyes DAO to incubate governance models and grassroots community development. He is an ambassador to Set Protocol and an author of a weekly publication called Token Tuesdays. To stay up with Cooper, follow him on Twitter.