Over the course of the National Blockchain Challenge, I #BUIDLed a winning project around decentralized crowdfunding.
Platforms such as Patreon has high fees and can deplatform you at any time. Instead of having to go through a centralized platform, what if Creators can utilize smart contracts and decentralized protocols to crowdfund in an intermediary-free way?
Enter Patronage Collectibles.
You can check out our post-hackathon interview here.
The thesis of our project is: crowdfunding today doesn’t work. It has high fees, unfair curation, and most importantly: it’s BORING. As a Patron, when you support a Creator you often only get a cold and impersonal thank you message. It’s not something that gives you a personalized stake or a real feeling of ownership in someone’s creative endeavours.
Crowdfunding doesn’t have to be this way! We can use smart contracts to crowdfund in a decentralized manner. It would lower fees, be open to everyone, and we can also make it more fun through Crypto-Collectibless.
History of Collectibles
It’s worth mentioning that the human instinct to collect runds deep in our evolutionary history. Practically all human cultures, even those that do not engage in substantial trade or that use more modern forms of money, make and enjoy ornamental jewelry. Historically, these physical collectibles had to be time-consuming to create (a human proof-of-work) or it would’ve been easy for forgers to create fakes.
Non-Fungible Tokens (NFTs) are the next step towards bringing scarcity to the digital realm. NFTs are digital collectibles. They are unique cryptographic tokens which are not interchangeable, in contrast to currencies such as Bitcoin which are identical and fungible in nature. Cryptography and computational proof-of work ensures that each NFT is real and verifiable. CryptoKitties were among the first NFTs.
Through NFTs, the blockchain offers us a new model for digital ownership. Digital assets can be registered as a ‘token’ and tracked on a secure, immutable public ledger. You can preserve scarcity and verify the chain of provenance for each token. Even as the asset gets passed through multiple hands, its data remains immutable and intact. Each transaction is also publicly viewable on the blockchain, creating an audit trail of the collectible’s history.
With Patronage Collectibles, Creators can create and sell unique ERC721 Crypto-Collectibles to fund their work. When you support a Creator, you receive a unique collectible on the blockchain. This ‘badge’ gives you a true feeling of ownership in your relationship with the Creator. The collectibles can belong to different tiers and be used to unlock exclusive Patron-only content.
The catch is, the owner of a Patronage Collectible have to pay a recurring pledge to the Creator in order to continue their ownership. Failure to keep up with pledges will result in your Collectible taken away from you. Pledges gives Creators a recurring source of funding to continue their creative work.
To make it more concrete, let’s walk through an example user journey.
Your Patronage Collectibles can behave like utility keys and used to unlock exclusive Patron-only content such as a private link.
How are these pledges calculated and how much to Patrons have to pay to continue ownership? Pledges are based on the Harberger Tax mechanism.
Harberger Taxes is an economic policy that recently gained popularity due to the book, Radical Markets. We used this taxation system to give Creators of Patronage Collectibles a recurring income stream from their Patrons. You can think of Harberger Taxes as a variation of the ‘pay-what-you-want’ model. Harberger Taxes works as follows:
- Owners of a Collectible freely sets the price of that Collectible.
- Owners pay a % recurring pledge of the price to Creators.
- Anyone can buy off a Collectible at its advertised price. Owners cannot refuse selling at that price.
This system incentivises Owners to set a low price to minimize the amount taxes they have to pay. On the other hand, Owners are also incentivised to set a price high enough to discourage others from buying it away too readily. What ends up happening is you have to price a Collectible at the value you are willing to pay to keep it.
For our hackathon project, we decided on a rate of 1% per hour, but this value can be freely customized by the Creators of each Collectible.
The DApp and smart contracts are open source - you can check it out on Github here.
Thanks for reading! Feel free to send me any questions or feedback that you have.
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