The Cultural Build
Implementing Ostrom's Principles into the TEC
The Token Engineering Commons started with a cultural build, because we recognize the importance of our human nature and all the variables that human complexity offers to any system.
Economics is a social science, therefore it is highly based on behavioral patterns. Some of our patterns are still conditioned to traditional economic systems, so there is a collective responsibility to question and propose new behavioral avenues that better serve the whole.
Thankfully we are experiencing a revolution in technology, and we must remember that we are the ones creating and operating these tools and benefiting from their application. The technology is only helping us move towards ethical, human-centered economic systems. It is our collective responsibility to ensure that these systems are sustainable and protect the individuals and groups it is designed to serve.
The Cultural Build started in August 2020, and since then we have been developing processes to collaborate horizontally. We currently have 11 working Groups building the foundation that will sustain the advancement of the token engineering field.
The Token Engineering Commons is iterating on the work of Elinor Ostrom, who received a Nobel Prize in Economics for her analysis of economic governance associated with common pooled resources (CPRs). She spent years evaluating the interactions between people and ecosystems and provided a framework that illustrates how groups of people throughout history have been able to effectively and sustainably manage a commons without the involvement of a central authority.
This framework is at the foundation of the “Commons Approach'' and is defined through Ostrom's 8 design principles. In the following paragraphs you will learn about each design principle, and how they are embedded within the cultural build of the TEC. Each principle brings a new dynamic towards the development of emerging blockchain and cyber-physical systems.
1. Clearly defined boundaries
This principle recognizes the need to immediately define the boundaries of a Commons, and to specify those who are authorized to use it. This principle is often the first step to organizing collective action. In contrast to the ethos of decentralization as being depicted as a system that is completely open and accessible, the first principle by Ostrom emphasizes the importance of closing the initial boundaries of the system from “outsiders” who seek to benefit at the expense of the common resource.
This initial step is why the Trusted Seed exists. Defining group boundaries, in this sense, ensures that the participants within the collective action stage are aligned with the mission of the Token Engineering Commons. The Trusted Seed helps define group boundaries by limiting access to governance decisions to those aligned with the goals of the organization.
We accomplish this by utilizing the structure of blockchain technology and tokenization for establishing boundaries for inclusion. Tokens represent a holder’s contributions to the community, giving appropriate access rights and proportional decision-making power within the group.
Along with the structural mechanisms inherent in the technology, we are also defining clear boundaries within our cultural build that are centered around creating trust and familiarity among participants through our onboarding and orientation processes and within our Working Groups.
2. Congruence between appropriation and provision rules and local conditions
This principle recognizes the needs of particular communities to adopt rules associated with the management of a commons to fit their particular circumstances. Within decentralized communities and digital architectures we are able to expand the definition of "local" from "shared geography" to a "shared purpose". In this sense, we are taking advantage of the Hatch Process which allowed the TEC community to customize the parameters of the commons so that they would be aligned with our shared purpose.
In the TEC we will initiate a set of rules that are embedded within the structure of the organization which exist in the form of various voting methods and smart-contract parameters. These structures contain a set of procedures that dictate how organizational actions are executed and can be adapted to the specific requirements that the community may need at any given point in time.
Along with the structural mechanisms, the cultural build has enabled our Working Groups to adopt their own internal rules and procedures that allow them flexibility to become more anticipatory to the needs of their members. Working Groups have autonomy over their mission and establish when they meet, what their priorities are and how they execute their work.
3. Collective choice arrangements
This principle states that the individuals who are affected by the operational rules of the system should be able to participate in modifying those rules. Systems that utilize this principle are better able to tailor their rules to local settings and contextual circumstances. Enabling individuals to create and modify the rules around their shared purpose and limiting the influence of rule-making by external authorities, we will be able to produce stable cooperative behavior over long periods of time.
Assisting in the maintenance of our rule-making process are modular approaches to governance that allow the community to implement the most appropriate decision-making method for each type of decision. Tokenized governance allows us to move beyond the limited yes/no time-boxed voting methods and introduce new methods of digital voting that express the intensity of member preferences around operational rules and procedures over time.
This principle recognizes the need for a system of monitoring that is capable of auditing community conditions and behaviors. This principle acknowledges that the sustainability of our operational rules determined through collective agreements are dependent upon the long-term compliance to those rules.
However, even in repeated settings where reputation is important and where individuals share the norm of keeping agreements -- reputation and shared norms are insufficient by themselves to produce stable cooperative behavior over long periods of time.
Ostrom observed that in all long enduring commons settings, the use of monitoring activities were of critical importance to sustainability. These monitoring activities should be low cost and performed by members of the community in transparent ways.
In the TEC, we rely upon our Transparency Working Group that is developing new mechanisms and processes that ensure the act of monitoring is incentivized, low-cost, and provides unparalleled transparency to the public.
5. Graduated sanctions
This principle recognizes that members who violate the rules are assessed with graduated sanctions by other members, by officials who are accountable to those members or both. The important thing to note about the principle of graduated sanctions is that these activities are undertaken not by external authorities but by the participants themselves.
Similar to the principle of monitoring, Ostrom observed that participants are not likely to spend time and effort on sanctioning other members for violations of their collective agreements. However, the settings where graduated sanctions are successful adopt a system of “quasi-voluntary” compliance.
In such a system, strategic actors cooperate only when they can expect others to cooperate as well. The compliance of each depends on the compliance of others (e.g., paying your taxes). Strategic actors will comply if (1) they perceive that the collective objective is achieved, and (2) they perceive that others also comply.
Administering graduated sanctions within the TEC will be accomplished by creating our own internal enforcement methods that deter those who are tempted to break the rules, and thereby promoting quasi-voluntary compliance around our collective agreements.
6. Conflict resolution mechanisms
This principle states that members and officials should have immediate access to low-cost arenas to resolve conflict among members or between members and officials. It acknowledges that rules in reality are never unambiguous, and that even when the monitors and sanctioners are themselves members, the rules can be interpreted quite differently by each individual.
This result can be problematic, as members who seek ways to subvert these rules can justify their actions in various ways by “interpreting” them in a manner that achieves compliance to the rule but subverts the intent of the rule. Additionally, members who make a mistake or unknowingly violate the rules should not be judged by the full weight of enforcement.
Each of these scenarios requires evaluation through conflict-resolution mechanisms that allow for community members to decide upon sanctions in a democratic manner. Systems that do not have access to these types of mechanisms create an environment where rules may come to be viewed as unfair and result in a declining rate of conformance to collective agreements.
The TEC relies upon our Gravity Working Group to provide an arena for conflict resolution. If our system of soft governance is unable to resolve the conflict presented, we also have technical mechanisms that can be utilized in the form of Disputable Voting and Celeste.
7. Minimal recognition of rights to organize
This principle states that all members are endowed with the ability to create their own institutions and that this ability is not challenged by external authorities. It acknowledges that members within a community devise their own rules without creating formal structures, and, that if the sustainability of this system is to endure for long periods of time, those rules should not be influenced or changed by external individuals and organizations.
In the TEC, we accomplish this principle by not establishing strict rules as a prerequisite for participation. Instead, we provide broad guidelines for members in the form of our agreements and allow each Working Group to decide the most optimal path forward. Scaling the organization horizontally and minimizing forms of hierarchy can only be accomplished by recognizing the rights of members to organize themselves in a manner that is not dictated by external authorities.
8. Nested enterprises
This principle states that the design principles above are organized within multiple layers of nested enterprises, namely joint communities at large. It acknowledges that establishing rules at one layer, without modifying the rules at other layers, will produce an incomplete system that may not endure over the long-term.
Ostrom observed all of the successful systems under evaluation contained this design principle. In essence, the effectiveness of these principles are dependent upon the effectiveness of the larger systems upon which they rely.
The importance of acknowledging the placement of the TEC among the rest of the token engineering community is extremely important, and this why we are establishing partnerships with projects such as Block Science, Giveth, Commons Stack, 1Hive, Curve Labs and beyond. By creating purposeful alignment with the many projects that contribute to and benefit from the TEC, we ensure a sustainable path forward to the advancement of token engineering as a field of study.