Thread by @ixoworld

A few weeks ago, @protocollabs @gitcoin @fiftyyears organized the “Funding the Commons” Conference to discuss how do we fund open-source and commons-based goods.

Here’s a 🧵on @shaunbconway’s presentation on Adaptive financing.

shorturl.at/ALU03

1/ For our #Edtech project with @chimple_org and UBS Bank, we’ve implemented this crypto-economic primitive called AlphaBonds.

Our aim was to achieve alpha, reduce negative externalities (dependency), and increase positive externalities (strengthening education services).

2/ This was accomplished by decentralizing financing and allowing local stakeholders to participate.

This meant replacing TradFi Development Impact Bonds, which are very centralized, have lots of intermediaries, and costs are high. 🏦

3/ To successfully fund in terms of the outcomes, you need to create an interface between the real world and the data on the #blockchain.

Why? Because we want to ensure that there is room to course-correct rather than fail and that results are delivered on time. 🎯

4/ That interface is a token bonding curve, which regulates supply and demand in a sort of automated-market kind of way.

But current bonding curves have drawbacks: they can’t see what’s happening on-chain or sense what’s happening in the real world.

5/ This means the parameters for the curve are set and you can’t change them since they can’t respond to new information.

The innovation with RISK ADJUSTED bonding curves is that the parameters can be updated in response to new information. 📝

6/ The chance of a future payout is predicted by alpha, ranging from 0 to 1, and is used as an input to adjust the curve's parameters.

The continuous funding brought in by this mechanism adjusts the price to whether the project will achieve its goal, and then a payoff is made.

7/ Bond token holders can participate in prediction markets by taking positions in success and failure pools.

As new signals arrive on alpha, the system alpha is adjusted to provide a prediction on whether the outcome will be achieved. 🔮

8/ In the case of @chimple_org, we're not using a prediction market; instead, we're using a signal that is coming in from the tablet devices - student’s educational progress - which we use as a signal for continuously calculating the alpha. 🧒🏽

9/ Hypothetically, an #education token could be issued, and you’d have access to services such as access to learning software, or you may have rights to an educational bursary, for example. Linked resources could include credentials, verified attendance records, etc.