Read on Twitter
Some quick thoughts on feedback loops, incentive design and its role in DeFi, markets and life 
Feedback can be defined as the response a system has to a certain behaviour. Humans rely on feedback to understand the after-effects of their choices.
This is engrained in nature. Eat too much junk, and our body has its own feedback mechanism to let you know that in weight.
This is engrained in nature. Eat too much junk, and our body has its own feedback mechanism to let you know that in weight.
In modern products, feedback is used to guide a user's journey. A toaster's recoil, button click and the toast popping let a user know what is going on.
In markets, prices are a function of shareholder feedback to management's decision for the firm.
In markets, prices are a function of shareholder feedback to management's decision for the firm.
DeFi and token design are interesting because it gives you two-way feedback for the product.
User's holding the asset are usually a signal of their feedback being positive. If there is a rush to dump it during an airdrop, you know the feedback is negative.
User's holding the asset are usually a signal of their feedback being positive. If there is a rush to dump it during an airdrop, you know the feedback is negative.
What's interesting is token design lets you align incentives. Things like airdrops, yield farming, staking - are incentive design models that keep individuals vested in a network.
In traditional equity, you can at best take a line of credit with that equity.
In traditional equity, you can at best take a line of credit with that equity.
Feedback loops accelerate user behaviour.
One example -
Rising % of a network in staking means declining float of the asset in the market. Declining float, shifts price. This in turn increases yield in dollar terms, which in term leads to more of the network going into staking.
One example -
Rising % of a network in staking means declining float of the asset in the market. Declining float, shifts price. This in turn increases yield in dollar terms, which in term leads to more of the network going into staking.
In DeFi - products can have multiple feedback loops that go into an asset.
Eg : @AlphaFinanceLab has a suite of products, each with their own separate feedback loops
Similarly - @RariCapital has been experimenting with and without yield rewards to find product market fit
Eg : @AlphaFinanceLab has a suite of products, each with their own separate feedback loops
Similarly - @RariCapital has been experimenting with and without yield rewards to find product market fit
Combination of financial gains combined with real-time ability to scan user behavior with onchain analytics with tools like @Covalent_HQ and @nansen_ai creates different stakeholder behavior
Founders become cognizant of public scrutiny
Venture backers can benchmark easily.
Founders become cognizant of public scrutiny
Venture backers can benchmark easily.
Imho - token design, like product design is a very nascent stage. And its impact on user behaviour and by extension price is very under researched.
Some firms with material experience in design have an edge here (eg: @IDEOVC ).
Founders should use this more to their benefit.
Some firms with material experience in design have an edge here (eg: @IDEOVC ).
Founders should use this more to their benefit.
Thread inspired by this book - https://www.goodreads.com/en/book/show/41940285-user-friendly
