Trusting the Value of Impact Tokens for Higher Level Social Problem Solving
The role of Impact Tokens to help address common social problems is partly dependent on the ability of Oracle providers to accurately measure the cumulative alleviation of the social problem. Any alleviation of the problem results in new benefits which define the Outcome State represented by the Impact Token. As Impact Tokens are used as tools to help alleviate different types of social problems, Oracle providers will need to diversify their methods to account for increasing levels of complexity that enable these problems and the new benefits that result from the problem being solved. Measuring Outcome States is synonymous with measuring the benefits that result from the problem being alleviated. Expanding the universe of measurement methods and principles used by Oracle providers to reliably communicate the types and scope of these new benefits is important for establishing trust that the Outcome State is an improvement over the status quo.
Web 3.0 Measurement Challenges
Web 3.0 marketplaces are partly driven by demand for accurate and reliable data. Impact Tokens, as they are increasingly used to address more complex social problems, will face different challenges than other Web 3.0 data marketplaces. For example, supply chains managed on web3.0 face some challenges in ensuring that the state of off-chain assets match the description of the asset on-chain (i.e. that the crate of 35 medium sized widgets maintained below 40 degrees Celsius as recoded on-chain does not actually represent 35 large widgets kept at 45 degrees off-chain). But this challenge is easy to address using simple measuring collection methods. An eye test can tell the difference between a medium and large widget and remote sensors can record tempeture.
But the Outcome States that trigger the minting of an Impact Token could be increasingly behavior based, making them inherently complex and prone to high levels of uncertainty in their measurement. With complexity comes un-certainty, there is no way around it. If Impact Tokens are to be minted upon the attainment of an Outcome State that is dependent on a higher level of behavior change, the measurement methods used to validate the Outcome State must account for the complexity involved and the resulting implications on the degree of certainty that the Outcome State has been achieved.
The Value in Outcome States
“An Outcome State is a representation of the cumulative claims about what has changed in the state of the world, at a point in time.”-ixo White Paper
These “cumulative claims” are declarations that specific problems have been addressed (meaning they are either completely or partially solved). Without problems being solved there is no change in the state of the world that creates the value of the Outcome State as represented by the Impact Token. Value creation happens when there are new benefits to actors, like new access to financial goods and services. Solving the social problem enables new benefits which creates value. This creation of benefits is the change being purchased by Impact Token customers and the measurement of this value creation is what defines the Outcome State and the task of the Oracle provider.
The Potential Scale of Impact Tokens
Scaled use of Impact Tokens requires their use for more complex social problems, which in turn requires more advanced methods for measuring the alleviation of these problems and the resulting benefits. Current applications for things like immunization or qualification certificates are relatively “simpler” problems with simpler measures. Counting the number of vaccines administered as a measure of the Outcome State is a relatively simple input into the Bonding Curve and Impact Token purchasers (i.e. customers) can have a high level of confidence that there is little to no variance between the real-world Outcome State and the blockchain ledger that automatically minted the Token.
But what if Impact Token customers are interested in buying an Impact Token for decreasing incidents of identity-based violence? Or open defecation? Or reducing the consumption of bushmeat to improve the health of wild herds? These problems are more complex and their alleviation is more difficult to measure.
If Impact Tokens are to be used at scale by addressing more complex problems, the methods used by Oracle providers must expand into evidence driven practices of the various technical fields relevant to the problems and their associated methods for measuring these problems. Additionally it could require Impact Token purchasers to have a clear understanding of what they are buying in terms of confidence levels that the Outcome State has been achieved based on the methods used to measure it.
Value Partly Stems from the Solution Strategy
ixo has already been used for problems related to low school attendance, with Outcome States measured by daily student attendance rates. This is a relatively simple problem with relatively simple measures as student attendance counts were easily sent via SMS by teachers.
But what if the problem is “low graduation rates”? At first glance the measurement protocol for the Oracle providers seems straight forward, just measure the number of graduating students per the designated time period as a reliable measure of the Outcome State. The problem of “failure factories” in the United States highlights the dangers in over simplifying problems to just a few standardized measures that creates incentives for outputs (i.e. students being “graduated” instead of “educated”) being treated as outcomes (i.e. graduating properly educated students who are ready for the workforce). In this case the Outcome State was achieved, but no real value was created because no real problems were solved as partly measured by new benefit streams.
IMAGE 1: IMPACT TOKEN VALUE CREATION
This creates a necessity for Impact Tokens to have clear definitions of the correlated problems and benefits for the desired Outcome State, this provides the transparency for Token buyers to determine the demand (measured in Token price) for the Token. There is no real value in un-educated graduates going into the workforce no matter the demand (i.e. price) for the Impact Token. For more complex social problems (i.e. “lack of properly educated graduates entering the workforce”) the value created by solving the problems could also be partly dependent on the solution strategy used to solve the problem.
For example, collective impact strategies are increasingly being used for more complex problem solving, specifically around educational outcomes. Likewise, decades of social impact experience have demonstrated the value add of integrating effective gender strategies, digital principles, etc. into solution strategies in order to achieve the desired benefits. The implication being that any value behind an Outcome States is partly dependent on the solution strategy used to achieve it (i.e. graduating ill-prepared students is not a viable Outcome State). Hence measuring the implementation of solution strategies, as part of the Outcome State, could become more important depending on the problem being addressed.
Implications for Impact Tokens: Next Steps
Measuring the effectiveness of problem solving, creation of new benefits and the resulting value in the Outcome State requires use of the principles, protocols and methods from technical fields associated with the social problems addressed by the Impact Token. Integrating these pre-existing practices into new protocols specific to Oracle providers for Impact Tokens will require rigorous experimentation and the accumulation of evidence into Learning Agendas to guide best practices. The steps to begin building this evidence will be the subject of future posts and all are invited to collaborate with their ideas and questions as we move into a decentralized future of social impact.
