Start of a proposal for the first on-chain referral program: Proton Rewards.
“Show me the incentive, and I will show you the outcome.” — Charlie Munger
One of the most powerful forces in the world is incentives; as Charlie Munger (Warren Buffet’s partner) famously observed. In the world of marketing, incentive programs, otherwise known as “affiliate programs”, rule.
How can we align these incentives in the world of blockchain? I would like to propose to the Proton community, token holders and specifically block producers, a framework to think about this problem.
Note: this is my personal proposal as a token holder of Proton, not an official proposal by Metal
Usage drives value
The first thing I will note is that in the short run, hype drives value, but in the long run, usage drives value. This is the fundamental rule of networks: they get much more valuable as they get more usage.
So how can we quantify usage, and how can we reward it as architects of the Proton Blockchain?
I think there is a very clever way, and as of yet, it has never been tested. simply stated:
build a referral program directly into the blockchain and increase supply programmatically as affiliates drive qualified users.
Let’s start with a simple affiliate model. All these models work more or less the same, and there is no “correct” answer. But for analysis purpose, lets examine the model of Coinbase. Here’s the specific text
If your friend visits coinbase.com/trade and initiates a buy or sell of $100 USD or more (or 100 USD equivalent of your domestic currency) within 180 days of opening his or her account, you both will receive a 10 USD (or 10 USD equivalent of your domestic currency) referral bonus when the order completes. Orders can take up to 4 business days to complete.
Can this model be tweaked or improved? possibly. But the rough formula makes sense. And with a blockchain like Proton, this “trigger” can be fired algorithmically. The user is an on-chain account. The initiation of trading is on-chain. Referrals can be tracked and reported on chain (in fact, allowing for multi-level programs).
So how to do it?
The Proposal to the BP community and Proton Token holders is to track referrals that come from qualified wallets (like the Proton Reference wallet or Anchor). This tracking can happen within a database that is maintained by the Proton Consortium. The Proton Consortium can also validate each transaction, allowing for manual pruning of bad actors (like any affiliate program).
The smart contract that pays out the proton would also be under the control (majority multi-sig) of the committee, and could be adjusted depending on market conditions. Great opportunities to drive more traffic? increase the rewards (or equivalently decrease the difficulty threshold). Excess supply of affiliates putting pressure on XPR? Lower the affiliate payout.
Before submitting a contract to BP vote, I would like to ask the Proton community to weigh in. Is this a good idea? A bad one? My experience with affiliate programs is that they can be massively effective at driving traffic. As our friend Amy Wan has proven with Bitcoin Blast, games can drive millions of downloads. We need to incentivize such games and other applications to grow the Proton ecosystem. If we do, we can almost certainly drive more active users to Proton than Ethereum or any other blockchain.
And that, in my opinion, is valuable.