Funding scientific economies through blockchain
Scientific economies are globally distributed protocols for transacting in scientific goods and services, powered by the blockchain, and governed through the use of cryptocurrencies that incentivize positive emergent behaviors across the scientific community. A number of exciting projects are incubating on this theme that have the potential to change the landscape for scientific innovation and intellectual property.
A historical perspective of “The Science Stack”
Science, by all measures, is a public good or infrastructure that exists across borders. As a close friend recently noted: “cancer doesn’t care where you live”. Yet, the way that most science-focused funds are set up, implicitly evaluates investments in scientific technologies and marketplaces based on geographical (and sometimes political) boundaries. In fact, the scientific economy works best when there is frictionless collaboration across borders and fair attribution of contribution across the globe.
Historically, scientists have relied on a number of scientific platforms / intermediaries to facilitate collaboration and drive efficiencies. A number of venture investments were made to simplify various layers of the science stack — from the information layer (intellectual property management, scientific publishing), the operating layer (laboratory robotics and automation, outsourcing), to the funding layer (platforms to fund basic and commercializeable research).
In hindsight, thinking about science this way, was a prelude to thinking about science as an economic system. Each layer of the science stack could be described as a “feature” or “application”. However, no matter how hard one looks across the various pockets of opportunity, there are constantly constraints presented by the intrinsic setup of the system. What was missing, was a way to unite efforts across the stack to encourage collaboration— especially as these companies were often trying to tap into the same network effects.
Where We’re Going: Scientific Economies and Protocols
As more is learnt about blockchains, and importantly crypto-economics, there is a case to make that for the first time in history, there are the tools to (re)build an economic system from scratch from the bottom-up. More importantly, blockchains have provided a new mode of thinking to imagine how end-to-end scientific value can be created, scaled, and distributed by uniting the scientific stack through careful incentive design and engineering.
Such opportunities can be thought of as investing in “horizontal economies”. Horizontal economies are economic systems that facilitate transactions for a narrowly defined set of goods and services. These goods and services can be transacted across borders, and generally benefit from the removal of frictions and duplicated work from legacy centralized setups.
Different than investing in companies, horizontal economies don’t have the concept of equity or debt — or at least not yet. The only way to fund a new economy is to fund the point system under which value is recorded and transacted — otherwise known as cryptocurrencies or tokens. By investing in and holding tokens, investors become part of the economic network (or protocol). As an investor, one will not only be looking at token values/prices, but also will participate as members of the network’s governance through token ownership
In the past few months, a number of teams have started building blockchain-based economic systems that re-think how science can be done beyond borders.
These economies leverage the blockchain to create common protocols for everything from: results sharing, peer-review, publishing, basic research funding, commercialization, and scientific property rights. So far, these teams have sprouted up across the globe from America, Europe to Asia, and truly live by the mantra that “cancer doesn’t care where you live”, so science shouldn’t either.
Making and Managing Investments
From an investment management standpoint, managing crypto-assets will require investors to evolve their approach to risk management and underwriting.
Crypto-assets are a new type of asset that mixes features of conventional assets today. Depending on the token design, it will exhibit a blend of being a currency, commodity and security. To properly manage risk, investment frameworks will need to be expanded to also consider factors of:
- Fungability: Crypto-assets are digital and thus, more fungibile across borders
- Liquidity: Crypto-assets tap into global supply-demand pools, and as such are priced on a more continuous basis compared to conventional private equity
- Supply-demand factors: Crypto-assets will be subject to volatility driven by new patterns of supply-demand, given its global nature
- Regulation: Crypto-asset regulation is dynamic and evolving constantly, with different jurisdictions taking different views
Generally speaking, such factors can be technically baked into a pricing and risk frameworks based on “monetary supply/velocity”. Fine-tuning existing models will help provide for a quantitative basis to inform but not dictate funding decisions.
By using blockchains, there is an immense potential to advance the way that scientific ideas are conceived, developed, funded, and commercialized. The economies that pop up around blockchain will form the basis for the next generation of scientific infrastructure..