The Internet era is different from the industrial era. Customers are both users and contributors of value. This question is the famous Kevin Kelly question. Customers, as an integral part of Internet companies’ value, do not share the benefits brought by the growth of enterprises. People have tried to solve this problem. However, blockchain projects that incentivize users have failed, and this problem has not been solved.
Bitcoin’s algorithm is not suitable for Internet projects that calculate value based on the number of people
Bitcoin’s algorithm takes into account the halving of the cycle. This shrinking algorithm brings about an increase in value. This method of issuing coins with a high first and a low second is groundbreaking, and the principle is correct. However, Bitcoin is an algorithm that determines the cycle based on time, not based on the number of people, but based on computing power, so this algorithm is not suitable for projects based on the number of people. Projects that calculate the number of people by imitating the Bitcoin algorithm have not succeeded. Of course, the POS equity algorithm is unsuitable for projects that calculate the number of people. Mr. Zhu’s POP algorithm is based on the number of people, which may open a new path for the value distribution of Internet projects.
Characteristics of Internet users
To solve this problem, we must first understand the characteristics of users and then find corresponding solutions.
1. System value increases with the growth of customers
The Internet has a valuation for customers, and the valuation for different projects ranges from US$50 to US$1,000. However, when customers enter a certain Internet project, the valuation of the project increases. At various stages of a project, the value of the project is different, and the growth of the project’s value includes the value of the customer. The return of early participants is the highest because the value of the early project is low, and the proportion of customer value to the project value is also high. In layman’s terms, the value of early customers is greater than the value of later customers.
This rule always exists in Internet projects since projects are all small to large. Cryptocurrency projects are also Internet projects. The difference is that customers cannot participate in the seed round of Internet projects, while cryptocurrency customers can participate in the project in the seed round, and customers do not invest money. For example, in the Bitcoin system, the user’s computer still belongs to him, and Satoshi Nakamoto himself paid the cost of the initial project prototype.
Since customers can participate in the seed round, it naturally leads to the question of how to participate, that is, how to distribute tokens to customers who enter at different stages. The value of Internet projects grows with the value of users. There is a famous Metcalfe’s law: “The value of the network is proportional to the square of the number of users connected to the network.” Therefore, algorithms involving the number of Internet users are subject to this law.
2. The growth of the number of people in Internet projects follows the natural growth curve
The growth of the number of people in Internet projects is primarily natural, and the natural growth curve is also called the S curve. As shown in the figure below:
The issuance of tokens is reasonable only if it conforms to the natural growth curve. For a detailed introduction, please refer to the chainless white paper and the DW20 white paper. The number of tokens issued by the two projects is very different. DW20 is the transaction token of the chainless project, with issuance of 210 billion, while the equity token CLY issued by the chainless project is 2 billion. However, the same formula simulates the natural growth curves of two different tokens.
After checking his data table, Mr. Zhu’s formula does not calculate system value data but customer value data. The growth of customer value is still similar to the natural growth curve. See Figure 3.6 of the DW20 white paper.
Is it natural growth or Metcalfe’s exponential growth? From the perspective of Bitcoin prediction, most of them use exponential growth prediction models, such as rainbow charts. The value of the Bitcoin system is not directly related to users. It is basically a mathematical problem, so it may conform to Metcalfe’s law, but it must not be completely consistent. For systems with user participation, the system value is not entirely determined by users. Tencent’s value growth can verify this conclusion. When the number of users is fixed, the development of new businesses will increase the value of the enterprise, but this is another problem of project resonance. See the innovation of the chainless business model. So, in Mr. Zhu’s article, the concept of user value is adopted instead of system value.
Principle of POP algorithm
Based on the above conditions, Mr. Zhu designed the POP (Poof Of People) algorithm, which consists of two parts and is well adjustable, so it can be applied to projects with different issuance cycles and issuance volumes. The logic of the main formula is that the issuance of coins in each cycle decreases periodically according to the increase in the number of people, and the issuance volume is halved in 3 cycles. The halving is not based on time but on the number of people. This is a general algorithm that is suitable for all token distribution methods involving Internet projects with a large number of people. That is, as an Internet project, the POP algorithm is a tool for calculating the system’s value as users grow.
How Internet projects handle customer value
Internet projects that do not provide rewards to users must also pay advertisers this fee. Lei Jun took the correct posture. Xiaomi mobile phones entered the market at a low price without advertising fees. This is a disguised way of charging customers advertising fees, and word of mouth from customers plays the role of advertising. A correct understanding of the Internet is one of the factors that led to Lei Jun’s success.
As Chainless, the marketing fee is given to early users who are willing to promote through airdrops as a reward. Chainless distributes future benefits to early customers in advance to form the basic value of the Chainless system. Customers also promote Xiaomi and Bitcoin. Whether the marketing coins are given to channels or customers depends on the different stages of the project.
Typical Internet projects based on the number of people are WeChat, TikTok, YouTube, Facebook, etc. They rely on many users’ free contributions, which is their business model’s weakness.
The POS algorithm is based on the average value of users, but each user’s contribution is different. How do you measure it? It is not the POP algorithm.
The POP algorithm is very innovative. If Chainless succeeds, it will provide an effective template for cryptocurrency.
https://chainless.hk/2023/11/05/fourth-the-role-of-the-core-team-of-the-chainless-system/
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