Token-Weighted Crowdsourcing

Management Science, Forthcoming.

53 Pages Posted: 14 Dec 2018 Last revised: 5 Dec 2019

See all articles by Gerry Tsoukalas

Gerry Tsoukalas

University of Pennsylvania - The Wharton School

Brett Hemenway Falk

University of Pennsylvania - Department of Computer and Information Science

Date Written: Dec 3, 2019

Abstract

Blockchain-based platforms often rely on token-weighted voting (“ τ -weighting”) to efficiently crowdsource information from their users for a wide range of applications, including content curation, and on-chain governance. We examine the effectiveness of such decentralized platforms at harnessing the “wisdom” and “effort” of the crowd. We find that τ -weighting generally discourages truthful voting, and erodes the platform’s predictive power unless users are “strategic enough” to unravel the underlying aggregation mechanism. Platform accuracy decreases with the number of truthful users and the dispersion in their token holdings, and in many cases, platforms would be better off with an unweighted “1/n” mechanism. When, prior to voting, strategic users can exert effort to endogenously improve their signals, users with more tokens generally exert more effort — a feature often touted in marketing materials as a core advantage of τ-weighting — however, this feature is not attributable to the mechanism itself, and more importantly, the ensuing equilibrium fails to achieve the first-best accuracy of a centralized platform. The optimality gap decreases as the distribution of tokens across users approaches a theoretical optimum, that we derive, but, tends to increase with the dispersion in users’ token holdings. Keywords: blockchain, crowdsourcing, cryptocurrency, information aggregation, on-chain governance, strategic voting, tokenomics, token-curated registries (TCR).

Keywords: blockchain, crowdsourcing, cryptocurrency, distributed ledger, tokenomics, token voting, information aggregation

JEL Classification: L15, D26, D72, D82

Suggested Citation

Tsoukalas, Gerry and Hemenway Falk, Brett, Token-Weighted Crowdsourcing (Dec 3, 2019). Management Science, Forthcoming.. Available at SSRN: https://ssrn.com/abstract=3295811 or http://dx.doi.org/10.2139/ssrn.3295811

Gerry Tsoukalas (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Brett Hemenway Falk

University of Pennsylvania - Department of Computer and Information Science ( email )

3330 Walnut Street
Philadelphia, PA 19104
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
134
Abstract Views
701
rank
219,079
PlumX Metrics