TX joins European consortium to solve market failure of artificially scarce digital goods

2021-02-18

Laura Tuppurainen

Laura Tuppurainen
Head of Marketing at TX

Press release

An EU grant of €2.75m has been awarded to the consortium for the ATARCA project. A new economic category for abundant goods — anti-rival goods that increase in value when shared — forms the basis of research. ATARCA aims to create a new economic system in which digital goods are no longer traded with mediums of exchange, such as fiat money, but with mediums of sharing.

Current data markets are built on centuries old structures of exchange, in which a scarce rival good, such as oil, is traded for its financial equivalent, money. With a newly received EU Horizon 2020 FET Open award, the ATARCA (Accounting Technologies for Anti-Rival Coordination and Allocation) consortium investigates new economic structures that would alleviate the economic inefficiency caused by artificially limiting the supply of digital goods.

Despite a fiercely competitive call – with 902 proposals submitted by the 3rd June 2020 deadline – TX together with Streamr and its consortium partners were successful in their application for funding and expect to kick-off with the project in April 2021.

ATARCA project tests the applicability of anti-rival tokens

To date, technical and legal mechanisms, such as Digital Rights Management (DRM), are used to support Intellectual Property Rights (IPR). These were originally meant to incentivize the creation of digital and other intangible goods. However, the existing mechanisms create artificial scarcity and thereby fail to most efficiently support distribution of goods which by their nature benefit from sharing.

Countering mainstream economics, ATARCA argues that the current economic system is not fit for the 21st century, in which humans increasingly trade abundant goods with a finite medium of exchange. The term ‘anti-rival goods’ denotes a new theoretical category of goods that are characterized by abundance and that, unlike rival or non-rival goods, become more valuable the more they are being used.

“Despite a fiercely competitive call – with 902 proposals submitted by the 3rd June 2020 deadline – TX together with Streamr and its consortium partners were successful in their application for funding.”

This increase in value is due to network effects, which draw in an ever more increasing number of users to online platforms such as LinkedIn or Fortnite. The more these platforms are populated by users, the better the experience for the individual user. The cost of onboarding an additional user is close to zero. Looking beyond social online platforms, the same can be said for coronavirus tracking apps, industrial data markets or neural networks, which get better the more they are being used and fed with information.

To leverage this phenomena, ATARCA proposes to incentivize participation through the creation of a new financial technology, anti-rival tokens. These distributed ledger technology (DLT)-based tokens are used to instantiate a new ‘substance’ of quantified anti-rival value, a medium of sharing. The smart tokens will enable efficient, decentralized, market-style trading and ecosystems for anti-rival goods. Hence, they work somewhat like money, being a store of value and a unit of account, but instead of being a medium of exchange, they are a medium of sharing.

Unlike cryptocurrencies, such as Bitcoin, the value of anti-rival tokens will not be based on scarcity but on the underlying human relations. Their value reflects the way relationships are built over time through repeated interactions, by default benefitting all sides of transactions.

Professor Pekka Nikander from Aalto University’s Department of Communications and Networking explains that, “in ATARCA, we create cryptographically protected anti-rival tokens and test their applicability to governing industrial data markets and fostering cooperation in community driven currencies. If successful, this technology will not only help to properly organize the markets for data and other digital goods, but provide the structural fundamentals of a new type of economic growth. This will allow the societies at large to more widely explore structurally new incentives for systemic sustainability and scalable systemic intelligence.”

TX undertakes the technical implementation of two pilots

In ATARCA, this new medium of sharing will be tested in two different pilot projects. TX will be handling the technical implementation of both pilot projects.

The first pilot will be run in Barcelona together with local communities using the REC, a new social currency. The REC is a citizen exchange system complementary to the Euro, to which a second dimension, that of sharing, will be added. REC is an initiative of NOVACT, the international Institute for Nonviolent Action, which promotes social transformation processes based on human rights, justice and democracy in the Euro-Mediterranean region.

In the second pilot, TX will develop together with the open source project Streamr new industrial data markets to test drive mediums of sharing as a means of payment within Streamr’s real-time data ecosystem. Streamr is a decentralized P2P network for the transmission and sharing of real-time data.

“Unlike cryptocurrencies, such as Bitcoin, the value of anti-rival tokens will not be based on scarcity but on the underlying human relations.”

Demos Research Institute oversees the EU policy interaction within the ATARCA consortia. Demos has previously contributed to the interplay between policies and DLT, as well as AI technologies in research projects funded by Horizon 2020, the Finnish Strategic Research Council and the Prime Minister’s Office in Finland.

Pekka Nikander, Professor of Practice, is the project leader for ATARCA. Consortium members are Aalto University, Demos Research Institute (Helsinki, Finland), Streamr Network AG (Zug, Switzerland), Associacio Novact (Barcelona, Spain), and Qbit Artifacts SL (Onda, Spain).

ATARCA is not the only consortium working on solving the issue of how to adequately remunerate abundant goods. The GMeRitS consortium was awarded a prize of €1M by the European Commission for their initial work on such new financial systems. Several of ATARCA’s members are also part of the GMeRitS consortium. ATARCA is partially based on GMeRitS ideas.

This press release was originally published on 11 February 2021 at pr.euractiv.com.

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