Tokenomics design to incentivize digital goods sharing

TX – Tomorrow Explored has joined a European consortium to tackle a central challenge in today’s data markets: the incapability of the economic system to fully leverage the potential of digital goods which are not limited by scarcity like traditional products.

The project ATARCA (Accounting Technologies for Anti-Rival Coordination and Allocation) aims to investigate how crypto token technologies can be used to create new types of businesses based on the replicable and abundant nature of digital resources.

The project consortium consists of five partners and is led by Aalto University (Finland). The two-year project has been awarded an EU grant of 2.75m€ and it kicked off in April 2021.

Collaborators: Aalto University, Streamr Network AG, Novact, Demos Research Institute, Qbit Artifacts SL

ATARCA Case Study Graph
ATARCA Project Payment With REC

Digital goods require new types of incentives

For over half a century, economists have made a distinction between rival goods, which lose value when consumed, and non-rival goods, which may be used repeatedly without losing value. Moreover, it has turned out in the last two decades that many information and digital goods are in fact anti-rival in nature, meaning that they are characterized by abundance. Unlike rival or non-rival goods, anti-rival goods become more valuable the more they are being used.

This increase in value is due to network effects, which attract an ever-increasing number of users to online platforms, such as LinkedIn or Fortnite. The more users populate these platforms, 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.

The solution provided by mainstream economics has been to trade these abundant goods with traditional currencies, which are finite mediums of exchange, and to support their owners’ intellectual property rights (IPR) with technical and legal mechanisms, such as digital rights management (DRM). These were initially meant to incentivize the creation of digital and other intangible goods. However, the existing mechanisms create artificial scarcity and thereby fail to efficiently support the distribution of goods which by their nature benefit from sharing.

The REC is a local currency used with a dedicated mobile app in selected Barcelona neighborhoods. It’s also a platform for anti-rival token experiments in the ATARCA project. (Image credit: Novact)
The REC is a local currency used with a dedicated mobile app in selected Barcelona neighborhoods. It’s also a platform for anti-rival token experiments in the ATARCA project. (Image credit: Novact)

ATARCA tests the applicability of anti-rival tokens

To leverage the potential of sharing certain types of digital goods, 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 merely a medium of exchange, they work as a medium of sharing.

Unlike traditional 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 help properly organize the markets for data and other digital goods and 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 crypto tokenomics design in two pilots

The new medium of anti-rival tokens will be tested in two different pilot projects in ATARCA. TX works in collaboration with the decentralized data network project Streamr to handle the technical implementation and Service/UX design of the crypto tokens and their front ends in both of these pilots.

The first pilot will be run in Barcelona together with local communities using the REC, a social currency that was introduced for the first time in 2018. The REC is a local citizen exchange system complementary to the Euro. In the ATARCA pilot experiment, a second dimension, that of sharing, will be added to the REC.

“If successful, this technology will not only help to properly organise the markets for data and other digital goods, but provide the structural fundamentals of a new type of economic growth.”

– Professor Pekka Nikander, Aalto University

The details of the second ATARCA pilot have not been disclosed yet, but it will focus on an industrial use case and the development of new mediums of sharing for data-driven businesses.

According to the project timeline, results from these pilots can be expected toward the end of 2022 and early 2023. The project aims to create and grow a pan-European community of stakeholders from academia and public and private sectors to examine the impact of implementing new anti-rival governance and compensation technologies. This involves outcomes such as scientific publications and events, the creation of socio-economic policy recommendations, and the publishing of a toolkit for anti-rival business model design.

Consortium of mutually supporting competencies

The project consortium leader Aalto University has worked previously on another related ground-breaking EU project, GMeRitS. Streamr and TX are experienced early-stage commercializers of token technology. Novact, the International Institute for Nonviolent Action, is an NGO that has initiated the REC currency and other innovative social experiments. Demos is an experienced research impact partner that oversees the dissemination of project outcomes and the EU policy interaction within the consortium. Qbit is a software development company that has implemented the current REC technology and continues to develop it further.

Follow the ATARCA project on the TX website as well as our social media channels on TwitterLinkedinFacebook, and Instagram to stay up-to-date about the project news.

ATARCA has received funding from the European Union’s Horizon 2020 research and innovation programme. Any dissemination of results here presented reflects only the consortium view.

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