Many believe that we are now entering a new era of the internet - Web 3.0 - where society is organised around decentralised networks connected through the web.

In Web 3.0 people communicate, trade, plan and make decisions over the internet - from how to manage public infrastructure, to getting a mortgage - without the need for a central authority. 

Although still in its early stages with many projects still operating in the theoretical realm, this paradigm-shift in the way we think about power, hierarchy and governance could have a huge impact on how organisations and communities operate in the future. 

Proponents of Web 3.0 sometimes point to natural ecosystems as an example of complex, decentralised systems in action. In nature, mechanisms such as pollination and decomposition help to regulate the ecosystem and keep it functioning as a dynamic whole. The challenge in Web 3.0 is to design software ecosystems that can regulate these decentralised networks in the same way the “laws of nature” govern natural ecosystems. 

The question is, when it comes to something as complex and unpredictable as human behaviour, can decentralised human systems ever be as secure or intelligent as they need to be? Without any central institution or governmental body acting as an intermediary, can they be interwoven with the same rules and regulations that govern our world today? Lastly, what new regulations need to be established — and who decides what those will be? 

Angela Kreitenweis believes that token engineering is the answer. As a co-founder of Token Engineering, a global community of people exploring the building blocks of future token economies, Angela believes that token engineering is the solution for developing participatory crypto-economic systems that are more fair, secure and ethically robust than what we have today, giving people more power to shape the rules of the systems that they are participating in.

In 2020 Angela and a team launched the Token Engineering Academy. The Token Engineering Academy offers online training courses, seminars and workshops in topics like the token engineering design process, mechanism design and engineering ethics. Although the core team is based in Berlin, participants include data scientists, software engineers, philosophers, economists and social scientists from all over the world. In multidisciplinary work groups they design, specify and verify decentralised token systems — from governance to e-commerce. 

The hope is that these carefully engineered token economic systems could eventually displace today’s extractive economic systems.

In this profile, Tarn Rodgers Johns speaks with Angela Kreitenweis about how this discipline is giving us the tools we need to meet the challenges of the twenty-first  century.

I always like to compare token-based economic systems with systems that already exist. When we talk about the economy it’s often in terms of national economies, but something that’s not as obvious to most consumers is that we are already participating in globalised economic systems in everyday life. For example Amazon. Amazon is a whole economy within itself. Within its system are consumers, producers and sellers from all over the world. However, this global system is run based on Amazon’s terms and conditions. The system allows for certain actions; for example we buy things, we have certain guarantees and sometimes we want to send things back. Within that system we can also change our role and become a seller. A token economy might be similar, but with one significant difference. As a token holder we could potentially all be owners of a decentralized version of Amazon, and we can all take part in governing this system — since it's a public infrastructure. This decentralized version of e-commerce is being built already, at Boson Protocol.

In Web 3.0 we have decentralised systems that anyone can participate in, without any intermediaries. In this set-up there is the possibility to create new economies for new purposes, where we can optimise towards a certain purpose like never before. We can create new rules to make it fair for many more stakeholders, and create new platform economic systems as public infrastructures. This is what token engineering is dealing with.

So tokens are a medium by which transactions happen — they represent a certain value?

That’s one element, of course. In a token economy tokens can cover various functions of money: medium of exchange, unit of account or store of value. Like any other currency, it enables you to sell or represent a certain asset. It can be a unit of account to offer rewards for a certain contribution such as verification, or curation. A token can also grant access rights or voting rights. So what a token represents is a matter of deciding what form it will have, and then encoding the rules in software.

If you want to run a huge platform, for example an e-commerce platform like Amazon, on a public infrastructure like a blockchain, then you must be sure that it’s robust and resilient. These systems need to be continually updated, constantly evolving. 

Token engineering was first mentioned in 2018, and it's the youngest engineering discipline since the establishment of software engineering in the 1960s. It’s a multidisciplinary approach, combining cryptography, software engineering, AI, data science, operational theory, economics and social sciences such as behavioural economics, philosophy, law, ethics and policy making.

Token Engineering considers the design of token systems as an engineering discipline. The notion that we need engineering for these new crypto economic systems first came up in 2018, with the wave of ICOs [initial coin offerings]. Companies started to create crypto tokens and give them to investors in exchange for their investments. On one hand, by using this model, projects were able to raise a lot of money. On the other, it was clear that a lot of additional research was needed to make this more robust and secure. 

We have never had another moment in history where we have such rich data about economic transactions. In a token system, tokens make all of this economic activity visible. We can observe these economic systems in real time. We can apply AI to have continuously reinforced learning on potential attack vectors, to remove sensitivities early on. This is not something we can do in a traditional economic system. 

As I mentioned before, we can encode certain policies and rules in a token system. In the Amazon example, the policies of buying and selling are reinforced by the software. Additionally, we can encourage particular human behavior with incentives — for example creating tokens that expire after a certain period of time to encourage spending that leads to the development of the ecosystem.

We created the Token Engineering community because we saw that this also presents an ethical challenge. If you design for certain things, you don’t know yet what the outcome or negative side effects of that might be. There’s the classic example in AI of the paperclip; that if humans created an AI whose job was to maximise paperclip production, then it would eventually use all of Earth's resources to meet its final goal. This would be an unintended side effect with serious consequences for humanity. That’s why it’s necessary to approach this using the discipline of engineering. Incentives can have negative side effects, and that’s a huge responsibility.

In the Token Engineering community, the goal is not to optimise humans or create incentives so that people behave differently, or in a specific way. Rather, we want to provide the maximum freedom while ensuring safe conditions for all participants in the system. There is this big hope that token economies will help us solve the huge challenges of the 21st century, for example when it comes to climate change, reducing carbon emissions or encouraging fairness in global economies.

There is a huge opportunity here to find new ways to optimise economic systems towards sustainability. One example is from a recent group at the Token Engineering Academy. In one of our programmes we worked with a team that is tackling the challenge of only having national markets for [carbon] emissions certificates. Companies buy certificates to be allowed to emit a certain amount of CO₂, but these are all only local and national markets — which can be limiting. This team designed markets that would ensure that a single certificate is still issued and verified to a national institution, and at the same time it can be traded all across the globe.

Another example is a project that’s being drafted right now, and it’s about incentivizing the second or third life cycle of batteries. Electrical cars have a very short life cycle, but we can still then use the batteries for other purposes. In this project, the battery producers would rent them or lease them with a guarantee. The first life cycle of the batteries would be in the cars, and then they can be replaced and handed back to the producers for other use cases. So there are many opportunities to set up new incentives for sustainability.

Transforming our existing systems into public infrastructures, where we have permissionless access and different decision-making processes for defining the rules of such a system. This is the next step. 

I’m 100% convinced that there is potential here, it’s so promising. We need innovation, we need new ideas, we need to take new routes. This is it. It’s a very powerful tool, and an exciting challenge. 

Also creating this new discipline, supplying the tools, the knowledge and the method, and being part of this community of really smart people looking at how we can tackle these challenges is very inspiring. Being part of something like this is a once in a lifetime opportunity.

The Token Engineering Academy is the first educational institution for token engineering. There isn't anything else like this on the planet. No other educational institution is as advanced in terms of the programme they offer.

As I said before, Token Engineering is multidisciplinary in its approach. At the heart, it goes way beyond technology: it’s all about humans and society. Why should we create these new economies? If we just replicate our traditional, flawed systems then we are missing a huge opportunity. We started the Academy in 2020 because we saw that there is a huge need for economic change, but to do it properly comes with responsibility. Now we’ve had more than 700 participants from 21 time-zones in our programmes. All of our courses and programmes are online. We have people from different disciplines in our programmes  - engineering, software engineering, AI, finance and social sciences - and put them into research groups. We train people to work on particular crypto challenges in a multidisciplinary set-up. It’s just pure pleasure to be able to enable this kind of collaboration and see the creativity and high-quality results that come out of it, from new forms of incentives, to new infrastructures, to scientific papers. It’s just great to see people coming from all different backgrounds and this shared vision of new economies coming together. That’s what I enjoy very much about the academy.

There are two sides to this. I would claim that without the interest of investors, and without this huge amount of money being sent into the crypto space and being available now then this development wouldn’t be possible. In a way, there wasn’t ever a moment in history when this amount of money was being sent to people that are basically very idealistic. The people in this community are coming from peer-to-peer and open source. This investment is enabling people in the crypto space to design DAOs [decentralised autonomous organisations], new forms of ownership and public infrastructures to overcome these extractive platforms. In a way, it’s a bit of a fairytale.

At the same time, of course, there's also a drawback. Investors have not unlearned everything they did in the past. There's still this tension of maximising profits versus the best purpose, the best design and also the potential for impact and change. But it’s not the first time in history that we’ve had this challenge. I would say I consider the opportunity larger than the danger, still there is a tension, no doubt.

When we talk about conflicts of interest, everyone points to the huge investors and their continuous search for maximising returns. Sure — they are not in this just because they want to create a better world. Some of them are, though. But also even in the DAO space we see this behaviour coming from individual contributors, who only hold a handful of tokens. Even there you see this interest in maximising returns, very similarly. In all communities you have this tension of maximising returns for the short term results versus the long term ambition and vision. This is something we have to deal with on many levels. What makes me confident is that I see many projects that are actively trying to engage, address and deal with this. That, I’d say, is not something that I have experienced in the corporate world.

Token economic system: Infrastructure, mechanisms and rules for trading assets or services.

Blockchain: Underlying technology that these systems operate on. Method of accounting.

Cryptocurrency/cryptotoken: Tokens/unit of exchange in a token economic system. Crypto currencies have their own blockchain (‘native currencies’), whereas crypto tokens are built on an existing blockchain. 

Token engineering: Emerging multidisciplinary discipline concerned with the design of token economic systems. 

DAOs (decentralised autonomous organisations): Organisations that operate in a decentralised manner, often using a token economic system.