Token Necessity or Token Optimization: Interesting or Revolutionary The author, Dr. Nicholas Adams Judge, is political economist and cofounder of RootProject. The other cofounder is Chris Place, a Y Combinator Fellow. Their nonprofit’s pre-ICO just passed 203% of its goal and is open until July 28th, 2017.We’ve gotten similar feedback during the pre-ICO from several very prominent leaders in the crypto community. I’ll keep their names private (here and when asked) for sake of respecting our confidential discussions.A Token Designed for Mass Adoption Helps the Crypto Community Grow. The Arguments One argument: Because you can do some of what you want without a token, it’s not really necessary to include a token, and therefore it should be dropped.The other: Because one of six or seven rules in RootProject’s currency-institution regime isn’t necessary we should drop it in favor of simplicity.(A quick aside: “Institution” is a very broad term. Markets are institutions, elections, government organizations, private for-profit and nonprofit organizations are all examples of institutions.) Response 1: Kik and Decentralization I didn’t expect this necessity standard for several reasons. Particularly in light of the ICO that really excites a lot of people: Kik’s release of its currency Kin. Kik already works great. It isn’t necessary to tokenize its ecosystem.Kin, however, should make Kik a lot better over time. It creates an exciting opportunity for decentralized, organic input into a big organization. Again, that’s not necessary for Kik, but it does, historically, lead to a lot of creative development.I know some people will jump even at that claim, saying that decentralization is unto itself not an important end. But the thing is, there are multiple massive empirical literatures that associate decentralization with the growth of innovation, democratic skills, social capital and institutional efficacy.Decentralization needs to be done right, but the empirical findings across settings (religious organizations, cooperatively owned businesses, etc) are so strong that even if you don’t have that basic (democratic) value set that prefers to remove heirarchy from society when possible, you still need to be ignorant of academic consenses across many fields to argue that decentralization isn’t powerful.The point: Decentralization is hardly ever necessary, it just leads to bigger and better outcomes, and tokens are a powerful way to decentralize. RootProject, like Kik, is fundamentally improved by our use of a token, even if we could do some of what we wanted without it. Response 2: Necessity is a Useless Standard Because it Is Just a Reflection of Your Goals If you care primarily about cryptocurrencies, then it’s fine to say we need to build systems that can only be built with a cryptocurrency. But if you care primarily about changing the world, then ask where can cryptocurrencies play a powerful role in building institutional capacity — not just where they will be the only focal point.At RootProject, we could build out a crowdfunding app and on-the-ground nonprofit that helps a lot of homeless people without a token. A lot of smart, hardworking people are using tech to help those less well off. The problem is they’re not playing in the majors: Solutions to poverty are hard to scale, and the global macroeconomic forces that create poverty dwarf, by orders of magnitude, the impact of most apps.I’m interested in changing the game, not moving pieces: Using tech in all sorts of ways to restructure the institutional economics of the past two centuries — the institutional economics that have allowed massive corporate power to recolonize continents, shred the revolutionary past of the Republic and my Commonwealth, and invented things like suicide nets to keep factory workers working.You love cryptocurrencies so much that they can’t be used as a tool to accomplish other things, they have to be the focus? Fine. I love them as one very powerful tool to reestablish the revolutionary progress of free men and woman against tyranny and human suffering.To that end, RootProject’s token plays a lot of key roles: decentralization of key parts of governance; allowing those participating in the program to not just save but invest; incentivization of product evangelicals and developers, etc. However its most important feature is that it creates a virtuous growth cycle, a feedback loop between the nonprofit and the crypto asset.All that’s to say: RootProject’s token isn’t necessary if your goal is to help a few people, or even a few hundred. It is necessary if you want to help hundreds of thousands or millions of people, if you want to change the game. Market forces have advantages over non-market forces. Crypto assets can, if designed correctly, endow not-for-profit forces with a similar set of advantages. Response 3: Howey Test The Howey test doesn’t say a single thing about the necessity of a security-like entity in a business’s design. Just not one. The definitional turning point of the security is from the perspective of the holder, not the issuer.There’s ways to influence regulatory debate, but hoping the law says something it does not is not one of them. The way to influence regulatory decisions — again, a very well studied area of political economy — is to show the social (political) value of a new asset class in a visible way that regulators and people can understand. That’s what RootProject is trying to do. Institutions and the Social Sciences Just like there are very, very large literatures — hundreds or thousands of incredibly smart, humble, hardworking people— who have worked on issues related to decentralized organizational control, there are even more people that have poured their live’s work into the study of institutional design, be they public or private institutions, nonprofits or for-profit companies.The crypto community is led by computer scientists, as it should be. If I, as a political economist, thought I knew a lot about cryptography, I’d be insane. If I thought that my couple of years of statistical programming and other coding skills made me a tech expert, I’d also be insane.The crypto community is so young that there hasn’t been a meaningful dialogue between the social and hard sciences. Since the future of cryptocurrencies lies in the dance between tech design and institutional design, I’ve tried to use this pre-ICO as an excuse to get some of that dialogue going.For that dialogue to happen, we all need to know what we don’t know — where our knowledge set ends. Necessity of an institutional feature isn’t a good standard for the inclusion of an institutional feature. I don’t say that because that’s my opinion. I say that because the study of institutions has been an academic pursuit for hundreds of years, and has generated useful knowledge.Now, I need to stop writing, so I can focus on becoming a better coder and increasing my knowledge set where it is weak.