In Part 1 of this series, we discussed how all important challenges facing humanity can be broken down to coordination problems. We focused specifically on a particular type of coordination problem which we call “The Underfunded Public Good” problem, but which is also variously known as the “free rider” or “collective action” problem. We explored what this issue entails, why it emerges and how it affects both society on a macro scale as well as how it manifests in the crypto industry specifically.
In this piece, we will discuss solutions to this problem. We will begin by providing brief context on the problem as well as on existing solutions and why they fail. We will then describe some of crypto’s potential answers to this problem and how they could be expanded to address societal problems.
Existing Solutions To The Public Good Issue
To state the public goods problem simply: there are things that we all agree we want but that nevertheless remain underfunded. These so-called public goods are non-excludable and non-rivalrous. As a result, they possess a marginal cost that is below their average cost and thus should charge a price that, if collected, will not cover the costs of creating it in the first place. It cannot therefore be provided via market mechanisms and instead requires subsidies.
As with all coordination problems, humans have invented powerful social technologies to address the underfunded pu