Can Token Curated Registries Actually Work?

A Token Curated Registry (TCR) is a mechanism to incentivize the creation of high quality lists in a decentralized setting. TCRs are becoming popular in the token space. As part of advisory work on mechanism design for the startup Wireline, I wrote a research note on TCRs. I am not as enthused as many others. Here are some takeaways:

Token Curated Registries can work but there is no guarantee that voters will coordinate on the truth as a Schelling point so care needs to be taken in the design stage to imagine other Schelling points. The less focal or more costly it is to discover the truth, the more vulnerable the mechanism will be to biases and manipulation via coordination or collusion.

To understand whether a TCR will work in practice attention needs to be placed on the information environment. The key practical issues are the cost of acquiring high-quality information and the value to an applicant of getting on the registry. Put simply, TCRs are likely to work when high quality information is available at low cost. Vitalik Buterin’s examples of Schelling points were (wisely) all of this kind. Extensions of the Schelling point model to TCRs which are trying to surface information that is much more uncertain, variable and disputed need to recognize the limitations.

It will often be more important to put effort into lowering the cost of acquiring high quality information than it will be to modify the particulars of the mechanism. If high-quality, low-cost information is available many mechanisms will work tolerably well. If high-quality, low-cost information isn’t available, perhaps none will.

Read the whole thing at Medium.

And do check out Wireline. Wireline isn’t going to Mars but it is creating what could be a significant and very useful protocol to find and connect software services to quickly produce decentralized applications that can scale on demand.