🤔 Opinion | Borja’s View on Diatom’s Tokenomics and Ethos

🤔 Opinion | Borja’s View on Diatom’s Tokenomics and Ethos

It is great news to see well-meaning and purpose-driven projects emerge in crypto.

I am especially interested in Diatom because it touches on some of the environmental challenges I am most passionate about.

But perhaps precisely because I am so passionate about these issues, and I have a bit of experience and strong opinions on them, I cannot stop myself from sharing my critical thoughts on Diatom’s project:

About Tokenomics

At the most philosophical level, I think that using tokenomics to solve complex global issues is not going to get us very far.

Tokenomics is based on the same reductionist principles of classic economic theory, which are the founding pillars of the very system that we are trying to change.

A system that seeks continuous economic growth, in the view that humans are purely selfish and rational individuals. An understanding that leads us to believe that we can solve everything with incentives and punishments (the carrot and the stick), an ideal that tokenomics is here to pursue.

There is no doubt that the transition out of plastic pollution requires a lot of money to be invested in a wide variety of initiatives; minimising plastic production by designing alternative materials and extending the life-span of products, developing integral waste management services in the many places that lack them, innovating new ways to deal with plastic that cannot be recycled anymore, etc.

The trouble with Plastic Removal Credits

In my view, Plastic Removal Credits is a very complicated way to channel money towards those projects, potentially ineffective in the long term.

For the sake of comparison, we could look at carbon trading for a moment. How much impact has this idea had on cutting global emissions over the last 25 years?

The truth is that we are not so sure. Carbon trading is still controversial and many academics argue the ethics, fairness, and effectiveness of these mechanisms.

The idea of plastic credits is even more challenging than carbon credits, as I know from a former colleague working in Verra’s commission to develop the 3R initiative.

Let’s consider the following example. The implementation of solid waste management in poor areas near the sea. One that represents a considerable chunk of the ocean plastics issue:

You are going to certify with plastic credits such a program. You can estimate that, at the moment, 20% of their waste ends up in the ocean.

So, through this program, they collect over a dozen types of plastics, in most cases mixed and dirty, and they have to sort them, clean them and send them to the recycler. But recyclers only buy certain types of plastic, as others are not recyclable, so the rest is sent to the landfill.

How many credits do you give to that program? It is preventing a lot of plastic from going directly to the ocean, but it is not guaranteed to avoid pollution in the mid-term, as a good amount of it will end up in landfills. You know that the program sells plastics to recyclers, but how do you certify how much of it is actually recycled? Do you certify the waste collector, the sorter or the recycler?

Let’s say that you only give 1 credit per certified kg of plastic recycled. How do you know that recycled plastic is not returning to the ocean after its second life? Do you provide a second credit also to the recycled plastics? Wouldn’t that create a double-accounting problem?

Of course, Verra, with their powerful funders and smart partners (included my former employer SystemiQ) are working on answering the mentioned questions, developing very complicated guidelines.

However, the whole thing looks to me like a distraction to protect the status quo while allowing some corporations to be certified as “plastic neutral” while they continue to produce unhealthy foods wrapped in plastic packaging.

Profit expectations

Another concern of mine is the expectations that are created about the profitability of investing in Diatom:

“Diatom is a decentralized currency that grows more valuable as our ocean is measurably restored and protected.” Diatom.fund

Municipal solid waste management already operates at a loss, subsidised by local governments, residents and/or PROs (Producer Responsibility Organisations) everywhere in the world.

But with Diatom, investors (or DAO members), should expect big profits from investing in these initiatives, while poor communities struggle to pay for their waste management services.

The DAO and the Team

In their first office hours call, Diatom’s team criticised other projects in crypto for not being fully decentralised.

While those critics, along with their ambitions to be more decentralised are appreciated, they sound perhaps a bit too idealistic with regards to the level of decentralisation they can achieve.

If I had to bet, I would say that their founding team will not give up their power to the community and will keep most of the decision-making power for the foreseeable future. I don’t think that should be necessarily a bad thing, if the leadership team had the knowledge and experience in the very complex plastics pollution issue.

Although their lack of experience with environmental challenges is something that worries me, I can see that they are learning and surrounding themselves with experts and interesting partners. After all, if they are really good at raising money, they will certainly attract smart people.

Conclusions

In conclusion and back to my initial point, I am happy that the crypto community is looking beyond technologies and metaverses and into our living world, as it is suffering the consequences of our selfish actions.

Even if I disagree with the principles and mechanisms, I still believe it is good news that some of the wealth generated in crypto will be invested in seeking solutions for real world issues.

As a final note, I look forward to seeing in these projects more humility and diversity, more systemic and less tokenomics thinking.

Borja Blanco Méndez

Borja is an Industrial Engineer who embraces pluralist ideas and cares a lot about sustainable and fair transitions. He has a lot of project management experience in the field, having worked in circular economy and social entrepreneurship projects. Borja supports blockchain initiatives that fight for good causes without reducing humans to mere selfish, rational, profit-maximising individuals.

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