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  • Jeremy J. Wade

Rethinking Student Loan Financing with Web3 technologies: Experimental Thoughts



The rise of web3 will usher in a new internet logic. By enabling digital ownership (NFTs, social tokens), internet users can carry a wallet of these digital goods. These new digital inventories will provide functional benefits to their owners and be interoperable across different internet services.


So what does that mean for builders of new startups? In John Palmer's words: "As we move into the future, more people on the internet will be accumulating their own inventories of digital objects and won't want to spend time in software that forces them "start over."


This new mental model speaks to the transition from web2 to web3 and the potential to unlock a more decentralized internet benefiting billions of people worldwide.


 I'm curious about the ramifications of this on education. I've written earlier on how It's time to build the future of online education. The logic of our education system is increasingly outdated in the internet age, which will only likely accelerate with the adoption of web3.


Building in Public 🔨

I recently joined the Builders + Backers accelerator program summer 2022 cohort. The program is designed to support rapid prototyping and experimentation of new ideas. Inspired by others, I've decided to take this opportunity to also build in public.


My current idea is to experiment by launching a social token with the goal of reimagining student loan financing. However, my core assumptions need further refinement. I hope to answer questions like:


  • Can a social token create better incentives to align students, education programs, and funders?

  • How can we harness the potential of on-chain micro-credentials?

  • Can tokenized income share agreements improve education design and student outcomes?


As I work to design this new web3 experiment, my goal with this article is to document some of my initial thoughts for public feedback.


Thought #1: Social Token Paradox

Social tokens have captivated my imagination and the imagination of many working in Web3. Creator tokens platforms like Rally and Roll have garnered significant funding. Celebrities and athletes have seen early success experimenting with social tokens.


However, as Gaby Goldberg has pointed out in her article titled the social token paradox, early efforts in social tokens may not be fully realizing web3's potential. "Tokenized communities are centered around what you have while they should instead be centered around what you do." Early efforts are leaning into exclusivity and financialization with less thoughtfulness around authentic community incentive design.


Thought #2: Community Building Incentives

The real promise of social tokens is to create incentives to build and grow new communities—an opportunity to increase trust and shared ownership in building more opportunities for more people. Tokenized communities and DAOs can build useful applications not possible previously. Doing this will require more experimentation and thoughtful token design that considers both social and financial incentives.


Thought #3: Liquidity and Speculation

At the core of the paradox is the timing of social token liquidity. Liquidity has clear benefits. It provides for more efficient markets and better token price discovery. However, liquidity attracts speculators. Early in a project or communities lifecycle, liquidity creates unhelpful volatility and can warp incentives.


In the startup world, a Seed or Series A round investment is an illiquid asset. This period of asset illiquidity is appropriate while the startup is building product-market fit.


Thought #4: Liquidity Selling Schedule

Like the benefits of vesting schedules for startups, the social token design would likely benefit from establishing some liquidity selling schedules. In other words, a requirement to hold a social token for a designated period before being able to sell it. Speculators will be less interested in buying the token without an opportunity for short-term profits.


Thought #5: Minimum-viable DAO

With the right token design, social tokens could be an excellent way to test a minimum-viable DAO project. Alex Masmej, who famously tokenized himself, argues social tokens should start small, with one or a few founding creators, similar to how a magnetic founder rallies others around a company's mission.


So what exactly new can a social token unlock? As I try to design my experiment, I'd love to hear your thoughts on social token design and any case studies to learn from.



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