Our daily lives are run by lists. The grocery list hanging off the refrigerator door. The to-do list greeting us at work. The chore list we conveniently forgot when it was our turn to do the dishes.
Lists are often an effective tool in helping us manage our time and increase our productivity. But centralized lists — particularly online ones — have some major flaws. The biggest one? That both viewers and users have no choice but to believe the owner’s ranking method isn’t corrupt or reliant on a biased algorithm.
For example, YouTube uses playlists to help put creators’ videos in front of new viewers. Its algorithm dictates which videos gain more traction than others — and that algorithm may prioritize YouTube’s needs as a company over the needs of viewers and creators.
YouTube, and other companies like it, may delete content when they believe a user has posted content that they believe is controversial. Such centralized lists are also flawed because they can often be easily manipulated by bots.
Token-curated registries (TCRs) provide one solution to this problem.
In his 2017 whitepaper on the subject, Mike Goldin defined TCRs as “decentrally-curated lists with intrinsic economic incentives for token holders to curate the list's contents judiciously.”
The primary objective of a TCR is to create a high-quality list that provides utility for all of its stakeholders, who each have their own needs.
In his piece, Goldin describes the needs of the three most common stakeholders: consumers, candidates, and token holders.
As an example, consider a list called “best medical schools in the world.”
The consumer would be medical students trying to decide which university they should attend.
The candidates would be med schools that believe that they have the strongest program and want to be added to this list.
If that list was a TCR, then its token holders would want to boost the popularity of the list and, accordingly, the price of their tokens.
Aspiring candidates that want to join a list must purchase a native token and support their application with a deposit. Typically anyone who can afford these native tokens can apply for them — however, in some cases, token holders can attempt to block applicants they deem unworthy by challenging their application. A challenge is resolved via a token holder vote.
A token holder’s voting power is determined by the number of tokens they own. If a challenge is successful, the applicant isn’t added to the list and their deposit is distributed among the challenger and token holders that opted to reject the application. If a challenge fails, the applicant is added to the list, and they along with token holders who supported their application are awarded the challenger’s deposit.
Of course, the specifics of how these TCR are governed can vary greatly depending on the specific registry. The core commonality: anyone who holds a token on a TCR has a vested interest in seeing the value of their token increase, and typically a vote on actions that may affect the registry’s price as a result.
TCRs can do an effective job of aligning the incentives of all stakeholders, helping guard against bad actors rigging the system to their advantage. TCRs are maintained and curated by stakeholders that have a shared financial incentive to ensure the registry is successful.
In a centralized list, the curator isn’t always motivated to try to curate a high-quality list based on accurate and unbiased information. In some cases, they might be trying to increase page views to boost ad revenue. Their primary focus can often shift from what benefits the users of the list to what benefits their investors.
When contributors aren’t compensated for their compensation, fewer people are likely to contribute to the curation process, which means the list might become biased and unreliable. The few that do participate might try to exploit the list for their own financial advantage. TCRs ensure that contributors are compensated.
For example, Yelp makes money by generating ad revenue. It earns more as more people view and post reviews of restaurants and other businesses. However, the people creating Yelps’ money-making content — those posting and viewing reviews — don’t get compensated for the value they create.
If Yelp was a TCR, those community members could receive a portion of the profits they create through some form of token-enabled compensation.
A TCR is naturally optimized for higher quality control than a centralized list, since token holders have skin in the game and are willing to risk money to defend their beliefs. Decentralization ensures that the list curation process isn’t done by a single entity that may have ulterior motives.
A TCR offers greater transparency than a centralized list because all activity is tracked and recorded on a publicly accessible application. This ensures there is a visible trail where anyone can see what changes were made. Centralized lists don’t offer this type of transparency, which means the curator can secretly make changes without notifying anyone.
In addition, decentralization makes TCRs immune to censorship since the list isn’t owned by a single person. Plus, they have lower barriers to entry, since anyone that wants to be added to a list can buy a token to participate in the curation process.
TCRs also incentivize curators to ensure that their list is filled with up-to-date information. Unlike many centralized lists which can’t be amended once they are published, TCRs can be modified to contain new information.
All of these advantages are part of what makes token-curated registries a popular web3 alternative to traditional web2 lists.