The education and medical industries are two of the most important in the world because they have the ability to improve people’s lives. However, both industries are currently broken and in need of significant reform.
Don’t worry, this article isn’t about complaining. We’re interested in finding solutions to some of the main problems in education by looking into new innovations in web3. Our previous article about Web3 to Ed3 shows some of those solutions.
Most web3 solutions ask for a revolution in thinking in order to correct the 100 years of institutional success & failure. The reality is, that’s nearly impossible to do, especially in public education. If the legacy systems in the US that provide schooling to 50 million children of varying economic and learning levels were shut down in order to be reinvented, not only would kids lose learning, a place to be safe, food to eat, and opportunity for upward mobility, but also, 5 million educators would lose their jobs. The COVID-19 pandemic provided a window into what this post-revolution system could look like. While there was value gained in short-term innovations particularly with online and hybrid learning, the tradeoffs do not justify this level of disruption. Revolution as a point of entry is often a non-starter.
So.
This is a series of articles discussing the shortcomings of the education industry and how web3 solutions can be used to improve it. The goal is for education to eventually undergo a revolution, but in the meantime, the industry needs to be set up for success.
By starting with web3 concepts, we can gain a deeper understanding of the technology. Some of the web3 concepts include: NFTs, tokens, DAOs, DeSo, XR, Metaverse, DeFi, & more.
Funding Education
The current public school funding model is not set up to be successful on a large scale.
The debate around public school funding has been going on for many years. Some people say that schools do not receive enough money, while others say that schools do not manage their finances well. Before we can think about possible solutions, we need to understand how the system works. This diagram provides a simplified overview.
The way our public school funding is set up unfortunately makes it difficult for schools to be successful when they are trying to serve a large number of students.
The majority of public funds are generated through local taxes, resulting in discrepancies between funding for different neighborhoods. To reduce costs, district level management makes decisions for schools regarding items such as textbooks, transportation, and technology. Although this makes sense from a organizational standpoint, it leaves little room for autonomy for individual schools and reinforces outdated systems. Districts also need to retain a portion of funding to cover their own operating expenses.
Enter DeFi.
Decentralized Finance for Education
With decentralized finance, individuals can take control of their own finances without needing a central authority, like a bank or government. This could be beneficial for schools, parents, and teachers when it comes to raising funds and managing finances for their educational efforts. since they wouldn’t need to rely on a central lender. This would also require reimagining how funding and disbursements are handled.
Here are our ideas.
1. Funding incentives & returns
One of the main issues that districts and single schools face is making money. Decentralized finance provides new prospects for making a profit and gaining additional capital. By using different tokenization models, it might be possible to finance public goods like education without raising taxes.
Earning Returns
DeFi investments offer higher returns than traditional bank investments. The APY for these investments increase along with the level of risk. However, even the most conservative investments – those in crypto currency pegged to a fiat currency like the US dollar – yield around 8% per year. Tools like Yearn can make investing in DeFi easy, even for those without much knowledge of crypto currency.
If districts and schools diversified their investment portfolios, they could generate a lot more revenue.
Access to Capital
Here’s how it works: DeFi also enables access to capital, often at lower interest rates than traditional banks. Tools like Aave enable borrowing against crypto assets. What’s interesting about these loans is that you can also earn interest – or yield – while borrowing. That means that your 8% (or higher) will automatically pay off your loan. So, for example, if you have $1,000 worth of crypto and borrow $500 at 8%, your $500 loan will be automatically paid off in 6.25 months – without you having to do anything.
Tokenization for Public Good
Schools could create their own currency, which would be called tokens. Teachers and administrators would receive a percentage of these tokens, similar to owning equity in a company. If the school does well and more people buy the token, the value of the tokens would go up, and the school would have more revenue.
While this idea may seem outlandish at first, agencies such as the city of Miami have already taken steps towards making it a reality. Miami has its own currency, called MiamiCoin, which can be bought and sold just like any other currency. The difference is that the city of Miami receives a percentage of all MiamiCoins that are in circulation. Furthermore, other benefits can be tied to ownership of the coin, such as front row parking or other VIP treatment.
Miami plans to use a new digital currency to raise revenue for civic projects. The city estimates it will earn over $60 million from the currency, which will be used for decision-making and generating revenue.
2. Attracting Students and Donations
DeFi can enable new ways to attract students and donations for school districts. The potential is unlocked thanks to the frictionless transfer of funds. This could attract a global student body, enable atomized education, and encourage donations and philanthropic support.
Global Student Body
DeFi breaks down global barriers by doing away with transaction fees for international exchange and making it easy to convert one cryptocurrency to another. This means that students, teachers, and donors anywhere in the world can now participate in a school.
Students can join Dexter’s class by paying for it and logging in from anywhere in the world. The students can be from across town or across the world and they can easily enroll. Dexter is using tokens to experiment with attracting students from around the world. The model they are using is a play-to-learn model. They envision students enrolling for free online and earning tokens for completing assignments. When they have enough tokens, they can take an exam and move on to the next level.
With the ability to login from anywhere, students could be taught by educators from anywhere in the world and be easily paid. Donors would also be able to engage with schools regardless of location or currency.
DeFi could make school more like a virtual organization that shares educational processes and beliefs, rather than a physical place. In this future, a school could have multiple locations around the globe and easily take payments.
Atomized Education
Since there are very low fees associated with DeFi transactions, it is easy to give and receive rewards for smaller activities.
This could allow schools to generate revenue by offering small pieces of learning, which is something that is already happening in the private sector. Companies such as Outschool and Outlier offer specific lessons, activities, or resources for a fee, and now any school could do the same thing.
If there is no charge or fee for attending classes or hiring tutors, the entire structure of education can be changed.
Donations and Philanthropic Support
DeFi makes it easy to transfer money, which also makes it easy to transfer philanthropic support – like Pencils of Promise with crypto.
If a school opens a wallet, it can accept donations in any digital currency immediately. Some people have generated extreme wealth in crypto currency, which unlocks a new donor base. Tools like Endaoment make it easy for people to give. As a school, you could work to be added as an option for crypto donors.
Using blockchain technology for donations has the additional benefit of transparency and, optionally, anonymity. Donors can receive an NFT as a way to show that they supported your school instead of getting a picture with an over-sized check.
3. Decision making
DeFi enables decisions about things like spending and governance to be made in a decentralized way, without any one person or group in charge. This includes giving people control over how money is distributed.
Governance Structures
In a traditional public school, voters who don’t have kids in the school have as much say as those who do. Some communities may prefer this direct democracy approach, while others may want additional options. The key take away is that DeFi creates optionality.
Decision-making
Decentralized finance, or DeFi, also allows for more frequent input from token holders. Rather than waiting for an election to choose a board who then oversees decision-making, votes can be taken online at any time over issues facing the school. In this way, the token-holders can act as a school board, providing guidance and decision-making. What typically happens online (and in the real world) is a core group of stakeholders works through details and proposals, and then presents them for the community to approve. With this model, schools could think about more people being involved in specific aspects of a school. Instead of a school board making all the decisions, different committees could look at infrastructure, curriculum, staffing, etc. Decision-making becomes more decentralized and shared among the school community.
Schools could allow parents and teachers to have a say in decisions by providing them with tokens that give them extra Voting power. The community could also be given tokens to make sure their voices are heard and that the school is welcoming to everyone.
Distribution of Funds
Since DeFi uses systems that are based on incentives, it encourages people to participate in allocating funds. Not only do contributors have the incentive of earning money, but they can also vote on how funds should be distributed. All protocols are automatically verified on the blockchain, which makes voting simpler and more impartial. For example, the people who are most important to a school can be both contributors and voters, which would enable schools to cater to their students’ needs. Since contributors would earn more money if the outcomes were successful, they would be incentivized to help the school and stay involved.
The researchers found only one student project that is trying to use decentralized finance (DeFi) to improve the school funding model. They were surprised that there were no other models out there, but they think that the Satchel project has potential. Three students at Berkeley are setting up infrastructure to use contributions from community members (parents and other stakeholders) and non-community members as collateral for crypto lending. After one year, contributors can withdraw their original funds (including interest) and the remaining interest is given to the school, where the funds are used based on votes from all contributors.
The Transformer DAO: The Heart of a Nonprofit, the Brain of a Cooperative Organization, and the Body of a C-corp
Educational institutions have historically been operating with inefficiencies.
The curriculum and infrastructure of a school is entirely determined by the quality of the school’s leadership. Key stakeholders, including parents, students, and staff, have little say in how the school operates or what and how they are taught. Expectations about national test scores or graduation rates often influence course delivery.
For a long time, there were not many solutions to the problem of poor-quality education. Even the best-intentioned and best educational models, like micro-schools, charter schools, and any other innovative system, can be hampered by inadequate funding or the quality of leadership.
Let’s get into DAOs, Decentralized Autonomous Organizations.
It is our belief that DAOs will eventually replace traditional educational institutions.
Let’s start with some basic background.
A DAO is a community with a shared treasury. However, DAOs are a new generation of cooperatives for the following reasons:
- The DAO runs on a protocol mapped to the blockchain, and most of the running is automated
- DAOs span collective ownership, collective learning communities, social clubs, content curation, and asset creation… while most co-ops, focus only on collectively owned tangible goods or assets, such as housing and merchandise
- Cooperatives operate on the basis of 1 person = 1 vote, while DAOs have the flexibility to innovate governance structures through various tokens and voting protocols
- The DAO uses token economics to create a layered incentive structure to meet a variety of personal interests, including making money, learning, producing, promoting, and networking, all in one place.
The goal of the game is to use token incentives to bootstrap new networks.
The following four points are critical to the operation of DAOs: balancing rewards and responsibilities in a transparent infrastructure, having a clear purpose, being resistant to corruption, and having a decentralized governance structure.
Let’s analyze it.
DAOs run on the blockchain
In a DAO, all operations are transparent and automated, meaning that there is no need to trust any single party. Because all transactions are recorded on the blockchain, they are visible to all current and future members. This system is very different from any other organization that has ever existed.
DAOs span asset ownership, communities, social clubs, content curation, and more
In traditional businesses, people have to limit their activities according to the legal status of the company. However, in DAOs, various business models have developed that allow community members to profit from the deals they have made.
DAOs are typically constantly evolving entities, with k20 DAO being a notable example. What started as a learning space for educators has now transformed into something much larger, with an ultimate goal of investing in the next generation of web3 education. This kind of growth and change would have sounded unbelievable just a few years ago, but is now commonplace for DAOs.
DAOs can have various governance structures
Different societies have experimented with different structures of democracy, from one person having one vote to one stakeholder having one vote. The problem with giving everyone equal power is that itweakens those who contribute more and decision-making takes longer. When one side has more power than the other, it is undemocratic.
DAOs have the ability to choose any governance structure they want, including hybrids of traditional systems or more complex technical options, such as quadratic voting. Additionally, the DAO can change this structure at any time throughout its lifetime. The biggest infrastructure problems arise when legacy systems persist and cannot be changed even if necessary. DAOs can avoid this issue.
DAOs can take advantage of token economics
The most efficient way to operate a DAO is by using a system of token economics that rewards intangible behavior with tangible value. DAOs can have various tokens corresponding to various rights, which can be divided into tokens that hold equity, tokens that allow voting, tokens that have community access, tokens that grant roles, and tokens that unlock programs or assets.
The main advantage of token economics is that the right mix of rewards can satisfy the motivation of each community member. In addition, the correct sequence of issuing tokens can generate more enthusiasm than non-fungible tokens (NFTs). For example, a company that gives out rewards to members based on their daily contributions would probably be able to rely on its community to help with expansion if necessary.
Because of the reasons mentioned above, DAOs could bring about a transformation in the way both private and public organizations function.
The DAO would be:
- A new type of school where students, educators, and parents vote for resource allocation?
- A new type of charity that uses blockchain “transparent fundraising” to allow donors to see where the money goes?
- A new type of union where members can vote on projects and resources to support their work?
Leave a Reply