Token Economies: What Behavioral Science and Blockchain Technology Have In Common

“Token Economies”- two words springing up at Blockchain and Cryptocurrency summits and conferences with increasing regularity. Token Economies have been used by behavioral scientists and practitioners for decades, but recently they have taken off in the field of Blockchain and Cryptocurrency technologies. Both applications use the term “Token Economy” interchangeably. In technology conferences and summits, it is the original behavioral psychology definition that is used to describe the concept. The tech field is now using the original token economy concept and expanded it to apply to what some might call the future of commerce and currency. Exciting stuff. Here, I will break down the basic concepts of what a Token Economy is, and how both behavioral scientists/analysts use them, as well as the new application in the technology by Blockchain and Cryptocurrency developers.

tokens

The Token Economy

Let’s break it all down. What is a token economy? A token economy is a system where tokens, or symbols, are used as conditioned reinforcers which can be traded in for a variety of other reinforcers later. It is not a bartering system or prize system where objects/access/services are given directly following a target behavior, but a conditioned stimulus (token) without necessarily any intrinsic value that is agreed upon to add up to exchange or buy another reinforcing item. A common example that most of us are used to is money. Paper money, specifically, can be considered a part of a token economy in that it is “traded in” towards some terminal reinforcing stimulus (or “back up reinforcer” as it is called in behavior analysis). The paper money is a conditioned reinforcer because it has no necessary intrinsic value but has conditioned value for what it can eventually be used for within the token economy.

This was taken up originally by behavioral researchers in the 1960’s, as a form of contingency management for the reinforcement of “target behaviors”- or prosocial learning, in therapy situations. Reinforcers are important psychologically because, by definition, reinforcers change the rates of behavior that they follow. They can help teach life-changing skills, or alternatives to some destructive or undesirable behavior quickly. But, reinforcers can be tricky too. People can become bored or satiated with tangible rewards, such as food, but within a token economy, reinforcement can be delivered in the form of tokens and allow for a later exchange or choice of any number of possibilities desirable to that individual. By pairing these tokens with access to “primary reinforcers” (reinforcers that are biologically important) or other “secondary reinforcers” (stimuli that have learned value), the tokens themselves become rewarding and reinforcing- thereby creating a sustainable system of reinforcement that defies the satiation and boredom variables that the researchers originally found as barriers to progress. Alan Kazdin’s work “The Token Economy” is a fantastic resource on the origins and research that began it all.

What can a token be? Nearly everything. But, it has to be agreed upon as a token (given some value for exchange) in order to serve as a token for the purpose of trading it in, or buying with it. Giving someone a high five after doing a great job at work, for example, is not a token. It is a reward, and possibly a reinforcer, but it was not conditioned to have value, and cannot be saved or exchanged. Tokens also need not necessarily be physical, or tangible. They can be symbols, or recorded ledgers, so long as that information can be used for the exchange in the corresponding token economy. This is where blockchain and cryptocurrency technologies tie in to the original behavioral science understanding of a token economy. Can data, or information, serve as a token and be used in a token economy if it is agreed upon to have value and worth exchange? If you haven’t heard of BitCoin (a Cryptocurrency), the answer is yes.

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Blockchains and Cryptocurrencies

What is Blockchain then? And what is a Cryptocurrency? Using our original definitions of tokens and token economies, for data or information to be considered tokens they have to be able to be exchanged and have value that can be traded within the token economy. Blockchain technology solves this by creating units of data called “blocks”. These blocks, simply put, are a growing list of data records that contain a “cryptographic hash” of previous blocks. These linked blocks form a ledger which is resistant to duplication and tampering. In layman’s terms, unlike most data that people can manipulate and come into contact with day to day, a “block” within this Blockchain cannot be altered or copied and maintains a faithful record of time and transactions. Resistance to copying/duplication means that it cannot be forged, and resistance to altering means that this data (the record of information) is seen as reliable. If we create a currency using this technology, then we have the means to create units, or tokens, that are individual, can be traded, and have a consistent and (for the cases of this introduction) unalterable record of transaction. Assigning value to this creates a digital currency called Cryptocurrency. Tokens. Transactions can take place using these blockchains. These transactions take place person to person (“peer to peer” or P2P), meaning that once a unit of cryptocurrency is exchanged from one person to another, it resembles very much a physical exchange of all other forms of currency. This exchange does not require any medium, such as a bank, like physical currency does in online banking for example.

Blockchain and Cryptocurrency developers, then, would be looking to create a form of token currency that can be traded within this broader token economy- that is both reliable enough to be used by enough people to catch on or become commercially viable, while still maintaining the benefits of a cryptocurrency (security, privacy, etc) over traditional currency. These cryptocurrencies, these units of data, these blocks, have no intrinsic value themselves. They are tokens in the very real sense that the original behavioral research intended. Their usage and effects, then, appear to follow in the same vein. Currency can be reinforcing, reinforcement can alter behavior, and once a token takes on value through the conditioning process; it can be truly valuable in its own right as a “generalized reinforcer”- a reinforcer that is backed up by many other types of reinforcers. A dollar, for example, as a widely used currency can be used for a nearly countless number of goods, services, and transactions. This makes it a good generalized reinforcer. The more a token can be traded for, the better a generalized reinforcer it becomes.

Will a form of cryptocurrency, like Bit Coin, gain this same traction as a currency, or token, to access other reinforcers in trade? Many people say yes. That’s where both behavioral scientists and blockchain developers can both find excitement in each new development and innovation.

Likes? Comments? Questions? Did I get it wrong ? Leave your comment below!

References:

  1. Alan, K. (n.d.). The Token Economy: A Review and Evaluation. New York, NY 1977: Springer. doi:10.1007/978-1-4613-4121-5
  2. Blockchain. (2019, January 13). Retrieved from https://en.wikipedia.org/wiki/Blockchain
  3. COOPER, JOHN O. HERON, TIMOTHY E. HEWARD, WILLIAM L. (2018). APPLIED BEHAVIOR ANALYSIS. Place of publication not identified: PEARSON.
  4. What is Simple Token (OST) [Audio blog post]. (2018, August 22). OST Live Podcast

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