The Commodities Market the Public Needs,
and How to Get It

I. The Governing Principle

The following three things are not only true, but unlikely to change. First, if you can't mine it, grow it, or invent it; you aren't creating wealth. Second, every organization becomes an organism immediately upon creation. Unfortunately this subverts the primary reason for the organization almost immediately, as survival becomes paramount to all else. This is not a bug, but the natural way with humans who care intensely, at an organization's most vulnerable stage. Third, but most important, all living things act on incentive. Acting toward beneficial outcomes when the cost is low and the alternative paths have a high cost and low reward.

This framework is structured towards beneficial behaviors, maintaining very sharp and fatal teeth should the incentives prove insufficient. It is backstopped with the most draconian and necessary measure of all. The system must be designed with a poison pill. It has to be the first organization designed to die should it ever betray or circumvent its purpose. This poison pill removes any incentive for gaming the system by insiders, founders, or outside actors. It is non-negotiable and must be included from inception.

This exchange will get built regardless. The money involved is too obvious to ignore. That's the natural flow of the game. The questions are, who builds it and who profits? Do we want an extraction organism built on the status quo, or something new that actually benefits the people who produce the product? Are we ready to reclaim what we already own?

II. The Problem

Labor is a commodity. Every employer knows this and every employee should. Yet unlike a normal commodity, the worker who produces the labor, is not allowed to trade it on a spot market. Being forced to negotiate an individual price, a structural flaw that keeps the employee in a position of bargaining on uneven terms with an entity that simply has more leverage, or join a union. The latter often prioritizes leadership above members.

Data has been treated the same way. We have been forced to accept the model where company A gives you "free" use of their app or service, then bury their business model in long and opaque terms of service knowing the average person will not read the details. More terms of service, more value lost to the harvesters. Nearly $300 billion was spent globally on data last year, with an estimated 40% from the United States. That's wholesale. Not real-time or permission granted in most cases. Losing even more premium for the producer.

Every algorithm, every suggested purchase, every predictive text was trained on you. You got almost zero compensation for your time and training. The illusion that the internet was "free" was the most Kaiser Soze thing big tech could ever pull off. The Internet was never free. They hid the value from you the same way a hospital never tells you how much a procedure costs until you get the bill. The only difference being, data harvesters never tell you what they take.

The following is not charity, or socialism, or universal basic income. This is simple market completion. The chance for producers to achieve true price discovery through collective bargaining and known market mechanisms combined in a novel way.

III. The Proposed Market Structure

The public market requires three main components. Members who produce data, customers who purchase data, and the exchange. The exchange serves as an assayer and contract enforcer. It holds zero data. Simply grading quality, assuring availability, and granting permissions. Much like the NYSE, the exchange will use the transparency of the open market to set real time pricing and like OPEC or De Beers regulate supply availability, maximizing member revenue per transaction. The exchange will manage the market functions, enforce contracts and collect and disburse funds.

OPEC didn't create oil or the oil market, they created scarcity. De Beers did not invent the diamond, yet they created market scarcity. Both enforce that scarcity for the enrichment of those who control the mechanism. This design puts the producers in control. The innovations here are in the assembly and organizational architecture not in the mechanics. They have been around for decades.

Figure 3. Comparative analysis of scarcity mechanisms: OPEC, De Beers, and the proposed cooperative exchange. The critical difference is who benefits. Prior models enriched those who controlled the mechanism. This design enriches the producers.

IV. Market Architecture

The architecture begins with a permission wallet on the enrolled device. The wallet will live at the Knox Vault or Secured Enclave level securing the phone from most unauthorized permission based data scraping at the application level, which happens to be where most data is collected. The wallet serves as an auditor of all terms of service agreements a member encounters. Giving a concise report of what data is being harvested in the agreement and the current market value being surrendered through "free" use. Finally, the wallet is the assayer of the available data to fill requests.

The exchange will use a dynamic real time auction environment to keep supply at 95% of demand at all times, setting a floor price of 5% below spot price, based on a 7 day rolling average. A 20% drop in any 5 trading days will trigger a price freeze and emergency meeting of leadership. To initiate a purchase a buyer will request a "basket" of data "slots." Each slot comprising the entire data set requested. That buyer will be the anchor bid. By paying an origination fee and agreeing to spot price they will lock in their slot.

Based on the value of the data requested a minimum and maximum amount of slots will be opened in a basket. The more valuable data receives the lowest number of slots to maximize return. The exchange then verifies that it can fill all slots in the basket with the requested data and upon confirmation opens up the remaining slots for bid. Each slot above anchor commands an increasing premium. For example, a basket with 3 slots would have a starting bid of spot plus 10% for the second after anchor, and a 15% premium for the final slot.

Other opportunities exist for premiums to be returned to members. By limiting the daily number or type of baskets, the type or timeliness of the data, or having more members than is necessary to fill an entire basket. Members with highly differentiated profiles will always drive a premium due to a number of factors. Those premiums will be credited to the member during monthly income distributions. The exchange will also help facilitate and enforce exclusive data off-take agreements between members and buyers. This architecture incentivises maximum return on limited availability, capturing premiums at every opportunity and returning it proportionally to members. This is the only way members will ever discover the true value of their product to the people who monetize it.

Figure 1. Transaction order flow from data generation to monthly member distribution. The exchange never holds, accesses, or transmits member data. It acts as assayer and contract enforcer only.

Figure 2. Basket creation and filling process. The anchor bid structure guarantees the submitting buyer a slot while opening remaining slots to competitive bidding. Off-take agreements provide a pathway for longer-term exclusive arrangements.

V. Technology Stack

The core components are the permission wallet, the blockchain layer, smart contracts on the blockchain, pricing and supply algorithms, basket specification engine, payment rails for all three payment systems (ACH, USDC stablecoin, pre-paid debit cards) and biometric identity verification. Wallets should utilize liquid foundation models for two reasons. Continuous updating of new data collection techniques and seamless use of the device. By using a liquid foundation model instead of a static classification ruleset, the wallet is able to differentiate between member-initiated actions and unauthorized extraction attempts.

Once integrated with Knox Vault or Secure Enclave, the wallet's credentials, keys, and transaction records have hardware level protection against extraction or tampering. Together these two technologies provide the strongest available protection at the application layer. Neither can block OS level or telemetry level collection. That requires legislation, but help may be coming. There will be pushback and an outright attempt to ban the wallet from the app store. Given the public sentiment toward data harvesting and privacy this will actually help the exchange. Getting kicked off of an app store invites martyr status and the headline writes itself. While this architecture doesn't claim to be able to stop all data capture today, it will block everything at the application layer. This is where most of your money is lost. With enough members the data not only becomes more valuable due to premiums, members become a motivated and vocal constituency. They become an undeniable voice for change at 10 million members.

VI. Organizational Structure

It must be designed so the only path to survival is to fulfill its primary purpose above all else. It needs a "nothing to capture" architecture from inception to prevent both internal and external pressures. It achieves this in two ways. As previously mentioned the exchange possesses zero data. The exchange will also be set up to disburse payments monthly and will not hold members' money beyond the regular monthly distribution schedule. The one exception being in accounts holding less than $5, which will be rolled over until reaching the minimum distribution amount.

The executive board will consist of 5 members on 5 year staggered terms, with the most senior officer replaced annually. The pool of board candidates will comprise the original founding cohort until no eligible candidates remain. At this point candidacy will be open to all members who have never served. One term per lifetime. Combined with the nothing to capture philosophy, the term and life limits should ensure board continuity while removing any entrenchment problems. Transparency in the member compensation algorithm will be the responsibility of the board and made available at all times to the members. The board will be voted on biometrically by all members with a blockchain record and a small bonus for those who participate.

As the organization grows, regional offices will be needed to handle minor issues locally. The compensation structure for founders being net of expenses, should keep this growth from creating a bloated bureaucracy. Any amendment to the co-op's bylaws must be agreed upon by 80% of active membership. With the exceptions being the founding principle, the poison pill, and nothing to capture. Those three must be immutable.

VII. Enforcement Mechanism

While an organization can be designed to prioritize desired outcomes, it will forever be a collection of organisms. With this knowledge, a set of disciplinary measures must be designed into the founding architecture. Simple to understand and harsh enough to even deter violations of the "spirit" of the exchange. Any customer using data outside of contract will be banned from the exchange for life. The same punishment applies to members caught manufacturing data. One appeal per person for life. This appeal is heard by the board of 5 and the burden of proof is on the accused. Corporate officer or employee liability is still an open issue but ultimately solvable. The punishment must be an existential threat to their business.

VIII. The Poison Pill

The poison pill. This is the first structure designed for survival as a secondary or tertiary motivation. The poison pill enforces that outcome the same way it ensured a captured spy would never betray their mission. Something that isn't designed to survive at all costs cannot be threatened or manipulated. It has nothing to lose and therefore offers no leverage, and in this case nothing to gain. The poison pill is a self-executing contract on the blockchain that executes the instant the exchange subverts its primary function. That function being to return a maximized value to members. Should the poison pill be swallowed, all money will be disbursed immediately to members according to the compensation algorithm. The founders, the founding member cohort, and the architect get nothing.

IX. Compensation and Fee Structure

Compensation for the founders was the hardest circle to square. This is not a small endeavor and will require not just time but capital investment in the tens of millions at a minimum. The reward must be commensurate to the risk of time and capital. The incentives between the founders and the exchange need to be the same from inception so the design is aligned with the primary purpose. The system cannot be designed to maximize volume but revenue, while maintaining ideal volume. It cannot be designed to become a cost vacuum in operating expenses or payrolls. Efficient growth and management must be both a profit motive and survival mechanism for the founders.

The right metric is 90/8/1/1. The members receive 90% of all buyer-side income, gross. The exchange receives 10% of all fees paid by the buyer. This includes data fees, basket origination, uniqueness premiums, and all related buyer charges. The founders receive 8%, founding cohort 1%, and the architect 1%. All non-member compensation will be net of operational expenses. All fees charged to members for mid-month payouts or other administration will be returned to the members according to monthly distribution outcome. This ensures that all parties' financial interest will only grow if the exchange grows. Unlike web3, this is member owned, and it will only survive if it's left to fulfill its primary purpose.

Figure 4. Fee waterfall and ownership allocation. All founder compensation is net of operating costs and paid from buyer-side fees only. Member-paid fees return to members at monthly distribution.

X. Cold Start Strategy and Founding Cohort

The cold start launch phase is where the founding cohort earns their 1%. It will take a group of 50,000 unique and high value individuals to bring this to the public. These are not just high net worth individuals, but people whose online presence and data is particularly sought after. Tech founders, advertising execs, crypto evangelists, social media influencers, and venture capitalists are just a few examples of people with both financial and ideological motivation to become founding members. There is an increasingly large number of people who dislike the system they were a part of building. These are the most likely founding members. Those who want to abandon the death star and join the rebel alliance.

50,000 high value people creates a large enough member pool to train everything from the wallet itself to the dynamic pricing and basket mechanics. They also create the initial market. By only using a cohort of high value members we begin to see the start of real time price discovery. The founding members will have their status cemented forever on the blockchain. This status entitles them to an equal share of the founding members' 1% and qualifies them for potential election to the board. This status is not transferable. The profit sharing will transfer with the estate in case of death, but all other rights die with the individual.

The initial launch to the public may take a small cash guarantee of $5 per month for 6 months for the first 250,000 members. As member numbers grow, data becomes more valuable individually and in the aggregate. The only way to know is to build it and find out. The one guarantee: if we don't build it, we'll continue to see zero.

Figure 5. Critical mass thresholds and projected member income. Each milestone unlocks capabilities unavailable at lower membership levels. Income projections are conservative estimates based on current wholesale data market rates adjusted for consent and real-time premiums. Guarantee period activates at 250,000 public members.

XI. Known Hurdles and Mitigations

There are still some hurdles that need to be addressed. Most of these already have known solutions and just require either motivation or money.

The technical buildout will require heavy infrastructure and high speed data transfer at scale. The NYSE does 6 billion transactions a day. The plumbing exists, it's just pricey. Blockchain throughput is a tech problem. L2 blockchain infrastructure capable of handling institutional transaction volumes already exists. The liquid foundation model will need training to adjust to each individual and distinguish legitimate user action from unauthorized collection. There will forever exist the potential for market manipulation or monopsony by a few data brokers. These are solvable through basket pricing dynamics and issue restrictions. It simply becomes cost prohibitive to corner the data market. Data manipulation will always be a risk from the member side, but the lifetime ban should be deterrent enough. Any potential benefit from manipulating data is miniscule compared to losing access to the only marketplace to sell data retail.

Any anti-trust risk should be solved by the co-op ownership structure. Banking regulations should be solvable through the proper trust structure, also making it harder for overzealous governments to seize member assets. Nothing to capture. Each international jurisdiction will have to be treated individually as rollout goes global. These are solvable through known legal means except for authoritarian regimes. The largest hurdle is not only technical but legal. At inception the exchange will not be able to address the radio telemetry issue. Providers and governments will still have access to scrape raw data at the communication level. The only way to change this is legislation. This is why a critical mass of 10 million members is necessary. They become more than a market. They become political machine agitators. Rightfully demanding to protect what they produce. 10 million people with the ability and will to hold their representatives accountable becomes impossible to ignore. This is where design can create a powerful ally with aligned incentives.

The exchange fee structure will incentivise USDC transactions. In a global multi-trillion dollar market this creates a use case for USDC at scale. A digital petrodollar if you will. This should interest the U.S. Treasury Department. A powerful ally with aligned incentives.

XII. Outstanding Questions

There are still some questions left unanswered in this thesis. They weren't left for ambiguity. They are all solvable but will require legal scholarship and founding member participation to reach final determinations. The mission statement is the best example of something that will need to be addressed by the founders. This needs to be open enough to allow normal fluctuations of markets and system management, yet rigid enough that it's obvious when violated. This is the only way the poison pill works. The triggers are never accidental, just automatic.