If land parcels could own assets, “development” can take place by users adding valuable NFTs to their parcels. As @graven describes in his original post:
The Geo Web’s partial common ownership market requires land licensors to contribute network fees proportional to the self-assessed value of their parcels to the network treasury on an ongoing basis.
On the surface, this appears to be “worse” for the rational, self-interested market participant compared to a traditional private property rights system.
Why would one want to incur ongoing carrying costs versus buying property free and clear?
The answer is the second order effects. The allocative efficiency and increased public goods funding of partial common ownership will end up producing more individual and network value than a private property system would, but the Geo Web still needs to overcome that first order economic intuition
This is why the idea of funding private goods with positive externalities should be an important part of the Geo Web’s treasury strategy. Instead of relying on enlightened self-interest and/or low time preference, we can structure incentives that align individual participants’ immediate, basic economic interests with the public’s.
One way that we can do this by returning funds from the network treasury back to the market in the form of a rebate (with certain conditions).
These rebates can be distributed to land parcels rather than the licensor (via NFT composability). The licensor controls the parcel, so the immediate effect is “free money to spend” from the individual’s perspective. The important difference arises from the fact that land parcels and, by proxy, their downstream assets are subject to partial common ownership.
Additional value can accrue to the parcel in the form of an ERC-20 token (or ETH) even if the licensor decides not to spend the rebate. However it’s much more interesting, and the goal of this initiative, for licensors to invest their rebates.
The linchpin to successfully incentivize digital real estate investment is a smart contract-enforced requirement that rebates only be used in exchange for tokenized assets that are owned by the originating land parcel.
Land licensors can invest rebates in the NFT art, architecture, and applications that they deem valuable for their parcel. The next licensor will automatically assume control of those assets upon parcel transfer. The net result can be compounding parcel utility and in turn higher land parcel valuations. Both are net positives for the individual participant and the public.
At least some of the value of art, architecture, and applications will be in "the eye of the beholder.‘’ That’s part of the beauty of enabling market participants to invest the rebates as they see fit. It also introduces several challenges that must be addressed.
What if a new licensor doesn’t want to own the parcel’s downstream content or wants to move it to another parcel? There must be a mechanism by which to separate assets from the parcel.
For this, we propose allowing licensors to split NFTs from a parent parcel by setting a separate self-assessed value for the asset. All of the requirements of partial common ownership can be applied to the newly independent NFT.
This allows for freer movement of NFT assets while helping ensure that the value of the treasury-funded investment is still shared with the public (continued public goods funding via network fees).
The incentive for land licensors to utilize “free money” creates an on ramp to growing and diversifying the Geo Web’s partial common ownership economy.
The downside of an “eye of the beholder” market is that it opens the opportunity for bad faith participants to purchase “intentionally valueless” NFTs from themselves (just a different address) or another party who just refunds some or all of the rebate. There aren’t silver bullet solutions to this, but with mitigation tactics the benefits of the system can still far outweigh the cost of fraud.
Proof of unique identity tools like BrightID and Proof of Humanity are starting points to combat Sybil attacks. Instead of a binary evaluation of uniqueness required for payment, a score can be used to scale the maximum payment an NFT seller can be “trusted” to receive.
NFT marketplaces could also be incentivized to integrate, promote, and steward the Geo Web’s rebate-for-NFT market by earning a protocol-funded commission on each sale. Each marketplace could curate their own list of “valid” content and creators as they see fit.
Marketplace versus marketplace competition would be open. Geo Web stakeholders could withhold payment to or slash a marketplace’s stake that disregards their duty to limit fraud with a protocol like Kleros or a voting mechanism.
Larger markets for creators, artists, and developers to earn a living via the Geo Web is another positive knock-on effect of these incentives. Instead of the marketplace/app store model of taking a (significant) cut of every sale, the Geo Web can subsidize additional sales and revenue.
There are numerous ways to structure the disbursement of rebates. A fixed percentage of a parcel’s network fees is simple and eliminates some potential attack vectors for bad actors. Quadratic, tiered, capped, and fixed rebate amounts could help promote egalitarian values, but will require more complex supporting infrastructure to limit perverse incentives.
If the rebates are paid out in a custom ERC-20 token (i.e., GEO), there’s room for additional experimentation with tokenomics and redemption rates (assume that GEO can be redeemed for ETH from the treasury).