A revolution has begun. One of the major changes we are witnessing now is the shift from the Web 2 structure to the Web 3 structure.
At the heart of Web 3 is decentralization. This is the premise for innovation to gain momentum. One big change coming is the way companies, organizations and small startups are likely to operate and conduct business. The era of Profit Sharing Communities is coming.
profit sharing community
Profit Sharing Community (PSC) is like any other company except it is decentralized, open source and built on Permaweb using smart contracts. For Permaweb on Arweave, the smart contract will be the Smartweave contract. Smart contracts are the foundation of decentralized applications (dApps).
The benefits of this business model are enormous for all the individuals involved, from founders and contributors all the way down to users. Some might argue that this model is a better way to build a company than the traditional model as we know it.
Let’s look at the three main advantages of a Profit Sharing Community (PSC).
Real-time profit sharing
All profits generated by the organization’s dApps are distributed to holders of Profit Sharing Tokens (PST).
The initial distribution of these tokens can be decided by the founders and put into a smart contract. Going a step further, the distribution of more tokens can be decided by the community itself. On top of that, users of the app can be rewarded with tokens for interacting with the app itself. Essentially, the more profit sharing tokens someone holds, the higher the percentage of profit they receive.
Every time someone interacts with the dApp, a fee is charged. This fee is then distributed to token holders accordingly.
Let’s take the case of a user interacting with a decentralized social media dApp as an example. This small fee will be paid to PST holders as a kind of dividend every time they interact with the dApp.
Fees are so small to users that they seem insignificant, and they don’t even realize they’re paying a lot. However, such accrued fees can add up quickly, so token holders are not small profits.
Therefore, holding these tokens and earning a percentage of user fees is like yield. The more token ownership you have, the higher the yield percentage you own. Your assets are now generating passive profits.
The way the old model worked was that all profits went to the corporate finance department. The company can then decide what they will spend or invest that money on.
Let’s move on to the second benefit.
Fairer ownership of the organization
With the traditional business model, founders and investors own the majority of the company. Early employees do not receive a high percentage of ownership of the company.
In a Profit Sharing Community (PSC), you can assign ownership of your organization to everyone who actively creates value for it. As mentioned above, early users of Profit Sharing Community (PSC) dApps can be rewarded. Essentially, it’s like paying for people’s time. The time they spend using your dApp.
This seems fair because time is our most precious asset.
Going back to the social media platform example, early users of the platform who create a post or upload a photo will be rewarded with some profit sharing tokens. This means they will also receive a portion of the organization’s profits as a benefit in the long run.
By rewarding all these early adopters in this way, it gives them a reason to use the dApp more, stay longer, and invite more people to the platform. This will lead to exponential user growth due to network effects.
In fact, most of us enjoy using apps that other people are using. It’s hard to imagine using a social media platform where you are the only user.
For a deeper technical understanding of how token distribution works, we can take a look at Astatine. Astatine is a project found on GitHub that uses a feature to automatically distribute profit-sharing tokens to users based on settings you provide. It uses a decay calculator to generate a distribution plan for your Profit Sharing Community (PSC). Ideally, Profit Sharing Communities (PSCs) would want to distribute fewer and fewer tokens over time in order to maintain their sustainable circulating supply.
Therefore, early adopters will reap the greatest rewards. A true believer in a project, sticking with it, will be able to harness the greatest growth of any successful Profit Sharing Community (PSC). A good way to do this is through staking, which brings us to the third point in a way.
By holding these PSTs, you can also conduct the governance of the Profit Sharing Community (PSC). Each PST holder is granted the right to vote on all decisions facing the Profit Sharing Community (PSC). Community members will be able to propose changes that may be made to the Profit Sharing Community (PSC), and holders will then vote on the matter.
The system becomes fairer when you add commitment time to the voting formula. How voting rights are determined depends not only on the number of tokens a person holds, but also on their level of commitment.
Here is the formula:
Voting rights = ownership * commitment time
Commitment time is calculated as the amount of time an individual is willing to lock their tokens in a Profit Sharing Community (PSC) smart contract. This operation is called staking.
Staking your tokens for a fixed period of time means that you will not have access to those tokens during that time. At the end of the staking period, you will receive your tokens. So, in return for staking tokens, stakers get more voting power.
Additionally, the fact that someone has their tokens locked means they are motivated to practice good governance and make the best decisions for the future of the Profit Sharing Community (PSC). The future value of their tokens depends on it. So true long-term believers in Profit Sharing Communities (PSCs) will be well rewarded.
Many communities are created with this structure. They can be seen at community.xyz.
profit sharing startup
A spinoff of the Profit Sharing Community (PSC) is Profit Sharing Startups (PSS). Arweave founder Sam Williams talked about in a recent YouTube video that all the similarities between Profit Sharing Startups (PSS) and their sister Profit Sharing Communities (PSCs) come with one small strings attached – Profit Sharing Startups (PSS) Generation All of the tokens are non-transferable. New tokens can be minted to reward others, and tokens can be burned, but not sold or transferred.
By using this approach, tokens do not behave like traditional stocks or securities in the eyes of many regulators. Of course, a lot depends on each individual jurisdiction. So, in essence, this will bring all the benefits of having a Profit Sharing Community (PSC), such as how governance works, without having to worry about regulation and the involvement of regulators, which can seriously hinder the growth of startups.
If a Profit Sharing Startup (PSS) proves to be successful, it could clone itself and change its structure from a Profit Sharing Startup (PSS) to a Profit Sharing Community (PSC) where all the Tokens, just like how they are distributed in Profit Sharing Startups (PSS).
Conclusion and future
It is likely inevitable to see more companies and startups use the Profit Sharing Community (PSC) model. When innovators, founders and entrepreneurs capture this business model, we could see a huge boom in Profit Sharing Communities (PSCs) entering the mainstream.
But where will this revolution go? Will we see this model used by entire governments to reward the future of their citizens? Or maybe an island community decides to use this method in combination with tourism, and all profits generated by tourists are distributed to the citizens of the island for cumulative growth.
Or maybe even a decentralized way for a public community to distribute their assets based on the time invested in helping the commune, in which case more time dedicated to the public community leads to more governance.
This is my slogan.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/in-depth-understanding-of-the-profit-sharing-community-psc/
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