30 Mechanism Design Web3 Examples
Mechanism design of dapps for user participation
Random Observation/Comment #865: My personal AI heuristic function is focused on having the most fun.
//Made with DallE via GPTo1 prompting
Why this List?
My friends always ask me what I do at work. In the past few years, I had focused on mechanism design and understanding incentives of people within the web3 market. The best way to explain it is like playing an RPG like Diablo. Players try to optimize their builds to balance maximum DPS, magic regeneration, health regeneration, etc. The mechanism design part of this is understanding the game so well to not just tweak the specific characters, skills, and build trees, but to actually create the balanced ratios for fun and addictive gameplay.
When I apply this to Web3 projects, I’ve mostly looked at Token Generation Event (TGE) go to market example successes and patterns used to create an engaging platform for both users and businesses. A vanilla design for the token valuation could be a reflection of a DAO’s treasury holdings and its platform’s growth strategy. A more complicated token may involve governance, staking, restaking, and % revenue share from platform rewards.
This list is a bit more detailed than previous ones. Maybe more of a table than a list. Perhaps my evolution of writing will be writing Matrices. Maybe I’m in the Matrix.
LinkedIn’s Skill Endorsements and Networking
Mechanism: LinkedIn allows users to endorse each other's skills, improving profile credibility.
Economics: Users endorse skills to build goodwill and receive reciprocal endorsements, boosting their visibility in job searches. Companies gain access to a talent pool, paying for tools to recruit these validated candidates.
User Engagement: Users stay engaged to maintain a professional presence, improve their reputation, and access career opportunities.
A Web3 equivalent could tokenize endorsements, where users earn tokens for endorsing validated skills, incentivizing meaningful interactions.
Etsy’s Seller Marketplace
Mechanism: Etsy provides a platform for independent sellers to reach buyers, charging transaction fees.
Economics: Sellers profit from exposure to a large audience but pay a fee for sales; Etsy profits from these fees and optional promotion tools.
User Engagement: Sellers stay because of Etsy’s reach and marketing tools, while buyers return for unique products.
A Web3 version could allow sellers to tokenize products as NFTs for transparent ownership and reward users with tokens for buying or reviewing items.
GitHub’s Contribution Metrics
Mechanism: GitHub tracks contributions, rewarding active developers with visibility and reputation.
Economics: Companies gain access to active, skilled developers by evaluating contributions; developers enhance their resumes. GitHub monetizes through enterprise tools.
User Engagement: Developers stay to gain visibility for career growth.
In Web3, contributors could earn tokens for code submissions, which are stakeable for governance decisions on project roadmaps. The Github with funding model exists with Gitcoin.
Robinhood’s Free Trading Model
Mechanism: Robinhood offers zero-commission trading but profits from payment for order flow (PFOF).
Economics: Users benefit from low costs, market makers pay for order flow, and Robinhood monetizes through these payments.
User Engagement: Users continue using Robinhood for easy, low-cost investing.
A Web3 platform could tokenize transaction rebates, rewarding users for active trading and staking tokens for reduced fees.
TikTok’s Content Algorithm
Mechanism: TikTok prioritizes highly engaging short-form videos to keep users scrolling.
Economics: Creators gain visibility and revenue through ads, brands pay for ads targeting TikTok's algorithm-driven audience, and TikTok profits from ad placements.
User Engagement: Users stay engaged due to the addictive algorithm and diverse content.
In Web3, viewers and creators could earn tokens for engagement, fostering decentralized revenue sharing.
DoorDash’s Delivery Optimization
Mechanism: DoorDash dynamically assigns drivers to delivery orders based on proximity and demand, using incentives to ensure timely delivery.
Economics: Drivers earn fees and tips, customers pay convenience fees, and DoorDash profits from the margin.
User Engagement: Drivers stay for steady earnings; customers return for convenience.
A Web3 platform could reward drivers with tokens for timely deliveries, which could be staked for platform perks like reduced commission fees. The NFTs could represent a fungible membership that may work across food delivery programs.
Airbnb’s Instant Booking System
Mechanism: Airbnb allows hosts to offer instant booking to increase occupancy rates while maintaining trust through reviews.
Economics: Hosts earn rental income, guests pay fees, and Airbnb profits from the service fees on both ends.
User Engagement: Hosts stay for predictable income, and guests return for convenience and unique options.
A Web3 alternative could tokenize stays, where guests earn loyalty tokens for repeat bookings, exchangeable for discounts. The tokenization layer on top of Airbnb could be a tokenized sale of the listings to other owners so you can diversify your portfolio of earnings by being an investor across multiple Airbnbs.
Spotify’s Discover Weekly Playlists
Mechanism: Spotify curates personalized playlists to keep users engaged and subscribed.
Economics: Artists earn royalties from streams, users pay subscription fees, and Spotify monetizes through subscriptions and ads.
User Engagement: Users return for discovery and convenience.
A Web3 platform could reward listeners with tokens for data contributions that improve recommendations. This could also be a shared playlist or DJ creator economy. Wait, is this Soundcloud?
YouTube’s Ad Revenue Sharing
Mechanism: YouTube shares ad revenue with creators based on viewership metrics.
Economics: Creators earn a percentage of ad revenue, advertisers pay for placement, and YouTube retains the majority share.
User Engagement: Creators stay for monetization opportunities, and viewers return for content diversity.
A Web3 platform could tokenize ad revenue, allowing creators to issue fractional ownership of their channels to loyal fans.
OpenTable’s Reservation and Rewards Program
Mechanism: OpenTable lets users book reservations and earn points redeemable for discounts.
Economics: Restaurants pay listing fees, users earn rewards, and OpenTable profits from the ecosystem.
User Engagement: Users return for rewards and convenience.
A Web3 dining platform could tokenize rewards, allowing users to trade or stake tokens for premium reservation slots.
Lime Scooter’s Gig Economy Redistribution
Mechanism: Lime incentivizes gig workers to collect and redistribute scooters to charging stations.
Economics: Workers earn per scooter collected, Lime optimizes fleet availability, and users benefit from accessibility.
User Engagement: Workers stay for steady earnings, and users return for convenience.
A Web3 mobility platform could tokenize redistribution tasks, rewarding workers with tokens that can be staked for reduced ride costs or governance votes.
Twitch’s Affiliate Program
Mechanism: Twitch enables content creators to earn through subscriptions, ads, and viewer tips.
Economics: Viewers pay subscriptions and tips, creators earn directly, and Twitch takes a percentage.
User Engagement: Creators stay for monetization; viewers return for interaction and exclusive content.
A Web3 platform could reward active viewers with tokens that grant access to creator-specific NFTs. I believe they did this already with Spankchain.
Waze’s User-Generated Traffic Data
Mechanism: Waze incentivizes users to report real-time traffic conditions, improving navigation accuracy. Crowdsourcing is very web2.
Economics: Users contribute data for free, benefiting from improved directions, while Waze profits indirectly through ads.
User Engagement: Users return for better navigation.
A Web3 navigation app could issue tokens for data contributions, which users could redeem for premium features or trade.
Amazon’s Subscribe & Save
Mechanism: Amazon offers discounts for recurring purchases, encouraging customer loyalty.
Economics: Customers save money, sellers benefit from predictable demand, and Amazon profits from steady transactions.
User Engagement: Customers stay for savings and convenience.
A Web3 platform could tokenize subscriptions, allowing users to transfer or sell unused credits.
Bumble’s Matchmaking Incentives
Mechanism: Bumble lets women initiate conversations, creating a safer and more appealing experience.
Economics: Users pay for premium features, and Bumble monetizes through subscriptions.
User Engagement: Users return for unique features and matches.
A Web3 platform could reward active participants with tokens redeemable for premium matches or features. Perhaps there’s a matchmaking for crypto nerds and whales? I wonder if there’s a honeypot of whales looking for love?
Google Maps’ Local Guide Contributions
Mechanism: Google Maps incentivizes users to contribute reviews, photos, and corrections through its Local Guides program.
Economics: Users gain recognition and perks, businesses benefit from improved visibility, and Google monetizes through ads and map-based services.
User Engagement: Users stay for gamified rewards and influence.
A decentralized mapping platform could issue tokens for verified contributions, allowing contributors to redeem tokens for premium features. I remember this in the early days of Foursquare and Yelp. I do like my Google One features of being a Google Guide.
Duolingo’s Streak Rewards
Mechanism: Duolingo encourages daily learning by rewarding streaks with badges.
Economics: Users gain free access, while Duolingo monetizes through ads and subscriptions.
User Engagement: Users stay for gamified progress tracking.
A Web3 platform could tokenize streak rewards, redeemable for premium lessons or educational NFTs.
Reddit’s Awards/Upvote/Perks System
Mechanism: Reddit users buy and give awards to high-quality posts.
Economics: Users pay for awards, and Reddit profits from the sales.
User Engagement: Users stay for social validation.
A Web3 platform could tokenize awards, allowing recipients to redeem or stake tokens for platform perks.
Warby Parker’s Home Try-On Program
Mechanism: Warby Parker sends customers multiple eyeglass frames to try on at home before making a purchase.
Economics: Customers benefit from convenience, and Warby Parker reduces in-store costs while boosting sales.
User Engagement: Customers stay for the seamless shopping experience.
A Web3 e-commerce platform could tokenize product trials, rewarding users for returning samples on time or providing feedback.
Patreon’s Subscription Model
Mechanism: Patreon allows creators to earn recurring revenue from subscribers who gain access to exclusive content.
Economics: Creators earn consistent income, subscribers receive perks, and Patreon takes a percentage of earnings.
User Engagement: Subscribers stay engaged to support creators they love and access unique content.
A Web3 platform could enable creators to issue tokens representing fractional ownership of their content, allowing fans to trade tokens or vote on new projects. We’ve seen versions of this with friend.tech
Adobe Creative Cloud’s Subscription Ecosystem
Mechanism: Adobe bundles software into subscriptions, offering regular updates and cloud integration.
Economics: Users pay monthly fees, Adobe ensures steady revenue, and businesses benefit from reliable tools.
User Engagement: Users stay subscribed for continuous access to essential features.
A Web3 model could tokenize licenses, allowing users to trade unused subscriptions or stake tokens for premium features.
Stripe Atlas for Business Incorporation
Mechanism: Stripe Atlas simplifies the process of forming and managing a company, particularly for startups.
Economics: Entrepreneurs pay for incorporation services, while Stripe earns through ongoing payment processing fees.
User Engagement: Startups stay for the seamless setup and integration.
A Web3 platform could tokenize business incorporation, where tokens represent shares in DAO-style startups. I’d love to see more templates for creating DAOs that are actually fully incorporated.
Slack’s Notification and Integration System
Mechanism: Slack integrates with third-party apps and uses notifications to keep users engaged with team updates.
Economics: Users pay for premium plans, while integrations boost Slack’s ecosystem value.
User Engagement: Teams return for seamless communication and productivity.
A Web3 platform could tokenize notifications, rewarding users for managing integrations and providing feedback on app performance.
Rent the Runway’s Clothing Subscriptions
Mechanism: Rent the Runway allows users to rent designer clothing via subscription plans.
Economics: Subscribers gain access to rotating wardrobes, and Rent the Runway profits from recurring revenue.
User Engagement: Users stay for variety and sustainability.
A Web3 fashion rental platform could tokenize clothing usage, rewarding users with tradeable credits for returning items in good condition.
Coursera’s Peer-Graded Assignments
Mechanism: Coursera uses peer review for grading assignments in large online courses.
Economics: Users pay for certifications, Coursera profits from subscriptions, and peer review reduces instructor overhead.
User Engagement: Users stay engaged by participating in and benefiting from the peer-review process.
A Web3 platform could tokenize peer reviews, rewarding reviewers for their contributions and incentivizing quality feedback.
Venmo’s Social Payment Feed
Mechanism: Venmo displays public transaction feeds to create a social layer around payments.
Economics: Users pay no fees for social transactions, while Venmo earns from instant transfers and merchant partnerships.
User Engagement: Users stay for social engagement and ease of use.
A decentralized Venmo could tokenize transactions with stablecoins. This could just be your wallet in most cases. Perhaps there’s other features that would provide more rewards to users for verifying payments or participating in network governance.
PayPal’s Buyer Protection Program
Mechanism: PayPal resolves disputes and refunds customers for eligible purchases.
Economics: Buyers trust the platform, sellers gain access to a large audience, and PayPal profits through transaction fees.
User Engagement: Buyers stay for safety and trust.
A decentralized payment system could tokenize dispute resolution, with mediators earning tokens for verified judgments.
Peloton’s Gamified Fitness Challenges
Mechanism: Peloton motivates users with leaderboards, badges, and live competitions.
Economics: Users pay for hardware and subscriptions, and Peloton monetizes ongoing engagement.
User Engagement: Users stay for motivation and community.
A Web3 fitness platform could tokenize achievements, rewarding users with NFTs for completing milestones or winning challenges.
Ticketmaster’s Dynamic Pricing Model
Mechanism: Ticketmaster (these guys suck) dynamically adjusts ticket prices based on demand to maximize revenue and seat occupancy.
Economics: Fans pay higher prices for high-demand events, artists and venues receive higher payouts, and Ticketmaster profits through fees.
User Engagement: Fans stay because of access to exclusive events.
A Web3 ticketing platform could tokenize tickets as NFTs, allowing users to resell tickets transparently while artists earn royalties on secondary sales.
Freemium SaaS Models (Dropbox, Zoom, Canva)
Mechanism: Platforms offer free basic services while charging for premium features.
Economics: Free users drive growth through network effects, while paid users generate revenue.
User Engagement: Users stay for the utility and upgrade for advanced tools.
A Web3 SaaS platform could tokenize usage, rewarding active free users with tokens that can be traded for premium features, creating a more inclusive ecosystem.
~See Lemons Study Mechanism Design
After rereading my analysis, I’ve summarized that users keep engaging across these platforms because of 4 key factors:
Economic Incentives: Users are rewarded for participation, data sharing, or contributions (e.g., tokens, royalties, or discounts).
Network Effects: Platforms grow stronger as more users join, creating a self-sustaining ecosystem (e.g., eBay, Airbnb).
Convenience: Platforms simplify complex processes (e.g., Trello, Stripe Atlas).
Trust & Reputation: Transparency and fairness encourage continued engagement (e.g., TripAdvisor, Airbnb).
Knowing this, we can better design Web3 dapps, platforms, and token incentives for sustained usage and revisiting of sites. As with the early days of the Internet, even the less successful ideas (e.g. early e-commerce Amazon or couch surfing) can be a reimagined new company (e.g. same-day-shipping Amazon or Airbnb). I’ve loved looking at these projects and seeing them evolve to be revisited a few years later based on our retail habits.