--- title: Lasso Transactions as an alternative to Copyright date: 2025-06-18 keywords: [smart contract, copyright, crytpocurrency] subtitle: _A Solution to Fund Creativity and Combat the Free-Rider Problem in a World Without Copyright_ --- Often, people who oppose copyright give weak excuses as for how a market would sustain artists creating work, without the government creating an artificial monopoly on said work. In a recent conversation with one of my friends who also oppose many aspects of the current copyright system, we brainstormed alternatives. I opposed the traditional donation model as it's highly subject to [free-rider problem](https://en.wikipedia.org/wiki/Free-rider_problem), and demanded that a new model be created[^1], if we should reasonably expect to convince people to oppose copyright. I used the example of Paper Lily, a free game on Steam, while I enjoyed the game, the fact that it was free meant that future developement is mostly a hobby project for the developers. You can "purchase" the game, as a donation, but doing so is a highly voluntary transaction that wouldn't even directly fund the creation of the next installment of the series. Even worse, as a proxy for owners on steam, the free version has ~7.000 reviews while the paid donation only has ~100. If only a hundred people donate, why would I choose to pay? The total donations would only reach into the hundreds of Euros. We then devised a new donation system, one in which your donation directly supports the next installment of a series, a **Lasso Transaction**. The idea is that the artist creates a smart-contract, a form of _piggy bank_. Anyone can transfer funds into the piggy bank, but with one clear difference, with the transaction you supply an expiration date. This expiration date would represent when you would get your money back if the artist does not provide a product and liquidate the assets stored in the piggy bank before the specified expiration date. This would naturally create an incentive for the artist to create the game in a reasonable time frame, and it would also further incentivise donations. If I get my money back anyways because no future installment in the series is created, then I would be much less hesitant to put money on the line. This also solves one of the issues I've had with the current copyright system, in that it highly incentivises rent-seeking, since it's all about creating a single work that can generate revenue, potentially for decades. With Lasso Transactions only the creation of new content is subsiduized, while the art created can then be freely distributed. This could even be done in increments for Early Access games, creating Lasso Transaction based piggy banks for each major update. Traditional kickstarter-like in-game rewards or public recognition could still be given to depositors. ![Two graphs shoing earnings using Lasso Transactions, the longer the creator waits with product delivery, the less they earn. The in the left model depositors are more trusting and lenient, in the right model they are more impatient leading to skewed expirations. In both graphs the smart-contract is set up such that the minimum expiration date for the project is 6 months](./lasso-earnings.png) In the simplest model, if creators do not deliver, their reputation is simply tarnished, and future piggy banks will be left mostly empty as people would be much less willing to fund a grifter. Alternatively, depositors can veto the creator withdrawal, if some quorum of depositors vote to do so. Youtubers can create piggy banks per video and musicians can create piggy banks per song or album. Movies could even be funded under the same scheme if this model works well enough or the movie is cheap enough. If it's a larger project, the creator of the piggy bank can take out loans since the piggy bank holder can show investors a time-line for what the return on investment will be given some delivery date. But why stop there? Optimistically, they could be applied to a bigger scale. Lego is located in Billund, with no train-lines connected to the second-largest city in Denmark, Aarhus. Many workers would benefit from such a line, and might even be willing to donate in order for it to be built. Lego itself may be willing to donate large sums as it directly makes it easier to supply labour to the company. Lego could even additionally match individual donations to increase their impact. The government then just needs to foot the rest of the bill themselves, out of their own interest in developoing the economy. All-in-all, I think Lasso Transactions serve as an interesting mitigation to the free-rider problem. The core benefits of Lasso Transactions are: - **Incentive Alignment:** By tying donations to a smart contract with an expiration date, a low-risk environment for supporters is created. The refund mechanism reduces the hesitation to contribute, as depositors are protected if the creator fails to deliver. And creators are incentivized to produce work within a reasonable timeframe to access the funds, avoiding the stagnation that can occur with traditional donation models. - **Encouraging Ongoing Creation:** Unlike copyright, which can incentivize rent-seeking on a single work, Lasso Transactions focus on subsidizing new content. This could foster a culture of continuous innovation and creativity, as creators are rewarded for producing rather than resting on past successes. The incremental model allows for iterative funding, which aligns well with modern development cycles in certain creative industries. - **Transparency and Trust:** Smart contracts provide a transparent, tamper-proof system for managing funds. depositors can trust that their money will either support the project, be returned, or facilitate the destruction of creating party's reputation. - **Market-Driven Accountability:** The expiration date creates a natural deadline, holding creators accountable without relying on centralized enforcement. > This article is also available [in raw markdown](./index.md) [^1]: Vitalik has also proposed a [Harberger's tax](https://vitalik.eth.limo/general/2024/04/01/dc.html) for similar purposes. [See also](https://vitalik.eth.limo/general/2018/04/20/radical_markets.html).