Masa: Establishing AI Tokenomics from Data

Introduction

AI has been the defining narrative in Web 3 startups over the past year, primarily involving blockchain to integrate distributed computational resources into their token economies. These efforts resemble earlier initiatives like Filecoin. However, they face significant challenges due to the high computational demands of large AI models, which are often centralized. As a result, distributed computational resources are underutilized in the current large model landscape, leaving these projects without a fundamental driver.

Masa Network, a standout in the AI sector, launched its independent mainnet and tokens on April 11. It distinguishes itself by basing its economy on the behavioral data needed for AI training—a resource everyone has. Currently, the project boasts over 1.4 million unique wallet addresses.

On March 7, before this launch, Masa Network debuted on CoinList, where it conducted a community token sale that raised $8.75 million, marking it as the sole AI project on the CoinList Launchpad in 2024.

Source: Project Blog

The Three Pillars of AI: Computing Power, Algorithms and Data

Since ChatGPT’s introduction, there has been a swift advancement in Large Language Models (LLMs). Nonetheless, as these top models grow more sophisticated, their capabilities are beginning to plateau, suggesting a stabilization in the advancement of this technology. These LLMs, rooted in the groundbreaking paper “Attention Is All You Need” from Google, have seen reduced operational costs thanks to innovations by Nvidia, along with the use of standardized public datasets, which have normalized their performance levels.

In this fiercely competitive field, mastering data control has emerged as a crucial determinant of success.

Continuing a trend from the Web 2.0 era, users are habitually required to hand over their data to platforms, giving these dominant platforms control over massive data sets, which stifles market competition among large-scale models.

Masa aims to dismantle the data hegemony of significant tech corporations by introducing an innovative data exchange framework. This framework facilitates mutually agreed and verified exchanges of data between providers (both individuals and businesses) and consumers (like developers, startups, and corporations) while ensuring complete privacy protection.

This initiative has led to forming a global data marketplace that is expandable, secure, and robust, where user data remains private by default. Data becomes available in the market only after users consent to its use and after it has been anonymized through ZK technology. Developers accessing this data compensate users with platform tokens or NFTs.

Moreover, Masa enhances collaborative development by allowing open-source LLM toolkits within its network, enabling developers to create and disseminate their models. It also encourages the communal use of spare computing resources, fostering a more interconnected and resource-efficient network environment.

Background of Masa

Brendan Playford, the founder of the Masa project, is a serial Web3 entrepreneur who previously established Constellation Labs and successfully carried out an ICO in 2017 under the name $DAG. The Masa project was incubated through Coinlist’s Seed Program and Binance’s Most-Valuable-Builder Accelerator. Before the community token sale, the Masa Network had raised $18 million from leading investors, including Digital Currency Group, Anagram, Animoca, and GoldenTree.

In January 2022, Masa Open Alpha v1.0 was still a DeFi lending project, maintaining this focus until May 2022, when it received Pre-seed investment. Subsequently, the project shifted its development focus to establishing a decentralized credit system. During this time, the team realized the Web3 world lacked a unified identity protocol to aggregate on-chain data. In May of that year, Vitalik published a paper titled “Decentralized Society: Finding the Soul of Web3,” which envisioned how Soulbound Tokens (SBTs) could serve as identities for Web3 users. This inspired the Masa team to evolve their credit system project into an SBT infrastructure, launching Masa Soulbound Identity in August 2022, becoming the first Web3 EVM-based soulbound identity protocol. Its main feature allows users to declare a unique soul name. Over the next three months, users minted over 50,000 Masa Soulbound Identities and 65,000 .soul names on the testnet. Masa announced its 2.0 version in November 2022, and by January 2023, it went live on the ETH mainnet, with previously minted names starting to trade on OpenSea. The project further evolved and announced its 3.0 version in October 2023, shifting its focus to establishing a tokenized economy based on user data, closely aligning with the project model described in this article.

Source: Masa’s blog

How ZK Technology is Replacing GDPR for True Data Ownership

Data rights and privacy protection have been focal points since the Web 2 era, with the introduction of the EU’s GDPR (General Data Protection Regulation) being a landmark event. This regulation established three fundamental rights for individuals over their data: the right to access, the right to be forgotten, and the right to data portability. GDPR requires that personal data processing must be based on user consent, and individuals can withdraw this consent at any time.

However, GDPR has its limitations. Users generally can only consent to platforms using their data or face becoming “digital outcasts”; they do not receive economic benefits from the effective use of their data; they formally have the right to be forgotten, but in practice, there is no enforcement to ensure the actual deletion of data already collected.

The introduction of GDPR did not alter the long-standing fact that the world’s most valuable user data has always been monopolized by large tech companies and exploited without user consent or fair compensation.

Masa has proposed an innovative solution to this issue. Masa is building a “decentralized Google,” an open, secure, and incentive-compatible decentralized personal data economy. It uses zero-knowledge proofs (ZK) to return data sovereignty to individuals without compromising privacy. Users can contribute their data to the network and be rewarded with Masa’s native tokens. Developers can access this data to train AI models, perform analytics, and build innovative applications in a privacy-preserving manner.

Masa’s ZK Network: Four Core Layers

Masa’s zk-network is structured into four essential layers: the User Layer, Data Exchange Layer, Data Access Layer, and Developer Layer. Each layer plays a crucial role in securing and efficiently handling data within the ecosystem.

User Layer: Masa zkSBT

Users utilize Masa’s Zero-Knowledge Soulbound Tokens (zkSBT) to control their data sharing. zkSBT fully supports EIP-4337: Account Abstraction, allowing for complete anonymity without requiring GDPR permissions. zkSBT grants verifiable access passes to specific developers based on programmable terms, enabling selective disclosure through advanced zero-knowledge and fully homomorphic encryption techniques.

Data Exchange Layer: Masa zk-Oracle

The Masa zk-Oracle Network is a decentralized network composed of oracle nodes responsible for ingesting data from on-chain and off-chain sources into standardized formats. It then processes, verifies, and analyzes the data while maintaining an index for efficient data querying. Oracle nodes utilize zero-knowledge proofs to encrypt data, ensuring privacy protection. By employing zero-knowledge proofs and homomorphic encryption, the network preserves privacy while allowing developers to gain insights without exposing the raw data. This system supports encrypted messaging, VPNs, and decentralized file transfer.

Data Access Layer: Masa Blockchain Network

The Data Access Layer provides blockchain infrastructure for user zkSBTs and crucial data access protocol contracts. Storage and validation nodes operate within this layer, primarily implemented through opBNB and Avalanche Subnet. This layer, acting as the blockchain infrastructure, supports issuing and validating zkSBTs (Zero-Knowledge Soulbound Tokens) and key data access protocol contracts. High throughput of zkSBTs is facilitated using opBNB and Avalanche Subnet, ensuring a fast and cost-efficient environment.

Developer Layer: Applications

The Application Layer offers interfaces and tools for developers to build decentralized applications that comply with new privacy standards on Masa’s zk-data marketplace.

Masa harnesses cutting-edge Zero-Knowledge Proofs (ZKP) and Fully Homomorphic Encryption technologies to construct a secure, reliable zero-knowledge data network. This network includes the User Layer (utilizing Zero-Knowledge Soulbound Tokens zkSBT), the Data Exchange Layer (zk-Oracle network), the Data Access Layer (realized through opBNB and Avalanche Subnet), and the Developer Layer (providing interfaces and tools for developers).

Source: Project Blog

“My Data, My Profit” - Empowering Users with ZK Technology

Initially, users gather their online behavior and preferences through Masa’s applications or browser extensions. This information is anonymized using zkSBT technology and encrypted before being stored in a vector database. Subsequently, users can stake their data, allowing developers to access it in exchange for rewards. Developers can use this data to train highly personalized or specialized AI models.

Following the launch of the Masa mainnet on April 11, users can directly view their accumulated data points within the Masa App. Developers, on the other hand, can create various staking pools to encourage users to deposit different types of data. For instance, a staking pool set up by developers working on Web 3 quantitative trading AI might prefer to reward contributors who provide on-chain interaction data and social network dynamics related to Web 3. Users can withdraw their data from these staking pools at any time.

Source: Project Blog

Users interested in participating in the project can follow the official guidelines. Still, as of the publication of this article, there are only 3 SBTs available for claim, and the two data staking reward pools in the Marketplace are currently closed. This is because new users need to use Masa’s browser extension to collect data, and this extension has not yet been launched.

We have located screenshots from the project’s previous testing and promotional phases that provided historical reward activities for users as a reference. It is expected that the Masa team will soon launch new reward activities.

Source: Project Blog

Masa’s Highlight: Genuine User Data in Web 3

Transitioning users from Web2, where their data has already been extensively collected by traditional internet platforms, to exclusively using Masa is a process. However, in the Web3 environment, there is no equivalent to Google Analytics; user data is fragmented. Furthermore, Web3 projects often attract a lot of fake engagement, including from bot accounts, airdrop farmers, and other non-genuine participants. Project developers and investors are keen to understand how many real and valuable users they have.

This need becomes even more pressing against the backdrop of the 2024 bull market. Most Web3 projects still rely on a combination of Web2 solutions (like Google Analytics) and Web3 on-chain tracking tools (such as Dune and DeFi Llama), but these two data dimensions cannot be truly unified.

At Masa Analytics, users voluntarily integrate their data using their zkSBT, combining their frontend activities (like page views, clicks, comments, and shares) with on-chain activities (such as transactions, transfers, and cross-chain operations). This data can be used to build a unified data model, develop user growth strategies, or identify potential trading opportunities. Masa has provided a schematic to demonstrate the capabilities of this system.

Source: Project Blog

Masa has partnered with LayerZero, allowing any on-chain user and developer to contribute to and use data, which showcases its vision to become a foundational infrastructure across all chains.

Moreover, Masa has launched Masa Growth to assist Web3 projects in quickly achieving community activation or user growth. They have shared a case study of a partnership with Solid World, a blockchain carbon credit project, which attracted the first 5,000 community members within ten days through collaboration with Masa.

Exploring Masa’s Tokenomics

Masa’s token economics encompasses several key components aimed at incentivizing participation and growth within its ecosystem:

1. Token Rewards (Token Incentives)

• Data Rewards: Users who provide data to help train AI models or support analysis are compensated with tokens.
• Network Growth Incentives: Tokens are distributed directly to users to encourage network expansion.

1. Staking Incentives

• Node Operation Incentives: Operators of Masa Oracle nodes stake tokens to run Masa’s zk-Oracle nodes. These operators receive staking rewards during the first two years of network operation.
• Cross-chain Staking: Staking occurs between Masa’s Oracle and blockchain layers. The staked MASA tokens (stMASA) are used on the Masa Avalanche subnet to mint users’ zkSBTs and burn some of the Gas fees.

1. Network Fees

• Gas Fees: When enterprises and developers build applications utilizing Masa’s zk-data marketplace, they pay fees for using data and services. These fees can be paid in MASA tokens, stablecoins, or other native blockchain tokens. All fees priced in non-MASA currencies are subsequently converted to MASA tokens, a portion of which is burned.
• Incentive Distribution: These fees are distributed to Oracle nodes as incentives for providing reliable data encryption and storage, to validators on the Avalanche subnet for offering dependable data access infrastructure, and back to users who provide valuable data to encourage their ongoing participation.
• Community Funds: A portion of the fees is directed into a DAO community treasury for future development, research, marketing, and decentralized initiatives.

1. Governance

• Voting Rights: MASA token holders can participate in governance votes concerning technological upgrades, fee structures, and other matters.
• Decentralized Autonomous Organization (DAO): Over time, governance will transition towards a decentralized autonomous organization controlled by community members who manage network policies and financial allocations.

Below is the distribution of Masa tokens before the mainnet launch.

Source: Project Blog

Before the launch of the Masa mainnet, the total supply of tokens was 1,588,866,523, allocated and unlocked as follows:

Core Team: 406,485,769 tokens, 25.58%.

Team members adhere to one of the following unlock schedules:

• 180 days of the lock-up post-public sale, with 25% unlocked afterward and the remaining 75% linearly over 12 months;
• 180 days of the lock-up post-public sale, with 25% unlocked, the rest over 31 months;
• 180 days of the lock-up post-public sale, 25% unlocked, and the remaining 75% over 32 months;
• 12 months of lock-up post-public sale, 25% unlocked, and the rest linearly over 36 months.

Major Partners and Advisors: 113,296,478 tokens, 7.13%, with similar unlock schedules over 2 or 3 years post-public sale.

Private Round: 421,864,898 tokens, 26.55%, with a 12-month lock-up after the public sale, 25% unlocked, and the remaining 75% linearly over an additional three years.

CoinList Community: 111,220,657 tokens, 7%, with 35 days of lock-up post-public sale, 25% unlocked, and the remaining 75% linearly over 6 months.

Community Rewards: 158,886,652 tokens, 10%, 100% unlocked one month after listing on centralized exchanges.

Oracle Node Staking Rewards: 66,032,028 tokens, 4.16%, linearly unlocked over two years post-launch of Masa Oracle, expected in Q4 2024.

Ecosystem Growth (Treasury): 311,080,042 tokens, 19.58%, with 25% unlocked when listing on centralized exchanges, and the remaining 75% linearly over two years.

Below is a graphic detailing Masa’s historical fundraising.

Source: Project Blog

Conclusion

Masa is on its way to becoming the largest zero-knowledge user data network in the world, positioning itself as the “decentralized Google” of the AI era. This scalable, secure, and resilient global data market will allow billions of users to earn from their data contributions and enable millions of developers to use this data by default to create innovative applications.

The Masa team envisions a world where #YourDataPaysYou. In an era where data is the new oil, Masa is a pioneering force poised to reshape the landscape of the AI data economy.

Please refer to the official Masa roadmap below for Masa’s development plans in the coming period.