Routed Closure: Rethinking Value Capture in Decentralized Ecosystems
For designers and analysts of decentralized systems, it clarifies a fundamental flaw in assuming value capture automatically funds participants, but the insight is incremental as it formalizes known issues.
The paper argues that decentralized ecosystems require 'routed closure'—captured value must verifiably reach critical participants—unlike centralized systems with default reallocation pools. It formalizes this with Route-Admissible Value and the External Value Routing Closure protocol, showing via case studies that revenue, fees, or token prices do not guarantee sustainable incentive funding.
A decentralized ecosystem can capture value and still fail to fund the actors who keep it running. Users may pay fees, tokens may appreciate, issuers may earn revenue, and protocols may burn value, but none of these facts by itself shows that authors, miners, validators, suppliers, storage providers, or other critical participants are actually compensated. This paper argues that traditional value-capture analysis often assumes a centralized pool: once value is captured, it can be reallocated through budgets, contracts, payroll, or managerial discretion. Decentralized ecosystems do not have this default pool. They require routed closure: captured value must pass through a verifiable route to a specified critical incentive recipient, and it must be sufficient relative to that recipient's reward requirement. We formalize this distinction through Route-Admissible Value and operationalize it with the External Value Routing Closure protocol. A contrast set including YouTube, Steem/Steemit, Bitcoin, Ethereum, Aave, Filecoin, USDC, and XRP shows why revenue, fees, burns, token prices, or market capitalization should not be mistaken for sustainable incentive funding.