cryptoeconomics

laurent hardy

@donhylo

WHO I AM

2009  Bio Engineer

2010   Water & Energy Nexus

2012   MSc Renewable Energy Systems Technology

2012   Complex Adaptive Systems

2016   Ethereum Madrid

2018   Cryptoeconomics.hub 

blockchain is

more than RESILIENT

more than ROBUST

it is antifragile

@donhylo

robust

fragile

antifragile

cryptoeconomics antifragility

@donhylo

@donhylo

why are public open neutral decentralised p2p blockchains antifragile

cryptoeconomics antifragility

@donhylo

cryptoeconomics antifragility

  • 51% attack
  • Selfish mining attack
  • P + epsilon attack
  • Nothing at stake attack
  • Sybil attack
  • Double spend attack
  • Eclipse attack
  • $5 wrench attack

ATTACK VECTORS

The

Incentive

Machine

E(R_i) \varpropto H_i * T
E(Ri)HiTE(R_i) \varpropto H_i * T

expected value

block reward

hash power for the participant

number of tokens rewarded each block

@donhylo

cryptoeconomics the incentive machine

bitcoin objective function

Bitcoin
ASIC
Mining Farm

@donhylo

Bitcoin is the first example of a new form of life.

It lives and breathes on the internet.

It lives because it can pay people to keep it alive.

It lives because it performs a useful service that people will pay it to perform.

It lives because anyone, anywhere, can run a copy of its code.

It lives because all the running copies are constantly talking to each other.

It lives because if any one copy is corrupted it is discarded, quickly and without any fuss or muss.

It lives because it is radically transparent: anyone can see its code and see exactly what it does.

It can’t be changed. It can’t be argued with. It can’t be tampered with.

It can’t be corrupted. It can’t be stopped. It can’t even be interrupted.

 

Anyone who wants to create their own new digital life form can do so.

Like Bitcoin, it will live on the internet.

Like Bitcoin, it will survive as long as it does something that people will pay for.

Like Bitcoin, there will be no way of killing it.

Like Bitcoin, it will be radically transparent.

Like Bitcoin, it can’t be stopped.

Like Bitcoin, it will be able to pay people to do anything people are willing to do in exchange for its cryptocurrency.

Unlike Bitcoin, it will follow its own rules, whatever rules were programmed into it when it was created.

 

Ralph Merkle

cryptoeconomics the incentive machine

@donhylo

@donhylo

cryptoeconomics the incentive machine

@donhylo

cryptoeconomics the incentive machine

  1. oral ascending auction

  2. sealed bid auction

  3. dutch auction

  4. vickrey auction 

@donhylo

cryptoeconomics the incentive machine

$100

$75

SEALED BID AUCTION

$100

$75

Vickrey AUCTION

$25

​alice
jing
​alice
jing

$25

$75

@donhylo

cryptoeconomics the incentive machine

@donhylo

cryptoeconomics the incentive machine

@donhylo

cryptoeconomics the incentive machine

@donhylo

cryptoeconomics the incentive machine

sale concluded in less than 15 minutes

 

creators owning around 95% of the funds worth more than $280m at present time (Apr 25, 2017)

 

just 5% of the tokens were sold
for a combined $12m

new design ideas

@donhylo

proof-of-work

proof-of-stake

@donhylo

nothing–at–stake attack

@donhylo

layer two solutions

State Channels

ERC20

Alice wants to pay Bob

Bob

Alice

Alice open a channel by locking 9 tokens in it

Alice can start making payments to Bob

When the channel is closed, the remaining tokens are sent back to Alice

source: Raiden Network

@donhylo

@donhylo

plasma chain

@donhylo

sharding

cryptoeconomics

A new discipline

@donhylo

cryptoeconomics a new discipline

  1. Cryptography

  2. Game Theory

  3. Mechanism Design

  4. Behavioural Economics

  5. Network Science

@donhylo

"sergio arboleda"

Hexadecimal:

222bb51313f3d00a618a2a5cf4017dd9544fec7c75c24637fc021989b3385420

cryptoeconomics a new discipline | cryptography

rely on things that PROVABLY happened in the past

"sergio ardoleda"

Hexadecimal:

0d0bdd931f296f3ed7ff2604f4fe43c37ce625d52909851ee39887c355163211

@donhylo

cryptoeconomics a new discipline

  1. Cryptography

  2. Game Theory

  3. Mechanism Design

  4. Behavioural Economics

  5. Network Science

@donhylo

cryptoeconomics a new discipline | game theory

take decisions about the future based on what happened in the past

@donhylo

cryptoeconomics a new discipline | game theory

@donhylo

cryptoeconomics a new discipline | game theory

JOHN NASH

MATHEMATICIAN

1928–2015

@donhylo

cryptoeconomics a new discipline | game theory

Alex rats out Bob 

Bob remains silent

Bob rats out Alex

Alex remains silent

Alex gets 2 years
Bob gets 2 years

Alex gets 3 years
Bob goes free!

Alex goes free!
Bob gets 3 years

Alex goes free!
Bob goes free!

alex

bob

the prisoner's dilema

[0,0]

[-2,-2]

[0,-3]

[-3,0]

-2

-3

-3

-2

@donhylo

cryptoeconomics a new discipline | game theory

in fights against hawk

payoff to dove

payoff to hawk

in fights against dove

half the time he wins, half the time he loses

HE GETS THE FULL RESOURCE TO HIMSELF

he will back off and get nothing

both share the resource

hawk dove game

$$V/2$$

$$V/2-C/2$$

$$V$$

$$0$$

@donhylo

cryptoeconomics a new discipline | game theory

set the rules of the game

measure the PROBABILITY of outcomes

@donhylo

cryptoeconomics a new discipline

  1. Cryptography

  2. Game Theory

  3. Mechanism Design

  4. Behavioural Economics

  5. Network Science

@donhylo

cryptoeconomics a new discipline | MECHANISM DESIGN

@donhylo

we design the rules of the game consequently

we know the probability of the outcome that we want to see

cryptoeconomics a new discipline | MECHANISM DESIGN

@donhylo

cryptoeconomics a new discipline

  1. Cryptography

  2. Game Theory

  3. Mechanism Design

  4. Behavioural Economics

  5. Network Science

@donhylo

cryptoeconomics a new discipline | behavioural economics

daniel kahneman

amos tversky

@donhylo

cryptoeconomics a new discipline | behavioural economics

ultimatum game

Güth, Schmittberger, and Schwarze (1982)

 

You receive €100

You decide how much you will share with me

If I reject your offer, neither of us gets anything

If I accept your offer, we execute the deal

@donhylo

cryptoeconomics a new discipline | behavioural economics

we are not as rational as the standard economic theories like to think

@donhylo

cryptoeconomics a new discipline

  1. Cryptography

  2. Game Theory

  3. Mechanism Design

  4. Behavioural Economics

  5. Network Science

@donhylo

cryptoeconomics a new discipline | network science

emerging solutions

packed with probability distributions

the danger of making predictions

nonlinear interactions

complex systems

contagious effect

wisdom and/or madness of the crowd

bonding and bridging

Feedback is welcome.

Thanks.

Cryptoeconomics

By Laurent Hardy

Cryptoeconomics

Arguing why cryptoeconomics is relevant at the blockchain base layer and at the dApp token layer. Blockchain is antifragile and cryptoeconomics is responsible making blockchains benefiting from stresses or volatility. Tokens can be considered as incentive machines with superpowers. Cryptoeconomics also offers a path to potential solutions for the scaling problem of blockchain.

  • 219
Loading comments...

More from Laurent Hardy