token-based economic networks

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 

What is the game?

@donhylo

SOCIAL ORDER

is

coordination

and

cooperation

Hobbes > Locke > Smith > Hayek > ?

@donhylo

cryptoeconomics what is the game

Social Order For What?

PRODUCTION

and

CONSUMPTION

@donhylo

cryptoeconomics what is the game

markets

planning

coordination by rules

coordination by command

manually adjust
supply & demand

  • lack of information from the planner
  • lack of motivation from the planner

prices

a decentralised system of information and motivation at the same time

@donhylo

cryptoeconomics what is the game

Hayekians

markets are efficient

prices transmit information

limited role of the government

opposed to government–backed money in favour of commodity–backed money

NON–HAYEKIANS

neo–classical school of economics

markets don't work in an idealised way

attention to information asymmetry

attention to the condition of ‘market failure’

economic models make the world, they don’t describe it

@donhylo

cryptoeconomics what is the game

@donhylo

crypto currencies

store of value

means of exchange

unit of account

cryptoeconomics what is the game

do we want to include non–for–sale production or intangible things produced into 'what counts' in the economy?

do we want to try to measure output (what is valued and how it is produced) in new ways?

or do we want to stay in a culture of production for profit only?

do we want to enable people to trade in new ways?

@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

complex economic systems

How to design interactions between individuals?

@donhylo

cryptoeconomics what is the game

@donhylo

SUPER POWERS

Blockchain energy CONSUMPTION is now equivalent to that oF a country like

Bitcoin
ASIC
Mining Farm

@donhylo

What should the rules of the game be?

@donhylo

game theory

consensus algorithms

reverse

mechanism design

cryptography

@donhylo

token designs

   what decision should
  people take, given their
    access to information
   and a set of choices in a
       particular situation?

@donhylo

cryptoeconomics mechanism design

players

decisions

@donhylo

cryptoeconomics mechanism design

private information

(preferences or types)

@donhylo

cryptoeconomics mechanism design | private information

players

decisions

information

@donhylo

cryptoeconomics mechanism design | private information

normal distribution

discreet distribution

uniform distribution

Common Prior

a probability distribution over private information (types)

An optimal decision depends on each individual's private information

@donhylo

cryptoeconomics mechanism design | private information

type 1

type 2

type 3

type N

each person's private information can be mapped to social outcomes based on decision rules

@donhylo

cryptoeconomics mechanism design | private information

transfer function

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cryptoeconomics mechanism design | transfer function

Social Choice Function

diserable outcome

what people actually want

@donhylo

cryptoeconomics mechanism design | SOCIAL CHOICE FUNCTION

We would like

the real outcome

to be very close to

the desirable outcome

@donhylo

cryptoeconomics mechanism design | SOCIAL CHOICE FUNCTION

mechanism

outcome

settings

implementation

@donhylo

cryptoeconomics mechanism design

(N, X*\mathbb{R}^n, \Theta, p, u)
(N,XRn,Θ,p,u)(N, X*\mathbb{R}^n, \Theta, p, u)

Bayesian game setting

(A, M)
(A,M)(A, M)

mechanism

social choice function

C
CC

given a bayesian game setting, it is said that a mechanism implements a social choice function in dominant strategies or in Bayes–Nash equilibrium

@donhylo

cryptoeconomics mechanism design | IMPLEMENTATION

dominant strategies

this holds for the agent regardless of the strategies of other agents

Bayes–Nash equilibrium

no player has profitable deviations based on their beliefs about other players’ types and
the strategies of those players

@donhylo

cryptoeconomics mechanism design | IMPLEMENTATION

Revelation Principle

@donhylo

cryptoeconomics mechanism design | REVELATION PRINCIPLE

How to design interactions between individuals that lead to good aggregate outcomes?

what does this even mean?

@donhylo

cryptoeconomics mechanism design | outcomes

Efficiency of the outcome of social interactions

@donhylo

cryptoeconomics mechanism design | outcomes

Pareto efficiency

My mom packed me a ham sandwich for lunch but I don’t like ham; my friend’s mom packed her a turkey sandwich for lunch, and she likes turkey and ham sandwiches equally well. Nobody else cares what we eat for lunch.

My friend and I trade sandwiches; I am better off than I was before, and nobody is worse off. This is an example of a Pareto improvement.

@donhylo

cryptoeconomics mechanism design | outcomes

token design

STATE OF THE ART

@donhylo

economics

engineering

@donhylo

cryptoeconomics token design

Optimisation Design

BY ADDING PRACTICAL CONSTRAINTS

@donhylo

cryptoeconomics token design

2

token engineering

BY ADDING ENGINEERING THEORY, PRACTICE AND TOOLS

MECHANISM DESIGN

IDEAL DESIGN IN THE BEST CASE SCENARIO

1

3

Token

engineering

@donhylo

FORMULATE THE PROBLEM

Who are the potential stakeholders?

what do they want?

What value do they provide​?

WHAT DO THEY might get in return?

What are the possible attack vectors?

cryptoeconomics token design | token engineering

THEN, TRANSLATE THOSE INTO OBJECTIVES AND CONSTRAINTS

@donhylo

Stakeholders What do they want? What value do they provide​? ​What might they get in return?
Users
Contributors
Clients
Sponsors
Investors

cryptoeconomics token design | token engineering

@donhylo

Attack Vectors

  1. Stake distribution

  2. off–chain information

  3. IDENTITY THEFT

  4. BRIBERY

  5. collusion

  6. spamming

cryptoeconomics token design | token engineering

@donhylo

objective function

e.g the purpose of the token is
to maximise the amount of X
available to the end users

cryptoeconomics token design | token engineering

@donhylo

constraints

e.g. conditions upon which tokens are used as rewards

e.g. requirements for using the token

cryptoeconomics token design | token engineering

@donhylo

Existing Pattern

  1. CURATION

  2. PROOFS OF HUMAN OR COMPUTE WORK

  3. IDENTITY

  4. REPUTATION

  5. GOVERNANCE / SOFTWARE UPDATES

  6. THIRD-PARTY ARBITRATION

cryptoeconomics token design | token engineering

Token ecosystem

@donhylo

@donhylo

cryptoeconomics tokens | properties

A DEVELOPING ECOSYSTEM

READY TO USE AND ACCEPT IT

2

A UTILITY FUNCTION

TO CORRELATE VALUE WITH FUNDAMENTAL VALUES OR BELIEFS

AN INSTRUMENT

DIGITAL, SECURE, TRUSTLESS AND GLOBALLY ACCESSIBLE

1

3

@donhylo

cryptoeconomics tokens | models

Currency TOKEN

resource TOKEN

asset TOKEN

access TOKEN

equity TOKEN

voting TOKEN

collectible TOKEN

identity TOKEn

attestation TOKEN

utility token

security token

Cryptoeconomics Primitives

token | protocol | mechanism | primitive | incentive system | cryptoeconomics

@donhylo

cryptoeconomics tokens | CRYPTOECONOMICS PRIMITIVES

@donhylo

cryptoeconomics tokens | reality check

we could be doing this completely wrong

Simulators

agent–based modelling, complex science, AI, networks

 

CAD Tools

verify designs, gain insights, explore design space

@donhylo

cryptoeconomics TOKENS | TOOLS

Feedback is welcome.

Thanks.

Token Based Economic Networks

By Laurent Hardy

Token Based Economic Networks

What are token-based economic networks? How social order, a balance between collaboration and cooperation, has been achieved historically and where does cryptoeconomics fit in this context to foster innovation in the way economies are organised? What are the super powers of mechanism design? How it works and what role do tokens play? What is the state of the art of the tooling used in mechanism design, i.e Token Engineering?

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