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
source: Basics of Social Order
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
@donhylo
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
Bayesian game setting
mechanism
social choice function
given a bayesian game setting, it is said that a mechanism implements a social choice function in dominant strategies or in Bayes–Nash equilibrium
source: Game Theory Online
@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
-
Stake distribution
-
off–chain information
-
IDENTITY THEFT
-
BRIBERY
-
collusion
-
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
-
CURATION
-
PROOFS OF HUMAN OR COMPUTE WORK
-
IDENTITY
-
REPUTATION
-
GOVERNANCE / SOFTWARE UPDATES
-
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.
