INCENTIVE STRUCTURES TRANSFORM SOCIETY.

WHO AM I

2010 MASTER IN ECONOMIC SCIENCE - STATISTICS

2015  DISCOVERED THE WORLD COMPUTER IDEA - ETHEREUM

2016  CONNECTING WITH LIKEWISE MINDS - COMMUNITY ETHEREUMMADRID

2017  SPREADING THE IDEA - TEACHING CONCEPTS (BITCOIN & ETHEREUM)

2018  COLLECTIVE RESEARCH - CRYPTOECONOMICS.HUB WITH LAURENT

INTRO

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Vlad Zamfir, Ethereum Foundation 2015

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CRYPTOECONOMICS

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IS A FUNCTION OF ALREADY EXISTING INFORMATION.

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TOKEN & PREVILIGES

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CRYPTO ELEMENTS

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CRYPTO GRAPHY

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HOW TO PROOVE IDENTITY

 

HOW TO PROOVE CORRECTNESS

 

HOW TO PROOVE TIME HAS PASSED

 

GAME THEORY

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JOHN NASH

MATHEMATICIAN

1928-2015

 

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You

Your game partner

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Cooking lover

Boxing lover

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	Hawk	Dove
Hawk	(50-100)*0.5 = -25	50
Dove	0	(0.5*50)-10=15

Attacker

Opponent

V= 50     D= -100     T= -10

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MECHANISM DESIGN

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AUCTION DESIGN

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AUCTION + STAKING

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BEHAVIOURAL ECONOMICS

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ULTIMATUM GAME

You get 100€
​You have to offer something to your partner
If your partner accepts you get the remaining part
If your partner reject both get nothing

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SURPRISINGLY POPULAR

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Ultimatum Game

NETWORK SCIENCE

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METCLAFE'S LAW

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PROBLEMS OF OVER-CONNECTON

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HIGH SPEED CONTAGION

 

 

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NO INNOVATION

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RESEARCH GROUPS

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CONSENSUS PROTOCOLS

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The purpose of a consensus algorithm, in general,

is to allow for the secure updating of a state according to some specific state transition rules,

where the right to perform the state transitions

is distributed among some economic set.

VITALIK, 2014

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HOW CAN WE ACHIEVE CONSENSUS?

 

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LET'S PLAY A GAME...

 

14237 59049 76241 81259 90215 100000 132156 157604

14237 59049 76241 81259 90215 100000 132156 157604

THOMAS SCHELLING

GAME THEORY ECONOMIST

1921-2016

 

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ONCHAIN APP'S NEED TO KNOW THE OFF-CHAIN TRUTH.

 

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Oracles - central point of failure and control

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Oracles decentralised

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Schelling Coin is a mechanism based on the game, that if you choose the answer, which everyone else has chosen, you get a Schelling.

 

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Who won the election?

 

 

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Choose Hillary or Trump

 

If you choose

what the majority says

you get a Schelling.

 

 

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Majority

You

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Trump as being the truth

is the Schelling Point.

 

 

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Centralisation

 

 

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Energy Waste

 

 

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1. Randomly choose a validator based on the proportional stake invested from the group of already existing validators.
2. The chosen validator creates a block which points to some previously created block.
3. The chosen validator gets the block reward and the transaction fees.

BF based

 

 

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1. Randomly choose a validator based on the proportional stake
invested from the group of already existing validators.
2. The chosen validator proposes a block
3. All the other validators vote yes if they think it is a valid block
4. If ⅔ or more voting power votes yes, the block is included in the blockchain. Otherwise a new proposer is chosen and we go to 1.
5. The chosen validator gets the block reward and the transaction fees

Chain based

 

 

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Rich get Richer

 

 

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Low participation

can cause centralisation

 

 

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GAME ATTACKS

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SAME GAME

NEW RULES

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Choose Hillary or Trump

If you choose what the majority says you get a Schelling.

If you choose Hillary, but the majority chooses Trump you'll get the bribe.

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Majority

You

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If you choose Hillary

you win in any case.

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Costs = 0

Budget = ?

 

 

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Crucial to the success of any PoW attack

is the amount of hashing power.

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Carlos wants to buy an iPhone from Carla for 1 BTC, but he actually does not want to spend this money and tries a double spend attack.

 

 

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What should Carla do to protect herself from a double spend attack?

 

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Carla should wait for

a certain amount of confirmations.  

 

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Carla defines 2 transactions are needed

before she sends the iphone.

 

 

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Carlos creates a secret chain including a new transaction which is going to transfer the money back to him.

 

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Transaction: Carlos to Carla 1BTC

1 confirmation 

2 confirmations 

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Transaction: Carlos to Carla 1BTC

1 confirmation 

2 confirmations 

Transaction: Carlos to Carla 1BTC

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What are the reasons for doing such an attack?

 

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One double spend, which only you can do.

How high can this be?

 

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Destroying Bitcoin so that the confidence in the currency hence its value will drop massively.

Competitor in crypto or fiat (government)

 

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To go short on Bitcoin.

 

 

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What are the risks of an attack?

 

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In the case of no attack:

You can effectively get 100% of the mining reward.

 

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What is more beneficial to do an attack

or to play by the rules?

 

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The reason for doing a censorship attack in blockchains is similar to those in any other system, to exclude certain people/entities as well as blackmailing.

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We want to censor any transaction from Alex.

 

 

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1. Strategy

Tell the network to not include the transaction from Alex.

 

 

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2. Strategy

We have 51% hashing power - we can do a punitive forking.

 

 

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3. Strategy

If we have less than 51% we can do  

Feather Forking.

 

 

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Let q equal the proportion of mining power you have, 0 < q < 1

Let k = 1: You will give up after 1 confirmation (one additional block)

Chance of successfully orphaning (invalidating) the block = q2

If q = 20%, then q2 = 4% chance of orphaning block.

 

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Now you are a miner and

you have these 2 options:

 

 

 

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1. EV(include) = (1 - q2) * BlockReward + Alex's tx fee

2. EV(don't include) = BlockReward

 

 

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Unless Alex pays q2 * the BlockReward in fees for his transaction, other miners will mine on the malicious chain

4% * 12.5 BTC = 0.5 BTC

 

 

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Crucial to the success of a PoS attack

 is the amount of voting power.

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How would this look like in PoW?

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STATE CHANNELS

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TOKEN MODELS

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TOKEN SALES

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STABLE COINS

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TOKEN CURATED REGISTERIES

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