Cryptoeconomics
*Traditionally not a subfield of economics, but area of applied cryptography that takes economic incentives and economic theory into account. Has most in common with mechanism design, an area of mathematics and economic theory. Bitcoin, Ethereum, et al are products of cryptoeconomics, using incentives and cryptography to design new kinds of systems, applications, and networks.
It can be seen as a cross jurisdictional operating system and provides an auto enforcable economic/governance layer on top of the internet with implication on all areas of society.
This mind map is an attempt to line out derived research questions *
Crypto Macroeconomics
Cryptoeconomics is helping us create games which lean on the (semi)rationality of man + security provided by computers. For those who protect the rules of the game, rewards are given. For attackers, large financial walls are put up to disincentivize bad behavior. For every bad actor out there — we remember, cryptography helps us heavily favor the defender.
-
Mechanism Design
Aim of mechanism design is to make it expensive/not feasible to attack the network (passivley or actively)Related Research Fields:
- Behavioural Economics
- Institutional Economics
Proof Of Work
*uses the primitives above — leaning heavily on hashes (+ nonces) — to create a game for all the computers on Bitcoin’s network. The game creates a) competition for the chance to add the next block to the Bitcoin blockchain and b) provides an economic incentive for the block proposed to hold accurate transactions.
The competition aspect of mining proves to be important for security reasons, as well. It makes the system expensive to attack. To effectively ‘take-over’, an attacker would need to buy enough equipment and take on enough electricity costs to control more than 51% of the network. See what a cost of a 51% attack would be, today (over $3 billion).*
-
-
-
-
game theory: the theory of what to do when everyone is homo economicus and trying to maximize their own gain
Monetary Policy
Fixed Monetary Supply
In the case of Bitcoin, every 210,000 blocks, the bitcoin reward for mining and proposing accurate blocks halves. Satoshi and team also decided that 21 million bitcoin would be the total supply for the currency. algorithmically fixed total issuance of the currency which mandated that only 21,000,000 BTC will ever be created.
-
-
Consensus Protocols Base Layer Cryptoeconomic Primitive Native Network level A self-sustaining system, and its intrinsic token must be a necessary element of that system. the removal of the token would cause it to fail or work less effectively than the system with a token. Predictable coordination of a set of actors (whether it be humans or machines) towards some specific shared goal or outcome. This can include predictably failing in certain situations and knowing limitations.
-
"Middle Ware", AKA level-2 (L2) solutions
Applications that directly affect and surround this base-laye. State Channel Design (Raiden, Plasma, Lightning, 0x Protocol)
Crypto Micreconomics
-
Behaviour of network agents
(Miners, Tokenholders, Exchanges, Developers, Applications building on top of Network Token)
-
Externalities Analysis
of mining (miners), holding tokens (tokenholders), trading pairs (exchanges)
-
-
-
-
-
-