Unraveling CryptoEconDay Paris 2023

Recapping CryptoEconLab’s research seminar highlighting the top research and practical applications in cryptoeconomics

CryptoEconDay Paris recently converged at the Filecoin Network Base @ Son de la Terre for our third event in the 2023 series. This intellectually charged occasion, held alongside Eth CC, offered insights and research breakthroughs on the topic of cryptoeconomics.

Over 1,000 attendees explored captivating topics, hosted by the CryptoEconLab, including the Economics of Tokenized Infrastructure, Timing Games in Proof of Stake Protocols, Pricing Mechanisms for Proto-Danksharding, DAO Mechanism Design, Perpetual Oracle-Free Options, Verifiable DEX Design and Liquidity Mining.

CryptoEconDay Paris Playlist
Intro to CryptoEconDay Paris

Below is a recap of the event and summaries of the presentations for you to enjoy:

Barnabe Monnot, Ethereum Foundation Robust Incentives Group (RIG) | Time is Money: Strategic Timing Games in Proof-of-Stake Protocols

Ethereum Foundation produced a recent paper that exhibits the issue of timing games. Consensus participants in decentralized economic systems often find themselves in a privileged position, as block producers. In particular, Proof-of-Stake systems typically sample a block proposer at random and provide them with a slot where they are expected to propose a block. Delaying as late as possible the release of the block maximizes rewards to the producer, since they accumulate more fees and MEV in the meantime. Does this incentive lead to a slippery slope where everyone is late? In France, this is known as “quart d’heure de politesse” (“polite 15 minutes”), where everyone expects everyone else to be late, and adjusts their behaviour as a result.

Barnabe and his team have found so far that while timing games are worth playing in Proof-of-Stake, they are not currently being exploited by consensus participants. However there is strong evidence pointing towards their future potential, despite the limited exploitation of MEV capture observed at present.

Recording

Ulla Rone, Qredo & Maria Ines Silva, CryptoEconLab | How to put a token at the heart of its economy — a case study with Qredo

Ulla and Maria discuss a recent collaboration between Qredo and CryptoEconLab to update Qredo’s tokenomics. They provided an analysis of how Qredo’s custody network functions and detailed some of the changes related to tokenomics that are expected to occur in the medium to short term. They also went over how they modeled Qredo’s economy to tune and test a few key economic parameters to enable growth and sustainability of the Qredo network.

The new update to Qredo economics claims:

• Higher usage and more staking → lower circulating supply: Caused by the increased token locking and burning
• Low token prices → lower circulating supply: Due to the service fees tipping mechanism.

Recording

Matheus Venturyne Xavier Ferreira, Harvard University | Credible Decentralized Exchange Design via Verifiable Sequencing Rules

Trading on decentralized exchanges has been one of the primary use cases for permissionless blockchains with daily trading volume exceeding billions of U.S.dollars. In the status quo, users broadcast transactions and miners are responsible for composing a block of transactions and picking an execution ordering — the order in which transactions execute in the exchange.

Due to the lack of a regulatory framework, it is common to observe miners exploiting their privileged position by front-running transactions and obtaining risk-fee profits. In Matheus’ work, he proposes to modify the interaction between miners and users and initiate the study of verifiable sequencing rules.

Miners can determine the content of a block; however, they commit to respecting a sequencing rule that constrains the execution ordering and is verifiable (there is a polynomial time algorithm that can verify if the execution ordering satisfies such constraints). Thus in the event a miner deviates from the sequencing rule, anyone can generate a proof of non-compliance.

Matheus asks if there are sequencing rules that limit price manipulation from miners in a two-token liquidity pool exchange. The first result is an impossibility theorem: for any sequencing rule, there is an instance of user transactions where the miner can obtain non-zero risk-free profits. In light of this impossibility result, the main result is a verifiable sequencing rule that provides execution price guarantees for users. In particular, for any user transaction A, it ensures that either (1) the execution price of A is at least as good as if A was the only transaction in the block, or (2) the execution price of A is worse than this ``standalone’’ price and the miner does not gain (or lose) when including A in the block.

Recording

Paul Sengh, OpenBlock Labs | Incentive Design for DAOs: Past, Present, & Future

In this talk, Paul discusses the challenges of optimizing cryptoeconomic incentives for DAOs. He introduces two frameworks for incentivizing participants in DAOs: objective-based and performance-driven frameworks. Along with describing the principal-agent model, which describes the relationship between the DAO (the principal) and its participants (the agents) and the potential of reinforcement learning (RL) as a methodology for token optimization.

Recording

Jesper Kristensen, Panoptic | Automated Market Makers and the Future of Perpetual Options: A New Era in DeFi

In this talk, Jesper delves into the rapidly evolving world of Decentralized Finance (DeFi) and the transformative potential of perpetual options powered by Automated Market Makers (AMMs). He explores the underlying mechanisms that drive these automated entities, their role in creating efficient, decentralized markets, and their unique influence on the development of perpetual options.

He shows how Panoptic uses Uniswap as a Clearinghouse for options trading and how the platform enables many options trading strategies without an oracle running in the process.

Recording

Gabe Pohl-Zaretsky, Gauntlet | Liquidity Mining — The Good, the Bad, The Ugly

Gabe shows us a quantitative retrospective into the impact liquidity mining has had on DeFi, and in particular Uniswap, with discussion on how to improve the effectiveness of these types of programs. Ultimately showing how liquidity mining helps build up better network effects more than just having crypto protocols raising in value with no utility.

Recording

Axel Cortes Cubero, CryptoEconLab | Gentrification and sprawl: Urban planning crypto scaling solutions

Axel’s presentation helped us understand if innovation in blockchains always a good thing for the ecosystem. In a Filecoin example, this network has been at the center of massive innovation this year with the deployment of the Filecoin Virtual Machine (FVM), and Interplanetary Consensus (IPC).

He explored the ways in which deploying these new computing capabilities and scaling technology could lead to negative economic externalities for the network, and what cryptoeconomic mechanisms can be implemented to ensure these have an overall positive impact.

Recording

Xin Wan, Uniswap | Hyper-fragmented Liquidity, Adversarial Mempool & how UniswapX helps

Today there are problems with cross-chain liquidity and MEV competition. It’s literately impossible to find liquidity across all DeFi and CeFi venues. Pools grow faster than people can integrate. In MEV mempools, swappers are mostly getting their value extracted away by MEV searchers and bots with strategies the average user can’t avoid.

Xin shares with us a recent update in a Uniswap produce called UniswapX aimed at solving these challenges.

Recording

Akaki Mamageishvili. Offchain Labs | Multidimensional Resource Pricing with Application to EIP-4844

Akaki and his research team are currently studying a problem of dynamic resource pricing, where a resource has multiple dimensions. One particular example is a new proposal, EIP-4844, which allows a parallel market for specific data storage for rollup protocols on the base layer. In this presentation Akaki shows efficient strategies of calldata posting for these protocols, depending on their usage levels and delay costs.

Can rollups survive off of this strategy? Do these models continue to optimize the speed of transactions in Ethereum. In this presentation Akaki addresses those issues.

Recording

ZX Zhang, CryptoEconLab
David Sneider, Lit Protocol
Jacob Greene, API3
Kris Paruch, Admin

The Economics of Tokenized Infrastructure

Our panel discussed the economics of key infrastructure in crypto and how this will evolve over time. These are the layers most closely associated with the physical connection between devices and our popular crypto networks. They include Layer 1’s (L1’s), Remote Produce Call (RPC) protocols, Oracles and Decentralized Physical Infrastructure Networks (DePIN) that help make crypto a global value chain worth connecting into.

We cover why there are needs to tokenize infrastructure, the value props, best practices, unpopular opinions and some analogies in how crypto incentives enhance TradFi and Web2 product offerings.

Recording

CryptoEconDay Paris 2023 once again proved to be an important gathering for sharing cutting-edge research and lessons learned in the world of cryptoeconomics. We look forward to having you all for our future events in 2024.