A different approach to Free Riders Problem

A Nobel Prize Winning lecture invalidates the assumption that humans cannot govern a common resource without a central authority

The hype around Blockchain Technology and cryptocurrencies was immense. We saw billions flowing into this space — but the overall return was only frustration. It turned out that revolutionizing the century-long nested monetary system wasn’t as easy as everyone was hoping for.

The main challenge blockchain projects failed to overcome was creating sustainable and sound cryptoeconomics — a scientific field combining economics and mechanism design with cryptography — where they stumbled upon a major problem known as the free rider problem.

Free rider problem suggests that individuals consume more than they need because fear and distrust has its roots into how we see the nature of humans in general. To identify the fundamentals of this problem, and to solve it at once, Elinor Ostrom went on an exhausting expedition, proving that humans are not at all as helpless as the free rider problem inclines.

At the heart of the free rider problem

Economists differentiate four types of goods based on two metrics — excludability and rivalrousness. A good is excludable if access to it can be restricted to individuals, while a good is…