An Emerging Field in Crypto Economics
When I started studying economics, the first question that was asked to us in introduction to micro-economics was — what is economics? Students offered answers like understanding supply and demand, applied mathematics, and the study of market efficiency. The assistant professor at that point merely waved her hand away at all the obviously (not to me at the time) wrong answers.
Economics, she said, is the study of how people behave in allocating scarce resources.
I loved how brilliant that answer was in combining facets of behavioral psychology and mathematics, but more importantly high level. Scarcity is a condition that exists pretty much for all things — from actual physical goods to more theoretical items like time, effort, and work. That answer was and is just about the unifying theory of everything.
As I read the current literature and news on cryptocurrencies, I can’t help but gravitate back towards that definition. While the news read Ethereum breaking $500, I think about what are the various incentives for us to get there. When NEO becomes hot because it may be rumored to be the blockchain technology for all Chinese ICOs, I think about mechanism design so that hot isn’t just a fad but a fundamental system design. When I read that more founders are looking towards ICOs as a route to raise, I examine the behavioural psychology that incentivise the founder to think this way. When I analyze a SAFT document, I think through the mechanisms that allow a foundation to raise legally and long-term but give investors a dynamic incentive depending on committment.
A few months ago I asked Trent McConaghy what sources there were to understand crypto-economics and mechanism design. I don’t quite remember his exact response, but it was something to the effect that these are the early days. Fortunately I have found a great Medium post on the basics of crypto-economics to get started, as well as some academic research both on crypto and mechanism design itself.
A Crash Course in Mechanism Design By BlockChannel (Alex Evans + Steven McKie):
Cryptoeconomics 101 by Nick Tomaino:
What is Mechanism Design Theory? by Richard Adams:
An optimal ICO Mechanism by David Cerezo Sanchez:
Efficient Mechanism Design by Vijay Krishna and Motty Perry:
An Empirical Study of Namecoin:
Myerson-Satterthwaite Theorem:
Vickrey-Clarke-Groves Auction:
Mechanism Theory by Matthew O. Jackson:
https://drive.google.com/viewerng/viewer?url=https://web.stanford.edu/~jacksonm/mechtheo.pdf
Mechanism Design:
This post was originally published by tak_lo on Medium: https://medium.com/@tak_lo/an-emerging-field-in-crypto-economics-14e33fa3588f
