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Institutional framework
Economist, scientific Director of the graduate FINTECH, Director of research Thalamus Lab, Ranepa
Chapter 6. Optics for blockchains and DLTs
Alexander Didenko
The main goal of this long read is to understand what cryptoeconomic primitives are. From the previous long reads, you know what cryptoeconomic systems are — information systems in which the invariance of information in the past is achieved through cryptography, and game theory guarantees certain user behavior in the future. You are also familiar with the term "primitive": for cryptography, it means a relatively simple cryptographic protocol, the safety of which is proved mathematically; as a rule, several primitives are combined to solve a practical problem. The cryptoeconomic primitive is also relatively simple and is used in combination with other systems. Like all cryptoeconomic systems, it combines cryptography and game theory.
We previously discussed that there are several levels in the crypto economic system: payments and messages; smart contracts; and various applications. Top-level entities use lower-level entities. As a rule, cryptoprimitives are organized on top of the level of smart contracts. Read the general introduction to cryptoprimitives here. There are different types of cryptoprimitives:
Token curated registries
Curved bonding
Prediction markets
Stablecoins
Geospatial markets
The list of crypto primitives does not end there, it is constantly expanding.
Token curated registries
From a microeconomic point of view, the idea of TCR is simple: some experts possess valuable private information. The general public would benefit from revealing and aggregating that information in an unbiased, fair manner. For additional information, read TCR 1.0, from Mike Goldin (ConsenSys) and Continuous TCR, from Simon de la Rouviere, Ethereum developer, who designed ERC20 Ethereum Token.
Curved bonding
We have already discussed non-rivalrous goods in the context of zero-knowledge proofs. Now it's time to approach them again, on another occasion, though. What is a fair price for non-rivalrous goods, and how to organize the market to effectively reveal the price for it? People might have varying preferences for such goods: varying both across time and across agents. If somebody sets a stable price for a music album, there might be both people ready to pay more, and people ready to pay less this lump sum. Simon de la Rouviere describes the curved bonding mechanism, which should help in this case; there are also several extensions such as bonding curves for continuous token models and re-fungible tokens.
Hashtag markets, attention markets, and beyond...
The idea of hashtag markets lies in the interception of Schelling points and tokenization. It's a cryptoeconomic mechanism, that could be used to coordinate collective action without relying on a centralized party, by drawing public attention to certain issues.
[De]centralized [Fi]nance
Decentralized finance, or DeFi is currently the most emerging topic in cryptoeconomic world. First, listen to two interesting podcasts from Basic Block, dedicated to DeFi products (rus): Evgeniy Yurtaev (Zerion) talks about multi-collateral DAI, and Andrey Kozlov (Aave) describes flash loans.
Stablecoins
In 2014 Vitalik Buterin recognized the need and the challenge of creating a stable cryptocurrency in this post. Also, read an interesting post by Chris Georgen from Topl. You can read a basic introduction to stablecoins and classification here, where the author takes a critical stance against stablecoins. Haseeb Qureshi, the managing partner at Dragonfly Capital, shares an alternative classification system and a more optimistic view. Here is also the explanation of Dai stablecoins and decentralized crypto platform MakerDAO.
Additional materials
Blockchain for startups
A distributed ledger is a special algorithmic type of economic mechanism, since human agents in it also interact with machines. In the course, we will understand how the discipline of design of algorithmic mechanisms can be useful for a design engineer and a distributed ledger researcher.
What will you get
- 12 lessons with assignments in a chatbot
- Author’s presentation: simple, clear and with interest in the subject
- Free schedule: no deadlines and due dates for assignments
- All materials are available immediately, you can start learning at a convenient time
- Professional video and modern graphics
- Quick contact with technical support
- Certificate of Completion
What will you learn
- Build equilibrium models and other types of models in R and NetLogo
- Study deviations from equilibrium
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