$89.59 -0.28%
ETH · 11w

Cryptoeconomics and Mechanism Design – Hacker Noon

1. Privatized utility tokens will be common.

Many view digital currencies today as a speculative asset. They are the stuff that rich people risk “investing” in to hopefully make long-term gains. Generally, however, lay people are risk averse, preferring small, immediate gratifications over long-term gains.

Risk aversion: the tendency, when choosing between alternatives, to avoid options that entail a risk of loss, even if that risk is relatively small. Temporal discounting: the tendency to prefer small rewards received sooner to larger ones received later

Because of this, coins which can be used for the immediate exchange of value with a particular digital goods retailer may flourish early on. Specifically, these digital goods must be ubiquitous, so that token purchasers don’t feel there will ever be a substantial fall in demand. I predict that stable digital goods that are ripe for tokenization include bandwidth, storage, computation, and the media that drives demand for them.

We are already seeing much of this taking place. Bitcoin’s second developer, Martti ‘Sirius’ Malmi is developing a new cryptocurrency, AXE, which tokenizes bandwidth. FileCoin is tokenizing storage. Even pirates are gearing up to tokenize movie bounties. These sorts of utility tokens are likely to be interacted with regularly, while general-purpose coins, such as Bitcoin, will be used as a medium to exchange between utility tokens.

Behavioral cryptoeconomists will need to study the effects of risk aversion and temporal discounting in the adoption of speculative cryptocurrencies, as well as non-speculative utility tokens. To what degree do these phenomena predict the differential adoption of these distinct types of currencies?

2. Debt, in the current sense, will be out of fashion.

Cryptocurrencies that are under-girded by the blockchain did the hard work of fixing the double-spending problem. The side effect, however, is that debt cannot be created. Ho...

Continue on
Recent news
ETH -0.28% · · 7h

Trust Management of Digital Assets

This post was originally published on this siteBitcoin Press Release: The Membrana Blockchain Platform is intended to bring investors and traders together for concluding mutually beneficial blockchain...
ETH -0.28% · · 12h

Shrimpy x KuCoin Trading Competition

To celebrate our official partnership with KuCoin, Shrimpy will be running a weekly social trading competition through the beginning of January! Users are encouraged to trade on KuCoin while using...
ETH -0.28% · · 17h

CME Bitcoin Futures Are Poisoning Crypto

The Chicago Mercantile Exchange (CME) launched Bitcoin futures on 17 December 2017, the same day the price of Bitcoin peaked near $20,000 and then began to crash, a crash that has lasted a year. Today...