Engineering Token Economy with System Modeling

Cryptocurrencies and blockchain networks have attracted tremendous attention from their volatile price movements and the promise of decentralization. However, most projects run on business narratives with no way to test and verify their assumptions and promises about the future. The complex nature of system dynamics within networked economies has rendered it difficult to reason about the growth and evolution of these networks. This paper drew concepts from differential games, classical control engineering, and stochastic dynamical system to come up with a framework and example to model, simulate, and engineer networked token economies. A model on a generalized token economy is proposed where miners provide service to a platform in exchange for a cryptocurrency and users consume service from the platform. Simulations of this model allow us to observe outcomes of complex dynamics and reason about the evolution of the system. Speculative price movements and engineered block rewards were then experimented to observe their impact on system dynamics and network-level goals. The model presented is necessarily limited so we conclude by exploring those limitations and outlining future research directions

Token Economics in Real-Life: Cryptocurrency and Incentives Design for Insolar Blockchain Network

The study of how to set up cryptocurrency incentive mechanisms and to operationalize governance is token economics. Given the $250 billion market cap for cryptocurrencies, there is compelling need to investigate this topic. In this paper, we present facets of the token engineering process for a real-life 80-person Swiss blockchain startup, Insolar. We show how Insolar used systems modeling and simulation combined with cryptocurrency expertise to design a mechanism to incentivize enterprises and individual users to use their new MainNet public blockchain network. The study showed subsidy pools that incentivize application developers to develop on the network does indeed have the desired positive effect on MainNet adoption. For a startup like Insolar whose success hinge upon how well their model incentivizes various stakeholders to participate on their MainNet network versus that of numerous alternatives, this token economics simulation analysis provides invaluable insights