Economics and Math of Token Engineering and DeFi
06/2021 - For best results - it is recommended to make adjustments to your ebook to get the best fit on your device
Economics is a science. It primarily examines how decisions are made and which alternatives provide the greatest benefits to various stakeholders. Contrary to popular belief, economics is not solely about money. It is, and always has been, the study of allocation of scarce resources (behaviors). One of the key differences in token economics is to create rules around the allocation of scarce resources to affect people’s behaviors. We can enforce these rules through incentives and disincentives (punishments).
Just as Einstein's Theory of Relativity built upon, extended, and also limited Newtonian Physics, so too do new economic Web 3 models build upon, extend, and limit hundreds of years of economic theory that led us to this point.
While it is important to develop the technological infrastructure of Web 3 and explore ideas of what Web 3 can be, it is also necessary to examine the economics and incentives alignment of economic agents in Web 3 communities. It is easy to create a token out of the proverbial thin air, but the token only has real value if incentives make sense.
This book will dive into the foundational principles of Web 3 economics. We will examine the evolution of economics from Web 1 to Web 3, explore the relevance of traditional economic thought in Web 3 communities, and envision what economic and incentive models could exist in this new environment.
Finally, we will explore ways to apply the new Web 3 economics with token and tokenless models. Throughout the book we will also examine the mathematical principles that drive and underpin the various economic mechanisms we discuss.
While this book is informed by rigorous academic research, you don’t need to be an economist or a computer scientist to understand this book!