Blockchain Incentive Structures: What they are and why they matter

One of the most powerful features of crypto-economic protocols is their ability to create incentive structures that allow anyone in the world to permissionlessly contribute to a set of shared objectives. These incentive structures can be finely tuned to facilitate large-scale coordination to achieve specific goals. This represents a step-function i... See more

Tokens are what you get when you combine a target metric with a built-in incentive: you get an incredibly powerful mechanism for motivating people to do things! This power is why tokenomics is such a promising field and why so many protocols are using tokens to coordinate their communities.

But, if you read the previous section, you know that there’s a catch: while the value of a protocol’s token is meant to reflect the success of the protocol, it’s very difficult to design a token that actually captures the full breadth and nuance of the protocol’s goals. And the price incentive built into tokens leaves them especially vulnerable to ... See more

I often hear people in the blockchain space assert some form of the following argument: if a platform creates a native token, such as a utility token that can be used to purchase services provided on the platform, the creation of the token by itself will align the incentives of users to act in the best interests of the platform. For example, someon... See more