Languages are powerful. Arrival illustrates this idea. In the interest of avoiding spoilers, Dr. Louise Banks learns something about reality that she had not known before.
While this movie is an exaggeration, by no means is this phenomenon not real. There are languages that use absolute geographic directions (north, south, east, west) giving the speakers a sense of where north, south, east, and west are at all times. Russian has a specific word for “light blue” and “dark blue”, allowing them to discern these colors quicker than others that do not.
If something is important, I think it would only help to give that something a name. It’s good then that cryptoeconomics has recently (~3 years) been named.
Cryptoeconomics and especially institutional cryptoeconomics are things I had not heard of before. Naturally, when I was asked to join a panel to discuss Institutional Cryptoeconomics, I first whipped out the handy Google to look it up, then said “yes”.
I learn well by sharing what I know, and I don’t often pass up an opportunity to do so. In this case, I thought I’d come in knowing nothing, but as I read the definition of cryptoeconomics and institutional cryptoeconomics, I found out that I had encountered these topics, before it was given a name “cryptoeconomics”.
Familiarity with this would be useful to people who are technologists in the blockchain space, people who are thinking of ICOs, people who are thinking of tokenising something, smart contract developers, blockchain developers, etc. There are questions in each of these areas that are in the general vicinity of cryptoeconomics.
The oldest definitions of cryptoeconomics I can find are from Vlad Zamfir, a researcher in the Ethereum Foundation, and from Vitalik Buterin, an Ethereum founder. They both describe a discipline that allows you to reason about the blockchain space: how the incentives and disincentives shape the system.
More recently, there has been discussion around Institutional Cryptoeconomics. It is less centered on distributed ledger/blockchain, and more about the effects that distributed ledgers have on institutions and ultimately society.
With the definitions of Vlad Zamfir and Vitalik Buterin, I found those to be a little too specific to make a map of it in my head. It seems that they are talking mostly about reasoning about introducing changes to a blockchain.
To categorise things, I found it helpful to think about cryptoeconomics as the study of economics when cryptography is applied. Within that study, you have institutional cryptoeconomics and what Zamfir and Buterin spoke mostly about, distributed ledger cryptoeconomics.
Yes, it IS important
In this new world of cryptoeconomics, you should no longer just think about things in a purely computer scientific manner. When I make changes to a web application because it’s slow, all I think about are the costs: the cost to produce these changes, the cost to host these changes, and the cost to the business for not having those changes.
When making changes to a blockchain, it is no longer that simple. You have to reason about economic incentives, disincentives, Game Theory — all within a framework of what cryptography does or does not do for you. Each whitepaper I have read devote significant effort to tackling the cryptoeconomics [1, 2, 3, 4] behind their ideas.
If the players in the blockchain ecosystem did not give this thought, the chances of these networks to crash and burn will probably be higher.
When finding the next institution to disrupt with your unicorn startup, you should know what kind of technology to use, and whether or not it’s appropriate.
I’m glad it has been given a word. It shows how important it is. By giving it a word, it has already become more real.