Cryptic Economics

There are three types of cryptoassets: stores of value, security tokens, and utility tokens... this essay will focus on utility tokens. "New Models for Utility Tokens": post

In the work token model, a service provider stakes (AKA bonding) the native token of the network to earn the right to perform work for the network. For services which are commodities such as Keep (off-chain private computation), Filecoin (distributed file storage), Livepeer (distributed video encoding), Truebit (off-chain verifiable computation), and even “decentralized mechanical Turk” powered by humans such as Gems, the probability that a given service provider is awarded the next job is proportional to the number of tokens staked as a fraction of total tokens staked by all service providers. The beauty of the work token model is that, absent any speculators, increased usage of the network will cause an increase in the price of the token. As demand for the service grows, more revenue will flow to service providers. Given a fixed supply of tokens, service providers will rationally pay more per token for the right to earn part of a growing cash flow stream.

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I hold skepticism about modern economics (may also betray ignorance). Crypto-currencies only increase my skepticism. That said, I'm deeply interested in applications of crypto. I think complementary currencies are being revisited now in the form of Utility Tokens.

So I may come back to this article to try to understand the cryptic economics jargon and the cryptic crypto jargon to see if I can see how and whether these newfangled things can help us build a kinder world.

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Incentives for better computer security have morphed into investment promises. The former Satoshi intended, the later Satoshi did not intend.