CRYPTOECONOMICS GUIDE | 2023'

 

What is the definition of Cryptoeconomics? Why is it important?

Cryptoeconomics provides a mechanism to decentralize the centralized markets and institutions that comprise modern civilization, for communities to self-govern and grow, and for the robust independence of these new systems. Formally, it is an interdisciplinary topic that focuses on the research and use of decentralized, cryptographically-enforced economic and governance systems.

Despite the fact that we are currently at an early stage of understanding and application of this field, with few fundamentally compelling and functional examples, it is sufficient to recognize the strength and potential of the knowledge frontier that stretches before us. The comparatively simple cryptoeconomic concepts of Bitcoin and Ethereum have already spawned entire companies, altered politics, capital, and human coordination on a global scale, and laid the groundwork for much more that we cannot yet conceive.

Each of the advantages of these systems - disintermediation, self-governance, scalability, and resilience - affords us opportunity to comprehend the potential and significance of this field.

DISINTERMEDIATION

With disintermediation, we can supplant the monolithic markets and organizations that dominate so much of the modern economy and society. Communication, advertising, financial, and computing platforms are all tightly regulated and expressly prioritize shareholder interests over those of users. Only a small number of studios, networks, dealers, and labels govern the links between artists, their art, and their communities. Even in professional sports, little cartels dominate the finances, dynamics, and even the narratives of players and fans. The list includes insurance, housing, and agriculture, among others. When users of a system or market may interact directly with counterparts and other members of the system in a transparent and untrustworthy manner, the experience of those systems might reflect the users' own best interests. More art, lower prices, more open and unrestricted systems, greater privacy, and more opportunities.

SELF GOVERNANCE

Cryptoeconomics provides us with the means to construct and distribute self-governance frameworks. A group of individuals can opt to join a type of shared governance that is both well-understood and distrustless; the success of the organization is not contingent on the trust of a single individual or external organization. The rules are predefined, transparent, and resistant to ill-considered modifications.

Despite the fact that many groups share this objective, the initial barriers to participation are substantial. The efforts of local unions and workers to self-organize serve as an example of a simple type of government that might be studied, replicated, modified, and refined. Theoretically, we could envision groups of workers co-owning their local workplace, be it a cafe or factory. In practice, this procedure faces substantial obstacles, not only in terms of the design of the shared rules system, but also in terms of the effectiveness and functional dynamics of the rules system.

If templates were provided with a clear set of rules for the governance of simple local businesses and a shared cultural awareness of how this model has been applied for other organizations, we might dramatically reduce the barriers to entry for groups to self-organize. Moreover, these well-understood and standardized deployments could facilitate the effortless and trustworthy participation of third parties. From insurance cooperatives to the sharing of local resources, these same notions, based on recognized, accessible, and proven templates, can be implemented well beyond local production.

DAOs give us with a basic canvas, but in their current state, they are only a starting point. DAOs are not effective forms of governance in the same way that "blockchain" is not an effective form of technology. Recognizing that we are at the beginning phases of experimentation and development of successful forms of governance enables us to adopt a mindset of inquiry, iteration, and implementation of the lessons that each generation of rule sets provides. Historically, our systems of governance have often begun with whatever system will stop the carnage and then evolved through a series of compromises. But, we can now construct governance systems on purpose and use the knowledge gained from each generation or implementation to further enhance, develop, and evolve these systems.

SCALE

Designing a system of governance on any size is a challenging endeavor. This difficulty is amplified by the complexity of the tasks and the quantity of the impacted and participating population. Cryptoeconomic design enables us to create community-level solutions with natural scalability. Cryptoeconomics affords communities the option to design appropriate and efficient rulesets, whether it be rules for sharing community resources such as electricity or vehicles, or for health care or insurance. Cryptoeconomics will have fully fulfilled its promise to grow self-government alternatives when other communities with comparable governance objectives may adopt the same proven models.

In addition, due to the trustless nature of these systems, communities that share the same rule sets can form meta-structures that provide effective scale benefits. People opt-in to governance systems at the community level that best suit them, and these communities can then opt-in to groups of communities that share the same norms. Using this bottom-up approach to governance, we may create complex, large-scale cooperation networks that would be nearly difficult to implement with a top-down strategy due to the absence of a centralized coordinating authority.

INDEPENDENCE

When these disintermediations or alternatives pose a danger to current systems or even exist alongside them as viable possibilities, independence becomes of the utmost importance; new rulesets upon which communities rely must be developed to ensure their survival. Although it will be impossible to put the genie of decentralization back in the bottle, knowledge censorship will be more difficult than ever. Independence is one of the key reasons why centralized actors cannot terminate the ideology of decentralized and distributed systems. While cash has come into the business, the bright lights of the casino have blinded far too many to the original purpose of the sector: as an alternative to centralized institutions that would eventually endanger the existence of alternatives. The bold and potent impacts of the new forms of governance we might create will only be realized if the entire stack of technology on which they rely is not simply decentralized, but also dispersed and really robust.

THE TERRITORY

Cryptoeconomics is by definition a humble endeavor. Perhaps nothing in the history of human society has remained so persistently unresolved as our own self-governance. But, we now have the means to design better systems iteratively and to share these insights with the public.

Distributed systems allow us to design and construct trustless governance, for these governance systems to be resilient enough to survive and produce lessons and insights, and for these systems to then form large-scale metasystems that can challenge traditional systems. It is a process involving incremental, step-by-step research, development, and experimentation, but it makes what was previously impossible conceivable.

We believe that the best way to have the most influence is to develop what we can and to disseminate as broadly as possible the insights, lessons, and knowledge that result from this work. In the early days of computers (just a few decades ago), the initial systems consisted of electrical gates connected together to do simple binary arithmetic. As simple as this was, each new realization served as a building stone for increasingly complicated systems. With each passing year, complexity and the complexity it enabled expanded at a rapid rate, resulting in systems that would appear miraculous to their creators and which have drastically transformed the world and society.

Cryptoeconomics is following a similar direction. Each new understanding adds a piece to the jigsaw, and each new practitioner has the potential to create a system that will inspire countless more designs, changes, and improvements.

With the discovery, exploration, and documenting of this field of knowledge, we as individuals can magnify our contribution to the improvement of the global community. While our current tools and understanding are primitive, they represent the beginnings of a complex and rich language that we may use to construct the world we wish to inhabit.

Cryptoeconomics is significant because it presents some of the most fundamentally potent options to improve the world.

- Kaylin Thornton