Economics Design and Engineering for Robust DLT Ecosystems

Abstract

Matching economic theories, the paper discusses the underlying funda- mentals of token economics that exist within a token ecosystem. 3 design fundamentals that affect the soundness of token economics: 1) Market Design, 2) Mechanism Design and, 3) Token Design. Token ecosystems facilitate an exchange of goods and services between participants in the ecosystem. Concepts from matching theory, auction theory, monetary economics, allocation theory, network economics and game theory, can help better design strong incentives for participants, produce robust sta- ble outcomes, reduce inefficient allocation and improve the efficiency of transaction within the ecosystem. This challenges existing systems that will open powerful potential for long-term sustainability of token ecosys- tems and overcoming existing challenges.

Keywords: token economics, token engineering, ecosystem architecture, systems design, market design, mechanism design, token design, decentralised governance, blockchain economics, network economics, allocation theory

JEL Classification: O31, O33, O39, Y20