Cover image for Cryptoeconomics

Cryptoeconomics

Author Jian Gong , Wei Xu
Release Date: 2020/04/01
ISBN: 9781000062113
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"A systematic review of the structure and context of the blockchain-derived economic model... (the book) describes cryptoeconomics in connection with the game theory, behavioral economics and others in simple understandable language."—Wang Feng, founder of Linekong Interactive Group and Mars Finance, partner in Geekbang Venture Capital

Blockchain technology has subverted existing perceptions and is the start of an economic revolution, called, cryptoeconomics. Blockchain is a key component of cryptoeconomics. Vlad Zamfir, a developer of Ethereum, defines this term as "a formal discipline that studies protocols that governs the production, distribution, and consumption of goods and services in a decentralized digital economy. Cryptoeconomics is a practical science that focuses on the design and characterization of these protocols".

This book explains the structures of blockchain-derived economic models, their history, and their application. It uses real-world cases to illustrate the relationship between cryptoeconomics and blockchain.

Blockchain technology solves trust issues. A blockchain application can restrict behavior on the blockchain through a reward and punishment system that enables consensus in an innovative way. The greatest significance of cryptoeconomics lies in guaranteeing safety, stability, activity, and order in a decentralized consensus system. Security and stability are achieved mainly by cryptographical mechanisms. Activity and order are achieved through economic mechanisms.

Cryptoeconomics and Blockchain: Ignighting a New Era of Blockchain discusses the most popular consensus algorithms and optimization mechanisms. With examples explained in clear and simple terms that are easy to understand, the book also explores economic mechanisms of blockchain such as game theory and behavioral economics.

Table of Contents

  1. Cover
  2. Half Title
  3. Title Page
  4. Copyright Page
  5. Table of Contents
  6. Foreword
  7. Preface
  8. Authors
  9. 1 What Is Cryptoeconomics?
    1. 1.1 The Basics of Cryptography
    2. 1.1.1 Hash Algorithm
    3. 1.1.2 Key Encryption
    4. 1.1.3 Digital Signature
    5. 1.2 Basic of Economics
    6. 1.2.1 Incentives
    7. 1.2.2 Punishment
    8. 1.3 Supply and Demand
  10. 2 Mechanisms of Consensus
    1. 2.1 The Byzantine Generals Problem
    2. 2.2 CAP Theory
    3. 2.3 PoW (Proof-of-Work) Mechanism
    4. 2.3.1 Problem of PoW 1: Waste of Resources
    5. 2.3.2 Problem of PoW 2: Environmental Problem
    6. 2.3.3 Problem of PoW 3: Centralization of Computing Power
    7. 2.4 PoS (Proof-of-Stake) Mechanism
    8. 2.5 LPoS (Leased Proof-of-Stake) Mechanism
    9. 2.6 DPoS (Delegated Proof-of-Stake) Mechanism
  11. 3 Optimized Consensus Mechanism
    1. 3.1 Optimized Versions of PoW Mechanism
    2. 3.1.1 Litecoin’s SCRYPT Algorithm
    3. 3.1.2 Tandem and Dash
    4. 3.1.3 Parallel Algorithm and Heavycoin
    5. 3.1.4 Primecoin
    6. 3.1.5 Ethash and Ethereum
    7. 3.1.6 Equihash and Zcash
    8. 3.2 Optimized PoS
    9. 3.2.1 Byzantine General and Byzantine Fault-Tolerance Algorithm
    10. 3.2.2 Algorithm for Realizing Proof-of-Stake
    11. (1) Tendermint and POS Based on BTF
    12. (2) CFFG
    13. (3) CTFG
    14. 3.2.3 Trap of Proof-of-Stake
    15. (1) Relations with No Interest
    16. (2) Remote Attack
    17. (3) Cartel Formation
    18. (4) Future Work
    19. 3.3 PBFT Optimized Version: Federal Byzantine Agreement (FBA)
    20. 3.4 Other: Algorand Agreement
  12. 4 Game Theory and Cryptoeconomics
    1. 4.1 What Is Game Theory?
    2. 4.2 Nash Equilibrium
    3. 4.3 Schelling Point
    4. 4.4 Bounded Rationality Model
    5. 4.5 Game Theory Mechanism Design and Consensus Mechanism
    6. 4.6 Game Theory Mechanism Design and Blockchain Security
    7. 4.7 Prospect of Game Theory-Based Consensus Mechanism – Ethereum’s Casper Consensus Algorithm
  13. 5 Behavioral Economics and Cryptoeconomics
    1. 5.1 Behavioral Economics vs. Traditional Economics: Irrational vs. Rational
    2. 5.2 Behavioral Economics in the Blockchain World
    3. 5.2.1 How to Introduce Blockchain to Friends?
    4. 5.2.2 Why Are You Completely Indifferent to $10,000 Bitcoin, While Some People Are Crazy for it?
    5. 5.2.3 Why Do So Many Projects Like Airdrops?
    6. 5.2.4 DAO Is Really the Main Form of Organization in the Future?
    7. 5.2.5 How to Control Our Impulses? Maybe You Need a Smart Contract
    8. 5.2.6 Dilemma of Multiple Choices: Why Do We Want to Participate in All Projects?
    9. 5.3 The Intersection of Behavioral Economics and Cryptoeconomics
  14. 6 Cryptoeconomics and the Security of Blockchain
    1. 6.1 Sybil Attack
    2. 6.1.1 Cost of Sybil Attacks on Traditional and Blockchain Networks
    3. 6.2 Fork: Soft Fork and Hard Fork
    4. 6.2.1 Fork, Soft Fork, and Hard Fork Concepts
    5. 6.2.2 Main Characteristics of Soft Fork and Hard Fork
    6. 6.2.3 The Importance of Forks
    7. 6.3 P + ε Attack
    8. 6.3.1 What Is P + ε Attack
    9. 6.3.2 Protection from P + ε Attacks
    10. 6.4 DAO Attack
    11. 6.4.1 The Significance of The DAO Cryptoeconomics
    12. 6.5 Zero-Knowledge Proof
    13. Summary
  15. 7 Blockchain in China
    1. 7.1 The Power of Blockchain in Real Life
    2. 7.2 Real Use Cases of Blockchain in China
    3. 7.2.1 Financial Solutions
    4. 7.2.2 Police and Other Governmental Solutions
    5. 7.2.3 Food Safety and Supply Chain
    6. 7.3 Secret of Chinese Success
  16. 8 The Future of Cryptoeconomics
    1. Conclusion
  17. Index
3.131.110.169