moving beyond ‘tokenomics’; open source is the way
👉 Trend + tips: Token design, beyond tokenomics
Guy Wuollet et al
“Tokens” are a hot-button topic, capturing mindshare not just for those in crypto but for anyone interested in art, design, economics, gaming, math, psychology, and more. And while tokens have been described as everything from a “breakthrough in open network design” to a “new digital primitive (analogous to the website)”, we can generally define tokens as: an internet-native unit of value. Importantly, tokens represent not just monetary value — but also social, reputational, and many other forms of value.
Tokens can be used to coordinate and organize people beyond a purely economic context. That’s why the term “tokenomics” — token + economics — for describing the study and design of tokens is too limited. We need another term to designate “the study of “ tokens (“tokenology” perhaps?) for how to coordinate people, organizations, and/or computation towards a common goal through the use of cryptography and mechanism design.
Okay; so if tokens are a powerful new primitive that can be defined in many ways — allowing for a very rich design space — it would be great to have the modern equivalent of (what computer scientists refer to as) “the Dragon Book”! The Dragon Book helped turn the impossibly messy, big computer science problem of the 1950s — that is, of compiler design — into a more well-solved problem that could be tackled in stages, by applying rigorous principles at each stage.
It’s too early to produce such a definitive text on tokens, but some of early token design principles are already becoming clear. And while effective token models will have design elements unique to their specific objectives, most flawed token designs do share a number of common pitfalls. So here’s a list of instructive tips our team has observed, to help builders avoid the most common failure modes:
▶️ watch: “Token Design: Mental models, capabilities, and emerging design spaces” (2022) by Eddy Lazzarin
📖 read: “The web3 Playbook: Using token incentives to bootstrap new networks” (2021) by Chris Dixon
see also: 📖 “A novel framework for reputation-based tokens” (2021) by Jad Esber and Scott Kominers, on how reputation systems present an opportunity for platforms to recognize (and thus incentivize) participants’ meaningful contributions, including content creation, moderation, community building, and gameplay.
📐Code + theme: More client diversity through open source
Noah Citron et al
A recurring theme in our (and more importantly, the broader crypto community’s) open source efforts is making sure networks have no single point of failure. This helps makes decentralized networks more robust, more secure, and far more resilient than their centralized counterparts. But in practice, we often see potentially vulnerable points of centralization — whether due to specific aspects (like centralized remote procedure calls), or a lack of independently developed clients.
Client diversity, in particular, is critical for rollups; client diversity is needed on both the execution and consensus sides, but most of the development so far has been focused on execution clients. That’s why we *just released* Magi — a fast OP Stack rollup client written in Rust — which acts as the consensus in the traditional execution/ consensus split of Ethereum by feeding new blocks to the execution client, in order to advance the chain. Magi aims to be an independently developed, drop-in replacement for op-node, adding to the rollup’s client diversity; and encouraging greater safety and liveliness throughout the OP Stack via Rust.
But it also helps bring more contributors into the ecosystem, simply by broadening the developer base with clients in other languages...
see also: 🎧 “Programming languages & crypto”, with Sam Blackshear, Noah Citron, Eddy Lazzarin, and Sonal Chokshi (2023). This discussion — on how programming languages evolve and come into existence; conventional programming vs. blockchain programming; and more — is for both existing web3 programmers, and also other developers seeking to enter the space.
--Sonal Chokshi and a16z crypto team
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