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Token Economics in Real-Life: Cryptocurrency and Incentives Design for Insolar Blockchain Network

by   Marek Laskowski, et al.

The cryptocurrency market is valued in excess of 250 billion. Virtually all these ventures employ cryptocurrencies to incentivize adoption and use of their blockchain-based platforms. For Bitcoin, miners are incentivized to mitigate the double spend problem; for Ethereum, to operate a distributed application development platform. The study of how to set up these incentive mechanisms and to operationalize governance is token economics. Given the size of the crypto market, we believe that there is still great opportunity to research this novel topic. In this paper, we present facets of the token engineering process for a real life 80 person Swiss blockchain startup, Insolar. We show how Insolar used systems modeling and simulation combined with cryptocurrency expertise to design a mechanism to incentivize enterprises and individual users, and in particular through the use of subsidy pools, application developers, to help adoption of their new MainNet public blockchain network. For example, the study showed that the pool can be too small to properly incentivize developers, but it also can be so large as to signal largesse to greedy developers. For a startup like Insolar, their success will hinge upon how well their model incentivizes various stakeholders to participate on their MainNet network versus that of numerous alternatives.


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