Bitcoin's Use of Purpose-Driven Token Commons as Incentive Mechanism for Network Actor Coordination

Discussion

Shermin Voshmgir and Michael Zargham:

"Bitcoin’s proof-of-work [Nakamoto 2008] introduced an incentive mechanism to get network actors to collectively manage a distributed ledger in a truthful manner, by rewarding them with network tokens which are minted upon proof-of a certain behaviour. The idea of aligning incentives among a tribe of anonymous actors with a network token, introduced a new type of public infrastructure that is autonomous, self-sustaining, and attack resistant [Voshmgir 2020]. Such networks, therefore, represent a collectively produced and collectively consumed economic infrastructure. This common economic infrastructure can be viewed as a commons whose design and governance should be held to Ostrom’s principles [Ostrom 1990]. If there is an underlying optimal choice to be uncovered through a social process there is some hope that this optimal could be learned via a consensus process [Jadbabaie et al. 2012]. However, it is more realistic to take a polycentric viewpoint where there is no one social optimum and thus it is important to take a wider view of social choice [Arrow 2012] [Ostrom 2000] before embarking on the design of a purpose-driven token. After all, any choice of coordination objective is a subjective choice. Assuming one can define a common objective, the token designer would encode this objective as a cost function and strive for dynamic stability around a minimum cost outcome over time as is done with dynamic potential games [Candogan, Ozdaglar and Parrilo 2013], swarm robotics [Gazi and Passino 2003] and vehicle formations[Olfati-Saber and Murray 2002]. In all cases the design goal is strong emergence around some objective [Klein et al. 2001]. It is also possible to envisage the objective selection process as dynamic consensus [Kia et al. 2019]. Broadly speaking purpose-driven token design lives at the boundary of behavioral economics and dynamic decentralized coordination in multi-agent systems which bridges with institutional economics[Coase 1998], and in particular platform economics [Rochet and Tirole 2003]."

(https://epub.wu.ac.at/7782/1/Foundations%20of%20Cryptoeconomic%20Systems.pdf)