Crypto-Economic Systems To Address Sustainability

* Article: FINANCE 4.0: DESIGN PRINCIPLES FOR A VALUESENSITIVE CRYPTOECONOMIC SYSTEM TO ADDRESS SUSTAINABILITY. By Mark C. Ballandies, Marcus M. Dapp, et al.

URL = https://arxiv.org/ftp/arxiv/papers/2105/2105.11955.pdf

Abstract

"Cryptoeconomic systems derive their power but can not be controlled by the underlying software systems and the rules they enshrine. This adds a level of complexity to the software design process. At the same time, such systems, when designed with human values in mind, offer new approaches to tackle sustainability challenges, that are plagued by commons dilemmas and negative external effects caused by a one-dimensional monetary system.

This paper proposes a design science research methodology with value-sensitive design methods to derive design principles for a value-sensitive socio-ecological cryptoeconomic system that incentivizes actions toward sustainability via multi-dimensional token incentives. These design principles are implemented in a software that is validated in user studies that demonstrate its relevance, usability and impact. Our findings provide new insights on designing cryptoeconomic systems. Moreover, the identified design principles for a value-sensitive socio-ecological financial system indicate opportunities for new research directions and business innovations."

Excerpt

From the conclusion:

"In conclusion, we can answer the three research questions (Section 1) as follows.

First, IS can facilitate the construction of crpyoteconomics systems (CES) that use tokens to represent positive actions and thus incentivize human behavior toward socio-ecological goals (cf. RQ1 and Section 4.1).

Second, a methodology to design, implement and validate such CES needs to align stakeholder values with the interaction patterns enabled by the software artifact. This can be achieved by complementing general design science research methods with specific methods for evaluation patterns and valuesensitive design (cf. RQ2 and Section 3).

Third, To enable a socio-ecological finance system using a CES, it is important to translate stakeholder values into key design principles from which to derive interaction patterns that evoke the desired local agent behavior over time (cf. RQ3 and Sections 4.2 and 4.3).

The Finance 4.0 system is an example of a socio-ecological financial system instantiated as a CES. The design and construction of this system are comprehensively illustrated and documented utilizing state-of-the art cryptoeconomic models, architectures and taxonomies. Preliminary results validate the artifact’s relevance and usability in real-world environments and its appreciation by stakeholders (Section 4.4). The results point to various avenues for future research.

First, because the macro state of any CES is an emergent property of local agent behavior, the exact outcome cannot be anticipated at the design phase. To mitigate the risk of reaching unintended system states, these behaviors should be evaluated in simulations and longitudinal experiments with larger participant fields. This could provide insights into the robustness of interactions patterns such as the FIN4 token curated registry.

Second, preliminary study results indicate that users perceive cryptoeconomic tokens as different from money which may have an effect on the impact of these tokens on human behavior and motivation.

Third, the FIN4 system can act as a constraint configurator in behavioral experiments, thus serve as a tool to test the effects of multi-dimensional token-based incentive systems on human behavior in real-live settings."