Analysis of Blockchain-based Token economies

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We assist in substantiating the design of platforms and cryptocurrencies. At an early stage, this will be done by giving comments on White Papers – both regarding the design of the underlying token and regarding the proposed business model in terms of consistency and completeness of the proposed economy (e.g. with regard to regulating money supply and incentives for using a new token). If there are serious economic issues that threaten a smooth execution of the business model, we lay them out and give our advice on how they are best mitigated.

In order to conduct meaningful formal analysis, simulations and stress tests, we specify demand and supply functions (e.g. for money), so that the system can be analyzed using game theory and microeconomics or simulated in numerical software. Specifically, we identify which parameters are endogenous and can be calculated, and which parameters are exogenous. For the latter, reasonable assumptions need to be made, some of which can be derived from the business plan or a White Paper. We then test the stability of the proposed model given different assumptions on the involved players’ behavior, trends and shocks for key parameters. For example, we test whether speculators who change their behavior depending on expectations on future developments may threaten the desired exchange rate equilibrium.