Analysis of Token Economies

We assist in substantiating the design of platforms and cryptocurrencies. At an early stage, we can provide comments on White Papers – both regarding the design of the underlying token and 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 the smooth execution of the business model, we lay them out and give 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 pinned down by calculations, and which are exogenous. For the latter, reasonable assumptions are needed, some of which can be derived from the business plan or the White Paper. We then test the stability of the proposed model given different assumptions on the involved players’ behaviour, trends and shocks affecting key parameters. For example, we test whether speculators who change their behaviour depending on expectations of future developments may threaten the desired exchange rate equilibrium.