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Crypto FAQ: What is cryptoeconomics and how does it work?

  • Alt. Phrasing: What is a digital economy?; What is a cryptoeconomy?; What is Decentralized Finance (DeFi)?

  • Defn: cryptoeconomics
    [noun: portmanteau of "cryptocurrency" + "economy"]

    Cryptoeconomics *is a cross-disciplinary approach to the study of digital economies and decentralized finance (DeFi) applications. In addition to traditional economic concepts and principles (production, distribution, and consumption of goods and services) cryptoeconomics synergistically integrates concepts and principles from cryptography, computer science, and mathematical game theory disciplines.

Cryptoeconomics Cross-Discipline Tetrad

Stated succinctly as an analogy:

cryptoeconomics : Decentralized Finance (DeFi) :: [traditional] economics : Centralized Finance (CeFi)

  • Goals: see FAQ: What are the goals of cryptoeconomics?

  • Contributions from Cross-disciplines: Selected major contributions from the four cross-disciplines of cryptoeconomics are listed below:
    • Economics
      • Law of Supply & Demand
      • Law of Self Interest
      • Law of Competition
      • Fiat Money Theory
      • Modern Monetary Theory (MMT)
    • Cryptography
      • cryptographic keys
      • hash functions
      • asymmetric (public key) encryption
      • Multi-Factor Authentication (MFA)
      • End-to-End Encryption (E2EE)
      • Zero Knowledge Proofs (ZKP)
    • Computer Science
      • peer-to-peer (P2P) network architectures
      • Distributed Ledger Technology (DLT)
      • DLT data structures, blockchains, Directed Acyclic Graphs, Merkel Trees
      • single (central) point of failure
      • Byzantine Fault Tolerance (BFT)
      • consensus algorithms
      • digital signatures
    • Mathematical Game Theory
      • Nash equilibrium
      • Byzantine Generals Problem
      • Prisoner's Dilemma
      • Markov Decision Process
      • Schelling game
      • P + epsilon Attack


* How It works: see How [Cryptoeconomics] Works section of this web


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