Are we adequately supported with tooling? Verification of subjective vs. objective goals? Does the token mechanism have a balanced incentive model? Just some of the questions posed in this breakdown of the token engineering process. Suited for investors, users, entrepreneurs seeking to gain insights on how to apply more mathematical and engineering rigor into protocol, token and smart contract development.

1. Token Engineering
“Show me the incentive and I’ll show you the outcome.”
Charlie Munger

2. Matt Lockyer
Background
Full Stack Developer
Academia and University Lecturing
Blockchain Solutions Consultant
Currently
Token Engineering Advisor - FansUnite.io
Token Mechanism Team - Wireline.io
Founder, Soloblock.solutions

3. Building blocks of
digital scarcity
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4. https://blog.cofound.it/asset-tokenisation-a-primer-fbcc0393a944
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5. Types of Cryptoassets
Cryptoassets
Stores of Value (MV = PQ)
Utility Tokens (?)
Security Tokens (DCF)
Work Tokens
Burn & Mint
Discount Tokens
StablecoinsCrypto Collectible (NFT)
Proof of Service
Access Control
Signalling & Curation
Governance
https://medium.com/paratii/on-the-immaturity-of-tokenized-value-capture-mechanisms-1fde33f2bc8e
https://goo.gl/cPXpdX - Dimitri De Jonghe - Decentralized Web Summit - Token Engineering Community 5

6. Designing networks with
rewards and punishments
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7. 1.
Define the problem
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8. Define the problem
1. Why is this network protocol being built?
a. What objective(s) is it optimizing and/or maximizing for?
b. What problem(s), immediate and real world, is the network addressing?
2. Who are the stakeholders?
a. What do they want? What type of people are they? What do they know?
b. What can/do they provide? Is it money? Is it work? Ideas? Creativity?
3. How could a stakeholder / adversary attack the network?
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9. 2.
Evaluate mechanisms
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10. Evaluate mechanisms
1. Use a series of constraints and questions
a. Does the mechanism broadly address the problem(s)?
b. Define pass / fail criteria, codifying outcomes for completeness
2. Any open ended questions (likely)?
a. Does any mechanism solve these questions i.e. close the loop?
b. Are there any attacks on these mechanisms?
3. Does the mechanism have a balanced incentive model?
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11. Balanced Incentives - Bitcoin Example
Intrinsic Subjective
Positive Win block reward
Belief: bitcoin is an amazing SOV
that will change the world
(increase in value)
Negative Lose electricity $$$
Belief: attacking Bitcoin leads to
fork making efforts worthless
(decrease in value)
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12. 3.
Simulate, verify, design
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13. Simulate, verify, design
1. Are we adequately supported with tooling?
a. Simulation entrants - IncentiveAI, Consensys, ???
2. Verification of subjective vs. objective goals
a. Best restaurants in NYC vs. 2 + 2 = 4
3. Lacking intrinsic measures for creative economy
a. Nothing at stake problem
b. What is the value of a photograph NOT being licensed on a network?
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14. Example:
Incentivized Data Provider
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15. FansUnite - incentivize fans to provide accurate sports data
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16. Thank You
Questions?