Token Economics in Real-Life: Cryptocurrency and Incentives Design for Insolar Blockchain Network (1910.02064v3)

Abstract: The study of how to set up cryptocurrency incentive mechanisms and to operationalize governance is token economics. Given the $250 billion market cap for cryptocurrencies, there is compelling need to investigate this topic. In this paper, we present facets of the token engineering process for a real-life 80-person Swiss blockchain startup, Insolar. We show how Insolar used systems modeling and simulation combined with cryptocurrency expertise to design a mechanism to incentivize enterprises and individual users to use their new MainNet public blockchain network. The study showed subsidy pools that incentivize application developers to develop on the network does indeed have the desired positive effect on MainNet adoption. For a startup like Insolar whose success hinge upon how well their model incentivizes various stakeholders to participate on their MainNet network versus that of numerous alternatives, this token economics simulation analysis provides invaluable insights.