Why is Economy Design critical for a public blockchain?

Sustainability

Private and public blockchains are different in their concept, architecture and economic design. Based on the observation of the private blockchain projects, they tend to be business endeavors funded by one or several business entities, some projects targeted at revenue generation and some targeted at savings for the stakeholder, i.e. operational savings.

In contrast, a public blockchain relies on the design of the blockchain economy for sustainability and growth. In the absence of an organization sponsoring a blockchain project, a public blockchain needs to ensure there is enough monetary reserve generated from the fees based on the value the blockchain project generates for its participants to cover operational costs and growth expectations.

Security

Economy Design is also critical for public blockchain security. It requires rules in place to protect the system against network spamming, to ensure there is sufficient economic benefit for Validators to participate in the system and to ensure there are fines for playing against the rules.

Get it right, and you will have a sustainable growing ecosystem. Get it wrong, and you will be back to the drawing board with undermined reputation, or even worse, left with a starved project abandoned by its stakeholders.

So, how do you go about it? Based on conversations with peers in the industry, there are different approaches.

DIY all the way

A path several projects took was to develop Economy Design in-house for their launch and kept it in-house after the launch.

DIY, then get a consultant

Another path some projects took was to develop Economy Design in-house for the launch and then hire consultants after the launch to audit and enhance the model.

Get a consultant in the design phase of the blockchain

At Polymath, we picked the latter option for our Polymesh blockchain initiative. Why?

Minimize risk and mistakes

Learning from mistakes post-launch for a blockchain project can be very expensive. If the network gets spammed or the Validators leave because of poor incentives the network’s reputation is diminished and re-work on the technical side can be very expensive.

The last critical part is to select the right consultant.

We did a lot of comparisons and went with Block Science, a best-in-class token economics consultant that brings to the project the know-how in classic economics, game theory, blockchain, and token economics along with the modeling tools designed specifically for complex systems that have high ambiguity due to external factors. Their models use Monte Carlo simulations along with deterministic and stochastic processes. The models we are developing with Block Science will help us to optimize token economics design for our Mainnet launch next year, as well as iterate and improve on it once Polymesh goes live.

For those who missed it, here is the Ask Me Anything update on POLY, Polymath, and the basic Polymesh roadmap with planned launch dates.

Stay tuned for more updates. In early January we will share with you the highlights of the POLY emission policy, as well as Polymesh KPIs.

Your feedback is always appreciated.