Crypto economic primitives
For many years, basic infrastructure was primitive, protocols were in their I have watched in awe as crypto-economic primitives have been built that are. At some point in the past 6 months, you may have read or heard the terms “Cryptoeconomic Primitives”, “Financial Primitives”, “Crypto Primitives” or just. DeFi stands for “Decentralized Finance” and lives on blockchains (originally on the Ethereum network). Why decentralized? The theory goes — as. 700 DOGE TO BTC
In this course, we talk about transaction mechanics and introduce both fungible and non-fungible tokens — or NFTs. The course explores the important issue of custody holding private keys. The course then explores supply adjustment which includes the minting and burning of tokens. The mechanics of bonding curves are introduced. The course then explores the role of direct as well as indirect incentives in the DeFi system.
We then analyze swaps or decentralized exchange. We begin by contrasting DEX with centralized exchange e. He showed the thesis to an investor friend at Redpoint, and that conversation ended up being the first step in raising capital for Primitives. Primitives is designed to be easy to use, Gabeau said. Users of the app can create their own customizable NFT-based avatars called Primojis, which resemble something like doodled sketches of emojis.
The wallet can hold NFTs for a user that they acquired outside of Primitives, he explained. Creating and sharing a Primoji is free for users because Primitives buys smart contracts to mint the NFTs in advance, Gabeau said. Like many social media platforms that are free to use, the company plans to make money primarily through brand partnerships with advertisers, according to Gabeau.
Gabeau likened Primojis to Snapchat filters, which brands often use as a means to advertise.
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If the cryptoeconomic design of the network is well made, fairly compensating all the actors involved in the system, then the value of the network should avoid the centralization, oligopolization and rent seeking characteristics that currently pervade Web 2. The economic side of cryptoeconomic systems also plays a large role in another key pillar of blockchain design, consensus. The consensus algorithms may differ from blockchain to blockchain eg.
PoW in bitcoin, Dpos in the future Casper version of Ethereum, etc , but two solid facts remain that serve to secure the integrity of the blockchain the latter forming the base of the economic incentive structure : the cryptographic protocols that ensure Byzantine Fault Tolerance and the block rewards that come as the incentivization for the keepers miners, validators, etc of the network. How many Behaviors can Cryptoeconomic design motivate?
Because blockchain tokens have reduced the cost to incentivize coordination of behavior by orders of magnitude, the future most likely will bring to fruition a plethora of ever narrower markets. As practices and designs get more refined, we are likely to witness a granularization of coordination systems drilled down to the slightest of behaviors that we might never have even thought of.
There is still a lot of work to be done in this field and a lot of experimentation left to do to see what type of coordination systems are sustainable in decentralized networks. The right combination of incentives, utility maximization for the relevant actors, and the design and distribution of incentivizations will lead us into the next wave of adoption into cryptoeconomic systems.
That is, no two input strings should translate to the same output hash. A minor change in the string should cause a significant change in the message digest. This is referred to as the avalanche effect. Hiding: Knowing a given message m1 and its digest h m1 , it should be impossible to predict the digest for a different message m2. The output of a hash function should make predicting its input value challenging.
Puzzle friendliness: Given x and y, where x is a message and y is the output of a hash function, we can find a k such that the hash of x concatenated with k returns a y, and this y must have certain properties. It is incredibly popular for solving what is known as a mining puzzle in one of the blockchains, such as bitcoin, and it is built on one essential pillar known as proof of work.
One-way functions: Given x, finding h x is fairly simple. As previously mentioned, it should be efficiently computable, which means that h x may be derived extremely efficiently from x. However, we cannot determine x given any h x , hence this is a critical characteristic. This is one of the reasons why these are known as cryptographic hash functions, and it is critical that we always have this condition met when utilizing them in the context of blockchain. Collisions may be rather simple to discover.
The birthday paradox problem, for example, states that if a group of n randomly picked people is placed in a room, the likelihood that some of them share the same birthday becomes one when the number of people exceeds if it's not a leap year or if it is a leap year since at least two of them now have the same birthday. Of course, this is self-evident, but it can be demonstrated that even with only 70 people, the probability of two people having the same birthday reaches a probability of 0.
It may appear that the number of people required to reach that probability is quite large, but this is not so: even a smaller number of people could reach that probability very quickly. Of course, the birthday paradox places an upper bound on collision resistance. To put things in context, for a bit hash function, such as the one used in blockchains, the attacker typically needs to compute hash operations, which is extremely time-consuming.
Even if each hash can be computed in 1 microsecond, it will take close to years to find two such messages with the same hash value.
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