Cryptoeconomics is a growing field of study for students, aspiring coders and anyone who wants to understand how a blockchain is created, how a blockchain can be applied and what a blockchain is. It focuses on the protocols that determine the production, distribution and consumption of goods and services in a decentralized digital economy.
MIT, Duke, Stanford, Cornell and UC Berkeley are some of the universities offering courses on blockchain technology and the various cryptocurrencies that utilize it. By dissecting concepts such as Proof of Stake, Proof of Work, cryptographic primitives, client side validation and other blockchain fundamentals, innovative developers are building the world wide web of decentralized networks.
In an upcoming online introductory course on cryptoeconomics, YouTuber Karl Floersch talks mining 101: how miners decide on transaction order, form consensus and build blockchains that are censorship-resistant.
He begins with a lesson on how to build a decentralized PayPal. In a centralized system, power is not equally distributed among participants, making it easier to manipulate or attack. A central payment operator, for example, can censor different users and change the platform’s history by deleting transactions. Centralized systems with similar issues are Reddit and Facebook. These large social networks form the bedrock of the Internet 1.0. The former empowers a handful of moderators who monitor and control content from a pool of participants; the latter grants users a limited ability to control their own content while company admins unilaterally determine global decisions.
“It’s not just a slightly creepy internet thing that we get used to. Personal data is a new economic asset class recognized by the World Economic Forum as early as 2011.”
– Noah Thorp, Co-founder, CoMakery
In the decentralized version of these social networks, a new set of protocols shapes consensus and allows participants to control their own assets. In the case of a decentralized PayPal, a full history of transactions is intact and the “king”, vested with the sole authority to manage transactions, is demoted. The payment system starts looking a lot like Bitcoin or Ethereum – more trusted, more secure and less susceptible to an attack.