Newsletters will be a summary of each weekly episode, instead of a transcript. Let me know if you love or hate it! TLDR below. This is not financial advice.
General Conclusion
Whilst there is no holy grail of model to design (token) economics, there is a framework that you can use. I developed this after researching for 2 years. (Paper here) Basically deconstructing economics to its principles and then using that to apply to the new world order that governs our lives today.
This framework comes in 3 pillars, Market Design, Mechanism Design and Token Design. Within each pillar, there are variables and sub-variables to consider. Not every variable is important to your ecosystem design and each variable has different importance level. For instance, governance can be very important for most ecosystems.
Ps: This framework can be used for blockchain and non-blockchain based ecosystems.
1. Market Design
Market design is the design of the environment, where your participants and tokens interact. It includes thickness (pre-requisite to network effects), no congestion (majorly solved in the network layer) and safety. A badly designed market does not capture the value from your participants. That means people rather transact outside your network. This is bad because you lose the value-add of your ecosystem.
2. Mechanism Design
Mechanism design is also known as "reverse game theory". Game theory is about making decisions and finding the right one. Mechanism design is, based on the decision we want, what rules need to be embedded in this ecosystem.
Mechanism design can be roughly split into 2 main categories: non-automated (humans) and automated.
It includes governance, non-financial incentives and structure.
3. Token Design
Token design is the design of the token itself. Tokens is the incentive of your ecosystem. If your ecosystem does not have a token, you can ignore this pillar. Just like economics is more than money, token economics is more than just tokens.
It includes token policy (like monetary policy), financial incentives (since they are the main incentives of your ecosystem) and architecture.
What Does this Mean
As much as we want a holy grail and "one size fits all" model for token valuation and token economics design, there is no such thing. However, we can still design token economics in other ways. This framework serves as the first step towards designing your ecosystem, before the math model parts.
Ask Economics Design if you need design help or sign up to our advanced 201 class for more details.
TLDR:
Economics design: no "one-size-fits-all" model. But there is a framework to consider the various (50+) factors to get started with your design. This will get you about 75% done with your economics design.
It's the Economics Design Framework