Kaal claims by topic: economics, page 3

907 atomic, individually citable claims from the published work of Wulf A. Kaal tagged economics.

When a fundamental shift in value occurs, repegging the currency at its more accurate value is more efficient than soldiering on with tax mechanisms to restabilize at the old peg. 2019
Both dominant ideologies fail in symmetrical ways: capitalism produces inequity, inequality, monopolies, and other market failures, while socialism has incentive design defects in which hard work is not effectively rewarded and external costs are largely ignored. 2020
Decentralism generates efficiency through higher levels of connectivity rather than through the linear cost cutting and economies of scale that capitalism and socialism debate. 2020
Personal assets such as data, preferences, and opinions can only be commercialized to a limited extent in centralized structures, whereas decentralized structures allow those same assets to be tokenized, valued, and mobilized. 2020
Linking necessary data between governmental departments via blockchain could eradicate potential government corruption and increase the efficiency of the public sector. 2020
A jurisdiction is only truly favorable to DAOs if it grants the DAO limited liability as an entity and accepts its independent status without requiring any representative in that jurisdiction. 2020
Equity funding and token funding are substitutes: because equity investment in a blockchain startup makes issuing a digital currency both less likely and less necessary as a funding source, a market shift back toward equity funding should shrink the total volume of digital currencies issued. 2020
The funding sources for digital asset and blockchain startups cycled through four stages since 2016 and 2017: equity funding, then initial coin offerings, then equity offerings, then initial exchange offerings, and back to equity funding by the early 2020s. 2020
By 2019 the ICO market had lost its defining advantage over venture capital: because most ICOs between 2018 and 2019 imposed one to three year lockups, neither market offered early liquidity to investors or issuers, making the two substantively similar. 2020
ICO issuance exceeded venture capital financing of startups for the first time in the second quarter of 2017, with $210 million invested through ICOs against $180 million invested through traditional venture capital funds. 2020
Initial exchange offerings emerged as a market response to the near disappearance of the ICO market in January 2019, driven by the cryptocurrency exchanges that were most affected by the collapse. 2020
Regulatory uncertainty is curtailing the growth of the digital asset industry because investor classes across the spectrum, from retail investors to the largest institutions, are hesitant to participate while the legal treatment of digital assets remains unclear. 2020
Institutional investors face a distinct barrier beyond volatility: fiduciary responsibility to their clients limits the type of risk they may take on, and the lack of custody solutions recognized by regulators compounds the problem. 2020
Immature markets such as the market for digital assets in 2020 often cannot attract the institutional investors and venture capitalists who have sufficient operating experience in that market, which is a self reinforcing constraint on market development. 2020
Anonymity in decentralized networks imposes a specific design constraint: system architects need a special skillset to navigate the limits that anonymity places on system design, and that skillset remains very rare in the early 2020s. 2020
Because the digital asset market has been so hype driven, technical experience has not added significantly to overall market development and maturity, leaving many top projects in 2020 still afflicted by unresolved technical issues. 2020
Bitcoin functions as a medium of exchange for a number of businesses but arguably fails as a store of value and as a unit of account, because of its volatility and its lack of intrinsic value. 2020
Cyber security incidents contribute to the volatility of the digital asset market through a specific channel: consumers instantaneously withdraw their assets from an exchange affected by an incident. 2020
Token design must be treated as an iterative process in which data collection and flexibility in core design parameters are essential, because prior crypto economic assumptions routinely turn out to be suboptimal once the network grows and user preferences change. 2020
The DeFi lending market is highly concentrated: MakerDAO alone accounts for almost ninety percent of the total USD value locked in DeFi projects. 2020
Centralized financial technology does not complete the disintermediation it promises, because users still deal with a technology company as intermediary instead of a financial institution, which leaves room for the decentralized solutions DeFi attempts to provide. 2020
DeFi is more efficient than existing financial intermediation including FinTech, and that superior efficiency traces to its extensive reliance on code and automation, which removes large parts of the human element and the errors and inefficiencies that come with it. 2020
The digital asset market resulted from a technology push rather than a market pull: developers were driven by technical advancement rather than by usefulness and user friendliness, and market pull may only evolve once the DeFi technology infrastructure is more developed. 2020
DeFi platform technologies often have limited product market fit because the reliance on code over human judgment produces products built around automation that ignore the human element in financial transactions. 2020
Because human interactions in business are often too complex to be fully codified objectively, DeFi systems that exclude all non objective information from their analysis do not fully utilize available information, which limits their efficiency and usefulness. 2020
Only a jurisdiction that grants a DAO limited liability as an entity and accepts its independent status without requiring representation can be truly favorable to DAO concepts. 2021
Because static complex DAO rule sets bring inevitable corruptive gaming and arbitrage behavior, effective DAO governance designs should focus on dynamic elements such as members' ability to re-evaluate existing precedent. 2021
Charging an admission fee disincentivizes betrayal and defection, because the sunk cost of joining makes cheating expensive when rejoining would also be expensive even under anonymity. 2021
For any game, a new assumption can be added that generalizes the game so that the previous winning strategy becomes a losing strategy and a new winning strategy arises; the authors offer this as a meta-theorem that cannot itself be formalized. 2021
Despite its alluring simplicity, the Code is Law credo taken as an absolute is not an efficient solution for business, because unintended consequences of contracts arise in almost every business arrangement. 2021
If the decentralized economy is constructed as a zero-sum game, cooperation becomes impossible because the only feasible long-term strategy is maximal extraction, and participants are incentivized to play the most ruthless strategies available against their counterparties. 2021
Rating systems on centralized marketplaces are actively gamed: new Amazon sellers are solicited by sock puppet operators offering to inflate their ratings and attack competitors. 2021
The sharing economy is defined as the utilization of previously idle services and goods and the partial use of others' property rights in goods, typically coordinated over a platform rather than through centralized employment. 2021
The sharing economy requires a reframing of legacy legal regimes, because the legal frameworks regulating disrupted and adjacent industries are often incompatible with the trends the sharing economy generates. 2021
Web 2.0 companies solved the hosting problem through a Faustian bargain: free hosting is exchanged for access to shared content, ownership of viewers' personal information, control over what may be shared, and access to user attention. 2021
Earlier centralized companies defeated more decentralized peer to peer platforms because of the technology of the time and the incentive design built into capitalist civilization: consumer devices could not match industrial upload speeds, centralized firms had the incentive to polish user interfaces, and economies of scale made central bureaucracy worth negotiating. 2021
Bitcoin proved that a decentralized peer to peer network can manage valuable assets without a central authority, but the centralizing force of competition concentrated power anyway, as economies of scale produced large mining farms in place of millions of individual members maintaining the ledger. 2021
Proof of work consensus is energetically wasteful because the entire global network redundantly computes wrong nonces, with the Bitcoin network consuming as much energy as the country of the Czech Republic. 2021
A decentralized banking DAO built on top of the Bitcoin ledger could charge a smaller fee to hold minor transactions temporarily and bundle them into a single larger Bitcoin transaction on the eternal blockchain. 2021
Fully compliant legal custody solutions for digital assets increase legal certainty and mainstream investor confidence, and that increased confidence in turn builds markets in digital assets. 2021
Without the ability to rely on proven custody providers, mainstream and legacy institutional investors are restrained from making digital asset investments for legal or business reasons. 2021
Traditional custody has become highly concentrated, with four large banks holding roughly $114 trillion in assets under custody at the end of the first quarter of 2018, and barriers to entry make it likely that this concentration continues. 2021
Institutional investors are less likely to engage in digital asset investments where custody solutions for digital assets are underdeveloped, and they find it difficult to commit fully until a reliable and respected custody solution exists. 2021
Increased networkability drives decentralization of science because it lowers the cost of ascertaining the accuracy of scientific results while raising the price a scientist pays for being inaccurate or wrong. 2021
Markets whose trades do not depend on physical location evolved without centralized coordination, as shown by the foreign exchange market, which developed decentralized because currency trading required no physical location. 2021
The digitization of content is the most lasting contribution to market decentralization, because the physical location of assets matters less as content is digitized and virtual products emerge, so markets are becoming increasingly decentralized. 2021
The ICO share of blockchain startup fundraising collapsed from 80 percent to around 35 percent by August 2018, recovered only marginally to 40 to 50 percent between September 2018 and February 2019, and then fell to 20 percent in March 2019. 2021
Decentralized cryptocurrency exchanges epitomize market decentralization because they let users interact and trade anonymously in a secure environment without third party intermediation. 2021
Conflicts of interest and counterparty risks are absent on a decentralized exchange because proprietary trading intermediaries such as market makers and centralized third-party operators cannot inject themselves into a transaction. 2021
Most decentralized exchanges have struggled with liquidity and price discovery. 2021
Decentralized exchanges may fail to ensure market integrity, because the code that creates a DEX can allow asymmetric distribution of trading information based on user status. 2021
Automation and the absence of a human backstop in compliance, back office, and settlement create new risks to market integrity on decentralized exchanges, including wash trading, frontrunning, and insider trading. 2021
Decentralization is not always efficient, because centralized economies of scale can create the near-optimal efficiencies for economic growth and decentralization may therefore result in the loss of economies of scale. 2021
Legacy businesses actively neutralize decentralized competition by acquiring little known companies that hold highly competitive decentralized technologies, as Microsoft's acquisition of Skype illustrates. 2021
Centralization follows an S curve: in the expansion phase the benefits of centralizing power, capital and control rise faster than its costs, but in the decline phase the rising costs of centralization, including corruption, diseconomies of scale and cronyism, can no longer be offset, so centralized systems function less optimally and less efficiently. 2021
Even where superior decentralized technological solutions exist, the centralized elements deeply engrained in business and society can be perpetuated by the efficiency gains of the S curve of centralization, so superiority alone does not displace them. 2021
Decentralized networks depend on dynamic governance because evolving blockchain protocols require updates, and the practice of hardforking that remained prevalent in the early 2020s created significant economic loss for such blockchains. 2021
Because basic standards for the governance of digital assets were still missing at the beginning of the 2020s, the digital asset market stagnated and decentralized finance remained in its infancy; without standards and governance, certainty and market confidence cannot develop. 2021
Market leaders fail against disruptive technologies because they shortsightedly refuse to cannibalize their own dominant position, and that refusal often produces abrupt loss of market dominance or total replacement. 2021
APIs dissolve traditional value-chain hierarchies because a company can obtain features more cheaply and more easily by connecting separate products through APIs than by controlling the entire value chain itself. 2021
The sharing economy outran its legal frameworks: the legal regimes governing the disrupted industries were often incompatible with the trends the sharing economy generated, forcing cities and municipalities into a proactive regulatory stance. 2021
The networked information economy, built on peer-to-peer exchange of information, may be replacing the centralized industrial information economy of the late nineteenth century, because cheaper access to information enables a much greater role for decentralized individual action. 2021
Diversity of inputs raises the value of network membership: because contributions increasingly come from the edges of the system, they are less homogenous and more diverse, which increases the utility of membership for every node. 2021
Tokenization of assets is the issuance of a digital asset that forms the digital representation of an existing real-world asset, analogous to securitization in that it converts liquid or illiquid real-world assets into tradable digital instruments. 2021
The decentralized economy cannot fully proliferate until it acquires the institutions ordinary commerce depends on, above all a secure and meaningful reputation system for anonymous supranational partners and an effective, dynamic governance system. 2021
Blockchain transactions will always be expensive compared with other peer to peer transactions, because blockchain data must be stored eternally and redundantly on as many machines as possible to support decentralization. 2021
Decentralization empowers knowledge at the edge: individuals with fine grained information about their neighbors and community can make better underwriting decisions than a centralized hierarchy can. 2021
Concentration of power, especially monopolies or trusts, decreases market liquidity, while decentralization of power improves it. 2021
Greater transparency is in tension with more open membership, because larger networks are only achieved when privacy is ensured. 2021
The code that constitutes a decentralized exchange can create new risks to market integrity, because automation removes the human backstop in compliance, back office and settlement. 2021
It is not possible to create a centralized regulator like the SEC for the decentralized economy, because doing so would place a supranational market under competing jurisdictions with naturally contradictory regulations. 2021
Determining what fraction of a currency is hot money is necessary for efficiently defending its stability: overestimating the hot money ratio makes the currency costlier to use, and underestimating it makes the currency insecure. 2021
Reputation changes the incentive structure of a decentralized organization from a single stage, zero sum game into a repeated positive sum game, which is why the authors treat reputation as the key to effective decentralized governance. 2021
The authors stipulate corruption in an organization as any action that benefits a minority at the greater expense of the group, and locate its source in power that is distributed inappropriately as measured by efficiency. 2021
Reputation can be objectively valued by estimating the probability of future business deals, taking the expected value of that probability, and computing the present value of those deals, which is what makes reputation function as a promise of future rewards. 2021
Decentralizing the power structures of core institutions improves them in both effectiveness and efficiency, because decentralization supplies transparency and liquidity. 2021
The eight institutions are necessary conditions for business, which grinds to a halt without them, yet when they run well they consume only a tiny fraction of the economy's resources. 2021
Core institutions are perceived as leaching from the economy only because of corruption, and well designed systems eliminate those economic frictions. 2021
Keeping decentralized networks running productively requires a dynamic design with checks and balances combined with the incentive design insights of game theory. 2021
The largest and most decentralized organizations of the present are non-profits, which is evidence that decentralized organizations have historically struggled to survive economic success. 2021
If an organization's goal is to maintain decentralization, its tools must be used deliberately to prevent the natural concentration of power that occurs when economic inefficiencies create pockets of corruption where rent-seeking actors accumulate. 2021
No profit-seeking decentralized organization can succeed against centralized competitors in the contemporary marketplace until all eight institutional problems are solved at once. 2021
Bitcoin proved that a decentralized digital representation of value is possible, but it is not efficient enough for wide use because the rest of a decentralized economic environment does not yet exist around it. 2021
Ethereum will not be efficient until it operates inside a robust decentralized economy, and it will not last at all unless its governance is fixed. 2021
Without a secure and meaningful reputation system, none of the other aspects of the decentralized economy will be effective, which makes reputation a precondition for the rest. 2021
A sophisticated governance system is required for a decentralized organization to adjust effectively to market changes and to maintain stability. 2021
Reputation and governance are the two most important institutions missing from the decentralized economy, and once they are solved the remaining missing pieces are relatively easy to supply. 2021
An artificially scarce currency such as bitcoin is deflationary as long as its market expands, and like gold its price fluctuation makes it unsuitable for daily commerce. 2021
Renegotiating contracts every time the currency's value changes is expensive and continually and randomly punishes at least one of the contracting parties. 2021
A fully decentralized structure with proper governance could solve the abuses that pervade the gig economy. 2021
Code based trust in decentralized applications lowers transaction costs and simultaneously raises consumer and market confidence and certainty, which facilitates economies of scale that are only occasionally and temporarily possible in centralized structures. 2021
Middlemen such as police, lawyers, and insurance salesmen are the catalysts that exist to overcome the friction of economic corruption, and engineers who eliminate them mistake the catalyst for the friction. 2021
Removing the middlemen who serve as business catalysts would kill the economy: liquidity would dry up because after a few people unfairly lose on business deals, no one will take the risk of initiating one. 2021
Despite billions of dollars of investment, radically decentralized tools including bitcoin currency, Ethereum smart contracts, and the InterPlanetary File System have not pervaded the mainstream economy. 2021
The killer app for the decentralized economy is the DAO, a company governed autonomously by smart contracts and organized without any single permanent governing authority or concentrated ownership, whose existence would justify the other decentralized overhead tools. 2021
New DAO proposals appear almost quarterly in the 2020s and most fail because of a lack of decentralized governance solutions. 2021
Centralized company formation is supported by an enormous infrastructure amounting to all of civilization, so the entire environment of the decentralized economy must be built before it can support its first truly successful DAO. 2021
Unless the Web3 vision builds at least the features and social advantages of the current political and legal systems into its economy, the decentralized economy will merely be a parasite on the dying host of the traditional mainstream economy, and once the host dies today's social advantages will be lost. 2021
Without decentralized versions of the services that overhead institutions provide, including justice, media, banking, underwriting, and insurance, DAOs will not be able to compete with centralized companies. 2021
Interoperability, meaning the API economy, is most efficiently achieved in the long run on decentralized platforms, because negotiations on a level playing field are fairer, resolve quicker, and encourage more business. 2021
No set of written rules can be made complete: the Folk Theorems demonstrate that however rules are written, strategies exist that follow those rules yet profit the individual at the expense of the group, so a perfect secular constitution is impossible. 2021
When a law is written down rigorously, specifying precisely what is acceptable and unacceptable, competition obliges people to find the most efficient behavior available inside those rules, which is typically behavior located right at the boundary of what is permissible. 2021
Centralization is a powerful mechanism for rapidly building an efficient organization aimed at solving one specific problem, such as war in pre-unified China. 2021
Giving the Apaches cattle in 1917 succeeded where military force had failed because the valuable assets created a zero-sum battle over resources between lineages, generating the internal competition necessary to produce a hierarchy of power over the disbursement of resources and property. 2021
Honesty would be the wrong strategy for an agent if the contract were anonymous and its resolution did not affect future contracts, because that situation is a single-stage zero-sum game in which stealing all the entrusted wealth is optimal. 2021
Adding reputation to the contracting game converts it from a single-stage zero-sum game into a repeated positive-sum game in which the rest of the community becomes relevant, because reputation is a future-oriented commodity that pays off with the promise of future contracts. 2021
Without crowd controls, the reviewer's views and the author's intent are at odds and the reviewer can impose their own logic, forcing the author to rewrite functionally sound code repeatedly, which is highly time consuming and inefficient. 2021
The code review industry is dominated by a cartel formed by the top five code audit firms, and that cartel creates high barriers to entry for new players in the code review market. 2021
Cartelization of the code review industry causes significant overpricing, because clients will pay almost any price to obtain the stamp of approval from one of the top five audit firms. 2021
Because customers cannot afford to search for better priced code reviews and are forced into cartel pricing to obtain market acceptance of their products, cartelization undermines any form of downward price pressure. 2021
Despite the significant flaws in code reviews and their often flawed results, the existing code review market does not allow for any form of insurance product of the kind associated with products in other markets. 2021
Decentralized code review underwriting makes the code review market more efficient because it democratizes the functions of code review and frees untapped sources of power and knowledge. 2021
Universal access combined with a public bidding price discovery methodology creates low barriers to entry in the code review market, because anyone can join the CRDAO by submitting high quality code reviews through the CRDAO portal. 2021
Because the existing code review market provides no publicly transparent pricing, it arguably harms the public for the benefit of the cartel and its clients, since neither the client nor the code reviewer benefits from public scrutiny of cartel prices. 2021
Public price discovery is a necessary public service function, because without public pricing consumers cannot realistically select the service provider that provides the highest value to the customer. 2021
The CRDAO price discovery mechanism enables full price transparency for consumers through the visibility of internal and external bids on job posts, which is unprecedented in a market otherwise dominated by a cartel. 2021
Because boards and donors seek to preserve endowments rather than spend them, funds accrue tax free long after the donor has taken the deduction, which runs counter to the spirit of the rules governing charitable deductions and may contribute to harmful inefficiency. 2021
Charging an admission or denial of service fee to become a voting associate disincentivizes betrayal and defection, because the sunk cost of joining makes cheating expensive even where associates can remain anonymous. 2021
Community audits enable enhanced efficiency of coordination because voting associates, with their highly specialized philanthropic skillsets, are ideally positioned to identify other experts in philanthropy. 2021
Capitalism and socialism each fail in characteristic ways: capitalism produces inequities, monopolies, and other market failures, while socialism suffers incentive design failures in which hard work is not effectively rewarded and external costs are largely ignored. 2021
Decentralism generates efficiency through higher levels of connectivity rather than through the linear cost reduction mechanisms that capitalism and socialism debate. 2021
Because of its autocratic and efficiency focused tendencies, centralized algorithmic automation is prone to create structures for the evolution of dataism, which ultimately denies the value of human inputs and individualism. 2021
Code based trust lowers transaction costs and simultaneously raises consumer and market confidence and certainty, which facilitates economies of scale that are rarely possible in centralized structures, despite the cybersecurity problems associated with cryptocurrencies. 2021
Because decentralized platforms can remove the consumer fees that are integral to their centralized competitors, they also remove downward pressure on platform worker compensation, since costs are less likely to increase and be passed on to workers and consumers. 2021
Transacting in cash costs United States consumers roughly 200 billion dollars annually, about 637 dollars per person, driven by the costs of production, storage, and transportation. 2021
Any testnet environment depends on proper governance to allocate power fairly and equitably at equilibrium in a sustainable fashion. 2021
By balancing validator stakes against reputation, HSPoS reaches an equilibrium of incentives in which validators are motivated both to succeed economically as validators and to participate actively in decentralized governance. 2021
Centralization is an optimal and natural evolutionary solution to most specific organizational problems, but only under static conditions, and competition is the most common driving force that produces a centralized structure. 2021
Friction is the inefficient allocation of power, meaning that a different distribution of power would let the organization reach its goals more easily, and it is an ever present feature of any hierarchy. 2021
The Folk Theorems of game theory prove that any rules that can be formally set down can be subverted: strategies always exist that follow the rules and still allow a minority player to profit at the expense of the majority. 2021
Governing by transcendental values, ideals that everyone understands but no one can concretely attain, reduces members' motivation to probe the limits of acceptable behavior and therefore reduces the policing the organization must pay for. 2021
Advances in technology have given decentralized systems the efficiency they lacked in previous eras, the very deficiency that allowed them to be outcompeted by centralized systems; this is the book's central thesis. 2021
Centralization is a natural state that evolves out of decentralization under competition unless it is consciously prevented by guarding members' power, while a centralized organization can always be conquered through its single point of failure at the top. 2021
Bitcoin and Ethereum are worth hundreds of billions of dollars not because people are using them but almost entirely because of speculation on their future value, which is the expectation that people will use them to build decentralized autonomous organizations. 2021
Centralized organization achieves efficiency through hierarchy: hierarchical structures let centrally organized entities allocate resources with minimal energy loss and identify and remove waste in the system. 2021
Hierarchical centralization is optimally efficient for making big decisions affecting an entire organization, which is why it has historically outcompeted every other organizational structure, whether corporation, army, or government. 2021
Centralized organizations are more effective and efficient than decentralized ones at the singular task they were designed for, because an optimally centralized structure has no redundancy while decentralization takes longer to locate the right components within its network. 2021
Centralization is dangerous in any market because monopolies ruin market efficiency by impairing liquidity, while the most efficient and liquid markets have high transaction rates of many goods moving between many small players. 2021
Corporations centralize power in order to pursue a singular strategy that efficiently exploits market circumstances, but this produces instability when the market swings, because a brittle hierarchy may crash before it can reorganize to handle a new challenge. 2021
Locking a user's reputation tokens instead of fungible assets would be a leap in efficiency and a powerful economic advantage over traditional finance, but this advantage is conditional on a coherent system that securely tracks the value of a reputation token. 2021
Exit by selling reputation tokens is more problematic for reputation than for other cryptocurrency tokens, because reputation is less fungible: a token's value is tied to the specific post in which the reputation was created and is subject to separate review. 2021
In a firm commitment underwriting deal whose public portion does not sell out, a member is forced to sell reputation non fungible tokens on the over the counter market to satisfy the resulting capital call, but only if that member cannot cover the pro rata capital requirement with liquid capital. 2021
Because the cryptocurrency market has been hype driven, technical experience has not added significantly to overall market development and maturity. 2021
Meaningful reputation in a business network removes the need for monitoring cost and lowers transaction costs by orders of magnitude. 2021
Incomplete transparency is deliberately required in phase 2, where the interface discloses only reputation staking outcomes and not the deliberation, so that the DAOIC can experiment with policy adjustments without fear of public market impact. 2021
Once its market position is solidified, the DAOIC could mandate that each token opportunity adopt decentralized governance mechanisms before the DAOIC begins reputation staking on it, using its market power to force governance reform. 2021
Without standards for digital assets it will be very difficult to increase regulatory certainty or coordinate market activity, and without regulatory certainty the digital asset market is less likely to evolve. 2021
If the DAOIC is perceived as having a market impact, it could significantly increase corruptive influences from other market players, which in turn increases the likelihood of regulatory intervention, so market neutrality is in the DAOIC's long term interest. 2021
Early stage funding fell from thirty five to twenty seven percent of total VC funding as venture capitalists increasingly focused on funding later stage companies. 2021
Traditional VCs struggle in the digital asset market because of that market's significant volatility and because they lack expertise in a market still dominated by several key specialized players. 2021
Traditional VCs often cannot effectively compete with the ever increasing array of decentralized token offering avenues. 2021
The value of the reputation tokens is a function of the return on investment of the DAO. 2021
Because the public co purchases alongside DAO investment club members and expects to pay for the right to benefit from the collective wisdom of those members and the deal pipeline they generate, the public should expect to pay the usual two and twenty fees. 2021
Over time the members of a DAO investment club do not need capital any longer, because the public market funds the deals and members get paid through the twenty percent public return on purchase that is minted into fungible reputation tokens. 2021
Market liquidity depends on trustworthiness, and trustworthiness depends on observed momentum: isolated instances of motion are insufficient, because the observations must be collected into a history before they carry weight and meaning. 2021
Where a DAO is automated around a single centralized point of failure, the work of decentralizing and giving members redundant power is wasted, because the point of failure functions as a supreme leader and full centralization would be more efficient. 2021
A DAO that relies on a centralized oracle will eventually be exploited, because the people controlling the oracle will become aware of their power over automated contract triggers and, given the competitive nature of capitalism, are right to take advantage of it. 2021
From a game theory perspective the open source culture advocated in the Web3 movement is not sustainable in the long term unless it is married with a culture of respect for history. 2021
A culture of respect for history is unnatural and must be consciously policed, which makes it another of the essential catalyst institutions that has to be deliberately built into the decentralized economy. 2021
Review changes the game theoretical perspective from a single stage game to a repeated game, which produces more efficient cooperation instead of internal competition and is what makes the open source environment sustainable in the long run. 2021
Markets collapse when opportunistic behavior saps the efficiency of cooperation: once the environment becomes too adversarial and trust is diminished, collaboration is no longer profitable. 2021
Strict legal enforcement is an inefficient remedy for opportunism because every unit of energy devoted to policing is energy that could instead have been used to cooperate productively. 2021
Each new post should be able to reference older posts, so that when a new post is validated it can raise or lower the reputational value of past posts depending on how users come to perceive the precedent. 2021
A reputation token is inherently worth more to the person who earned it than to someone who merely bought it, because of its secondary use in making future earnings, so reputation is harder to accumulate than cash and economies of scale are weakened. 2021
Because reputation tokens are constantly created, the reputation economy is inflationary, and a member with very high reputation must do proportionally more work merely to maintain the disparity, which makes reputation less likely to concentrate and acts as a natural counterbalance to accumulation of individual power. 2021
Reputation-based governance faces a chicken and egg problem: voting becomes more efficient once reputation is valuable, but reputation cannot become valuable without meaningful voting. 2021
A meaningful reputational system with the potential for retrospective review would let a network rely on fewer nodes, since randomly selected nodes staking their reputation can do the polling work and be reviewed and punished later, which is one reason proof of stake is more efficient than proof of work. 2021
Efficiency is only meaningful relative to goals, and understanding goals is the same as understanding values, so maintaining a system's efficiency requires adherence to its values. 2021
Transcendental values are necessary for long-term stability because every formal, explicitly specified protocol is permanently exposed to strategies that subvert it, a result the authors draw from the Folk Theorems of game theory. 2021
A society that relies only on meritocratic rewards destroys its own meritocracy: Price's Law differentiates rewards exponentially, the bottom tier cannot afford the training to compete, and the separation widens until the society destabilizes and collapses. 2021
The efficient arrangement is that all of society shares the essentials while individuals remain free to pursue nonessentials, which puts government business in charge of essentials and leaves private business free to pursue nonessentials. 2021
Demand for insurance and reputation policing runs counter to prosperity: when the system runs well and everyone profits there is less need for insurance, and when profits fall and competition intensifies cheating becomes more attractive and more policing is needed. 2021
Centralization and monopolies are a threat to market liquidity because they can carry too much mass or too much velocity, and an imbalance in either direction, too much mass and too little velocity or too little mass, damages the market. 2022
Decentralized structures outperform centralized ones on liquidity because in them market mass and velocity are uncorrelated, which yields more stable and predictable liquidity. 2022
Flatter markets with more diverse interests and talents are more effective and efficient at truth discovery, including price discovery and the identification of ideal solutions to new problems, and decentralization promotes that diversity by improving member autonomy and freedom. 2022
Valuation metrics developed for legacy assets apply only in a limited way to digital assets, so importing them wholesale produces unreliable digital asset valuations. 2022
Digital asset valuation uncertainty is produced by the combination of an immature digital asset market and a valuation infrastructure, legal, accounting, finance, technology, and back office, that was not built for these assets. 2022
Although many traditional assets also resist full assessment, the absence of established pricing standards for digital assets makes the loss of valuation accuracy for financial reporting worse than in traditional markets. 2022
Dual listing narrows bid ask spreads in traditional markets by injecting liquidity, but crypto markets behave differently: price differences between two exchanges can reach upwards of five percent during peak trading times. 2022
Digital asset exchanges have no closing prices, so digital asset managers cannot rely on the closing price convention that underpins traditional valuation practice. 2022
Because digital asset valuation methodologies vary significantly, the tradeoffs among them leave digital asset managers with meaningful valuation discretion. 2022
Even for the most liquid level one digital assets, managers may choose between the price on a favored exchange and an aggregate across exchanges, so the same asset can be reported at different values by different managers. 2022
The absence of digital asset valuation standards generates uncertainty and confusion for both investors and managers, and the industry would be better off with uniform standards. 2022
Arbitrage trading emerges in crypto markets because of information asymmetries across exchanges, which arise from imperfect disclosure, and the resulting decline in market efficiency is a key indicator of an inefficient market. 2022
Cross exchange price gaps in crypto do not self correct because of frictions on the arbitrageur side: South Korean investors faced foreign exchange conversion costs and regulatory capital controls that made exploiting the Bithumb premium impractical. 2022
Digital asset fund valuation disputes are aggravated by nondisclosure: Polychain Capital told a redeeming investor that the fund's asset valuation policy would not be disclosed. 2022
An investor who has been fully redeemed loses the ability to test the fund's valuation of his interest: the court held that Greenhouse retained no equity interest and therefore had no right to inspect the partnership's books and records. 2022
As of 2022 there is no agreed upon reliable valuation method for cryptocurrencies. 2022
Fair market value is the legal standard for valuation, but it carries real world problems that limit its usefulness in practice. 2022
Stocks and cryptocurrencies look similar enough, both traded on markets at fluctuating prices, to invite similar regulation, but they diverge in their potential for abuse, their nature, their acceptance, and their use. 2022
The adjusted net asset approach revalues balance sheet items toward current fair value but still fails to capture intangible assets, because intangibles are not represented on the balance sheet. 2022
When the bid ask spread grows too wide while trades occur at high volume, the market begins to lose liquidity and the asset's value starts to fall, forcing investors who unload positions to surrender unrealized gains. 2022
Put option based discount models for lack of marketability have been widely used, but they can be inaccurate because real investors do not possess perfect market timing ability. 2022
The main obstacle to digital asset market liquidity may be that the number of token holders has not continued to expand exponentially year over year; a larger stakeholder base would deepen liquidity and permit seamless entry and exit. 2022
Digital assets become less liquid precisely when large amounts are moved at once, because a large sell order floods the exchange and drives the price down. 2022
When exchanges apply different standards about who may trade on their platform, the market ends up showing different prices for the same asset across exchanges, which is one reason trading arbitrage has become common in crypto. 2022
Digital assets resemble high growth companies for valuation purposes, so scenario planning is essential and business leaders must reason backward from the future rather than forward from the present, because the relevant markets may not yet exist. 2022
Secondary trade pricing from exchanges is a legitimate market approach input for digital assets only when liquidity is high enough to rely on those prices; where liquidity is lacking or unreliable, a discount for lack of liquidity is required. 2022
DCF appears at first glance unsuited to digital asset valuation because valuation is framed as pricing a token at a point in time, but it becomes applicable where networks return cash flows to token holders or to those who contribute work. 2022
Under a deflationary token issuance model, which caps the number of tokens ever issued, prices are expected to increase because of the fundamental scarcity of token supply. 2022