10 Questions
What is the main purpose of tokenomics?
To incentivize people to buy and stake the token
What happened to the price of the OHM protocol?
It decreased
What is the main focus of Hofmann’s game?
Scarcity
What was the name of the project whose game theory model was popularized by the meme (3,3)?
Olympus DAO
What is the purpose of cryptocurrencies?
To introduce any game theory the creators would like
What is the purpose of decentralized autonomous organizations (DAOs)?
To vote on rules that define a cryptocurrency’s economy
What caused the price of the OHM protocol to fall dramatically?
Investors liquidated on a third-party platform
What is the purpose of the liquidity pool on a third-party platform?
To create a reliable reserve currency
What was hyped up on Twitter in Hofmann’s game?
10,000-character sheets
What is the main benefit of token holders voting on rules that define a cryptocurrency’s economy?
To introduce any game theory the creators would like
Study Notes
- Cryptocurrencies are a free pass to introduce any game theory the creators would like.
- In the past few years, token holders have been able to vote on rules that define a cryptocurrency’s economy by voting using tokens through decentralized autonomous organizations, or DAOs.
- For instance, Olympus DAO operated a huge decentralized money-market fund, where those who wanted to create a reliable reserve currency benefited from additional funds joining the pool.
- According to the project’s game theory model (popularized by the meme (3,3)), the most rational choice was to stake OHM into the auto-compounding protocol.
- The tokenomics of the protocol permitted this; by staking OHM, you would strengthen the decentralized reserve currency and allow people to buy more bonds.
- On the other hand, if everyone sold OHM, that would hurt the price of the protocol, and all holders would get hit.
- So, you can see how the protocol’s tokenomics incentivized people to buy and stake the token.
- Tokenomics don’t always go to plan. Eventually, lots of people did sell OHM after investors using an OHM liquidity pool on a third-party platform were liquidated.
- That caused the price to fall dramatically, scaring other investors away from the token.
- Meanwhile, the tokenomics of Hofmann’s game revolved around scarcity; there were only 10,000-character sheets that were hyped up on Twitter, which became immensely valuable.
Test your knowledge of game theory in cryptocurrencies with this quiz. Explore the concepts of decentralized autonomous organizations (DAOs), tokenomics, and the impact of game theory models on cryptocurrency economies.
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