Money 2.0 Stuff: Liminal spaces

The word ‘protocol’ sounds deceptively intimidating until you realize it is really just a cool synonym for ‘rules’. Rules, both formal and implicit, abound. Rules themselves are pretty boring. No one likes rules. The fun part comes from carefully evaluating these rules and devising exploitative strategies that have not been explicitly accounted for – I'm just playing by the rules, man! The fun part is discovering, and then occupying, the liminal space. The world of cryptocurrencies has liminal spaces by the bucketload, which is why it’s so entertaining.   

Once you begin to think about life through this rules-focused framework everything becomes a game. The blockchain industry lends itself particularly well to this lens. Blockchains themselves have a formal set of players – miners, users, full nodes – and a formal set of rules – consensus algorithms, transaction guarantees, rewards. The better blockchains are incentive compatible in that abiding by the rules should be the most economically rational behaviour for all players. The less, well, good blockchains have flaws in the design of their rules so that cooperation is no longer the Nash Equilibrium. Rational behaviour will be that which necessarily disproportionately benefits one faction over another. These less-good blockchains are zero-sum games, and without significant structural advantage, the best strategy is to avoid them altogether.