The Economics of NEO - Githubissues

Research Topic “The Economics of NEO” by Nicola Dimitri Professor of Economics Department of Economics and Statistics University of Siena- Italy www.deps.unisi.it

Project Introduction The project will take place in 16 months and will consist of two scientific papers: 1) “An analysis of the two tokens NEO economy” 2) “The economics of smart contracts in NEO”. (1) In the first paper I intend to discuss the economic fundamentals of the interesting “two tokens” economy in NEO. In particular, how the NEO token and GAS token holdings could co-evolve over time, for a generic user, based on the distribution mechanism specified in the NEO white paper. In particular, I would be very interesting to investigate to what extent NEO token holdings could affect GAS holdings with time, GAS being indispensable for operational purposes such as smart contracts implementation. The theoretical framework that I plan to use is founded on the “The Representative Agent”, (Blanchard-Fisher, 1989) a widely adopted model in dynamic economic theory, an example of which is contained in this recent paper of mine https://www.frontiersin.org/articles/10.3389/fbloc.2021.443966/full The Representative Agent approach has limitations, but also several advantages, and appears to be particularly suitable to investigate the monetary dynamics in NEO. Among the advantages it allows to model the following, fundamental, trade-off that NEO users seem to face. The larger the amount of NEO tokens held by a user the more the user could affect governance and receive GAS tokens, however the lower the benefit obtained by executing transactions paid with NEO tokens. This is because the Representative Agent approach is based on an explicit specification of a user’s utility function, which can embody her preferences for more, or less, liquidity in one’s wallet. One specific topic that I plan to explore is the existence and functioning of an internal market for trading NEO tokens with GAS tokens, and the forces determining their exchange rate. Indeed, even though the platform is planning to have 100mln units, of each of them, in principle nothing prevents their exchange rate to be different from one.
(2) In the second paper I intend to investigate the following problem related to smart contracts. The fees paid to deploy/implement a smart contract in NEO seems to follow a logic similar to the one adopted by Ethereum, on which I recently did some work. If the GAS announced by the user is enough, to cover the implementation costs of the smart contract, then the contract will be correctly executed, and the user would pay the GAS that she announced. However, if the GAS announced by the user is not enough the cover the implementation costs, no component of the contract will be executed, but the user will pay the announced GAS. This is because the GAS needed by a user, to implement a contract, may be unknown when she announces how much she’s willing to pay to implement the contract. Therefore if the user underestimates the true cost, she will lose the announced GAS without implementing any component of the contract. For many contracts, their implementation cost will be known to the users, with no risk for them to underestimate how much GAS is needed. However, when contracts are complex then users may not know exactly how much GAS they need to announce. For this reason, the principle underlying the smart contract payment is akin (not identical) to a well known model in Game Theory, the so called ”War of Attrition” game (Osborne-Rubinstein, 1994). Drawing also from this analogy, in the paper I intend to investigate what could be an optimal level of GAS a user should announce to the platform, to implement a contract.
I believe what I wrote may be sufficient to describe the project goal. However, please do not hesitate to let me know if you need more details on the project.

Team Introduction My name is Nicola Dimitri, and I’m Full Professor of Economics at the University of Siena (Italy) https://docenti.unisi.it/en/nicoladimitri one of the oldest Universities in the world, dating back to 1240. The Siena School of Economics and Management https://www.sem.unisi.it/en is frequently ranked as one of the best in Italy, with an international reputation and visibility.
As you can see from my CV https://docenti-deps.unisi.it/nicoladimitri/curriculum/ in most of my publications I’m the only author, which is also what I plan to be for this research project. For your perusal, from my CV I have extracted the following publications which are closer to the project

Bitcoin Mining as a Contest, Ledger, 2, 31-37 (2017)

The Blockchain Technology; Some Theory and Applications, Maastricht School of Management Working Paper, 2017/3 (2017)

Transaction Fees, Block Size Limit and Auctions in Bitcoin, Ledger, 4, 68-81, (2019)

Skills, Efficiency and Timing in a Simple Attack and Defense Model, Decision Analysis, 17, 227-234, (2020)

Monetary Dynamics with “Proof of Stake”, Frontiers in Blockchain doi: 10.3389/fbloc.2021.443966 (2021)

Who are the arbitrageurs? Empirical evidence from Bitcoin traders in the Mt. Gox exchange platform (with Saggese P, Belmonte A., Bohme R., Facchini A.) Working papers n 860, Department of Economics and Statistics, University of Siena-Italy (2021) (submitted)

Consensus: Proof of Work, Proof of Stake and Structural Alternatives, in Enabling the Internet of Value, (Vadgama N., Xu J, Tasca P. eds) Springer Verlag, (2022)

Proof of Stake in Algorand, (revised and resubmitted to ACM Distributed Ledger Technologies: Research and Practice (2022)

The Economics of Consensus in Algorand, Fintech, 2, 164-179 (2022)

Quadratic Voting in Blockchain, Information,18, 305 (2022)

I’d also like to pose to your attentions that, as mentioned in the CV, I’m Associate Editor of the specialised Journals “Frontiers in Blockchain” and “IET Blockchain”, as well as currently involved in a number of blockchain related projects, not yet inserted in the CV. Research Roadmap The proposed timing below refers to after the possible approval of the research project Month 4 first draft of paper (1) (First milestone) Month 8 final version of paper (1) (Second milestone) Month 12 first draft of paper (2) (Third milestone) Month 16 final version of paper (2) (Fourth milestone)

Budget

As I will work on my own, and the project is theoretical, the budget will reflect the time that I expect to need to write the two papers, which is about 70 days. Since for consultancy I’m paid, on average about 600€ per day, the requested overall budget is 40.000€. My proposal is to pay the sum in 5 instalments of 8000€ each. The first is upon approval of the project (Month 0), and the remaining four upon approval of each milestone.

I will ask to be paid in NEO Tokens, for an overall equivalent (29 June 2022) of 4790 NEO Tokens, with each of the 5 instalments amounting to 958 Neo Tokens

Proposal Info :clipboard:

Proposal Type: request-for-funding
Amount Requested: 4790
Token: ef4073a0f2b305a38ec4050e4d3d28bc40ea63f5 (NEO)
Receiver Address: Nd6QwLG4ix7ZD2zPEKgz5x2uKQYNxDAvhB (5f23339847c3f5d4b84fc7f36167fdf647cb73bc)
Created by: @nicoladimitri :rocket:
Raw Intents: :eyes:

[ {
  "target_contract" : "0x6276c1e3a68280bc6c9c00df755fb691be1162ef",
  "method" : "releaseTokens",
  "params" : [ {
    "type" : "Hash160",
    "value" : "ef4073a0f2b305a38ec4050e4d3d28bc40ea63f5"
  }, {
    "type" : "Hash160",
    "value" : "5f23339847c3f5d4b84fc7f36167fdf647cb73bc"
  }, {
    "type" : "Integer",
    "value" : "4790"
  } ],
  "call_flags" : 15
} ]

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AxLabs / grantshares

The Economics of NEO #7

Proposal Info :clipboard: