Grant: Substrate Tokenomics Survey

[taqtiqa-mark]

Project Abstract

A survey of some economic models used to develop Substrate (Dotsama) blockchain/token economies.
The published literature will be from the rational expectations equilibrium (a.k.a. no-arbitrage) approach to economic analysis.

Grant level

• Level 1: Up to $10,000, 2 approvals
• Level 2: Up to $30,000, 3 approvals
• Level 3: Unlimited, 5 approvals (for >$100k: Web3 Foundation Council approval)

Application Checklist

• The application template has been copied and aptly renamed (project_name.md).
• I have read the application guidelines.
• A BTC, Ethereum (USDC/DAI) or Polkadot/Kusama (aUSD/USDT) address for the payment of the milestones is provided in the application.
• The software delivered for this grant will be released under an open-source license specified in the application.
• The initial PR contains only one commit (squash and force-push if needed).
• The grant will only be announced once the first milestone has been accepted (see the announcement guidelines).

[CLAassistant]

All committers have signed the CLA.

[Noc2]

Thanks for the application. Feel free to remove all the parts of the template that are not relevant to a research application. We need to come up with a different template for research-focused applications. This way, it will be easier to understand.
Apart from this, I will share your application with a few additional people for more feedback. One initial feedback from me is that the application is quite expensive, and it might be easier to initially apply for a smaller grant so that we can get a better understanding of your work.

[laboon]

I think this would be a valuable addition to the space, but the price does seem rather expensive.

[Noc2]

Also, could you add the overview section: https://github.com/w3f/Grants-Program/blob/master/applications/application-template.md#overview-1 ?

[taqtiqa-mark]

@Noc2:

add the overview section:

Done, and I've cleaned out non-research elements from the milestones.

@Noc2 and @laboon:

the price does seem rather expensive

A couple of things will help a lot:

• Could you point to grants you consider comparable? (I did seek guidance here but got no response)
• Could you indicate items/topics/milestones you think should be de-scoped.

I'll wait the other reviewer feedback to see where you all land before revising scope etc.

[jonasW3F]

Thanks for the application. After reading it, I struggle to see the clear scope and contribution of this study. As far as I understand, you intend to "[...] provide a creative synthesis of existing token-economy research" of the Polkadot parachains? How would that look like? You state that you do this by reviewing their whitepapers, and published/working papers. While many of the former exist, rigorous (academic) token economic research is mostly absent. From the existing whitepapers, most parts focus on the usecases and initial distribution schemes. The token economics is mostly limited to some arbitrarly defined inflation rate which is split between collators and potentially stakers (if existing). As another dimension of your analysis, you mention different types of tokens. I'd not expect much other tokens than utility tokens that pay for transaction fees, are used in governance for voting and/or might be used for staking. Other token types are virtually absent as they'd constitute clear securities.

You also state that you will not be answering "[...] any particular token-economy design question". Further, I am also missing details on how you intend to analyse the situation with respect to the rational expectations equilibrium. The high price-tag and those open points make me question the contribution of the study and thereby how much it is needed.

In the case I've misinterpreted your approach, could you further elaborate?

[dsm-w3f]

Thank you for the application. I'll describe below the points that raised my attention after reading it. Hope to hear from you about them soon.

What will be the methodology planned for searching papers in the following categories?

• Published articles
• Working papers
• Polkadot parachain whitepapers

If you gonna plan the methodology as part of the grant work, please include that as a deliverable. Is common to use systematic approaches for doing academic literature reviews, such as systematic reviews or systematic mappings. This increase the confidence in the review. Working papers and whitepapers are considered grey literature and could have another approach for searching.

There is only one researcher doing all the work. How would you deal with researcher bias in the data collection/extraction for the papers in this case?

The current (incomplete) list of research to be investigated has some papers that are not from Polkadot ecosystem, such as Bitcoin. Why that? They will be used for comparison as related work? As for related work I think is fine. However, as papers to read and extract data for analysis make sure that your research as stated "A survey of some economic models used to develop Substrate (Dotsama) blockchain/token economies" include only Substrate (Dotsama) ecosystem. As far as I understood, the research is about already done Substrate (Dotsama) ecosystem tokenomics helping new projects with the knowledge of previous ones. Correct me if I'm wrong.

Deliverables:
We are developing an appropriate template for research grant submission. This is working in progress and should be ready soon. My apologies to have to deal with an inappropriate template for deliverables in a research grant. To summarize, the main deliverable for a research grant is the knowledge generated by the research, which should be transferred to the audience in some format, in your case a research paper. In this way, the final delivery from the grant should be the full paper available online somewhere (a preprint on arxiv.org would be enough). The deliverables in your application are most research questions. What would be expecting to receive in those deliverables? Text, tables, methodology, all of them? It is unclear to me the format of the deliverable and if all prerequisites to evaluate them will be present (methodology, raw data, analysis procedures, text describing the results). Usually, research projects are organized and developed in this order (could be different in your case): goals definition, methodology definition, execution, raw results extraction, data analysis, comparison with related work, complete the writing of the paper, and publishing. Could you please explain what will be the process that you will follow to perform the research and how they are time-based- related to your milestone deliveries planned? The milestones should be time-based in the order of delivery.

Researcher Profile, could you please provide a profile in at least one research indexer (Google Scholar, Researchgate, or another one)? This is just to have your publication record.

Regarding the price, could elaborate more about the formation and rationale behind the price charged?

[taqtiqa-mark]

Thanks @jonasW3F and @dsm-w3f for the thoughtful feedback. I believe we are at 4 out of 5 reviewers?

@dsm-w3f thanks for the prompt to update my Linked-In status. If you could update your comment accordingly, I'd appreciate that. I'm currently looking for my next contract.

[taqtiqa-mark]

@Noc2 and @laboon:

the price does seem rather expensive

A couple of things will help a lot:

• Could you point to grants you consider comparable? (I did seek guidance here but got no response)

As best I can infer/guess... the comparable you have in mind is Milestone 1 of Uncollateralized Stablecoin Research

Correct?

It is listed in the Under Development folder, since July 2021, for a 1 month activity - so I suspect I've misunderstood something.

Is there any way to track the status of that development?

[taqtiqa-mark]

Context to proposed budget:
I assumed (correctly it appears) my day rate would be out of budget. I used the average of the Glassdoor salary distribution for a Senior Economist (USA): USD 156k p.a.
I was originally unable to find a related research topic. The only grant I was familiar with related to re-implementation of prior on-chain IPFS grants @ 15K USD/month
Since then I found Milestone 1 of Uncollateralized Stablecoin Research

I'll revise taking the above feedback into account.

[taqtiqa-mark]

@dsm-w3f

What will be the methodology planned for searching papers in the following categories?

I've added methodology to the Milestone 1 deliverables.

Is common to use systematic approaches for doing academic literature reviews, such as systematic reviews or systematic mappings. This increase the confidence in the review. Working papers and whitepapers are considered grey literature and could have another approach for searching.

This exercise will be closest to a "Rapid Review", see Grant MJ, Booth A. A typology of reviews: an analysis of 14 review types and associated methodologies. Health Info Libr J. 2009 Jun;26(2):91-108. doi: 10.1111/j.1471-1842.2009.00848.x. Review. PubMed PMID: 19490148.

There is only one researcher doing all the work. How would you deal with researcher bias in the data collection/extraction for the papers in this case?

I have adjusted the source of the research to eliminate myself as a source of bias in the collection of research papers.
The Polkadot networks are those Parachains elected as at 19 December 2022.

We are developing an appropriate template for research grant submission.

That is great. This application targets the current template requirements, since that is all that is known.

This is working in progress and should be ready soon. My apologies to have to deal with an inappropriate template for deliverables in a research grant. To summarize, the main deliverable for a research grant is the knowledge generated by the research, which should be transferred to the audience in some format, in your case a research paper. In this way, the final delivery from the grant should be the full paper available online somewhere (a preprint on arxiv.org would be enough).

This was addressed under Future Plans:

The working paper will be posted to SSRN (e.g. FEN - Cryptocurrency Research eJournal), IDEAS, Arxiv (q-fin.GN)

I've repeated the detail in the final milestone.

The deliverables in your application are most research questions. What would be expecting to receive in those deliverables? Text, tables, methodology, all of them? It is unclear to me the format of the deliverable and if all prerequisites to evaluate them will be present (methodology, raw data, analysis procedures, text describing the results). Usually, research projects are organized and developed in this order (could be different in your case): goals definition, methodology definition, execution, raw results extraction, data analysis, comparison with related work, complete the writing of the paper, and publishing. Could you please explain what will be the process that you will follow to perform the research and how they are time-based- related to your milestone deliveries planned? The milestones should be time-based in the order of delivery.

I've attempted to address these questions.

Please let me know if anything further is required.

Researcher Profile, could you please provide a profile in at least one research indexer (Google Scholar, Researchgate, or another one)? This is just to have your publication record.

https://www.researchgate.net/profile/Mark-Van-De-Vyver-2

[taqtiqa-mark]

@jonasW3F

Thanks for the application. After reading it, I struggle to see the clear scope and contribution of this study. As far as I understand, you intend to "[...] provide a creative synthesis of existing token-economy research" of the Polkadot parachains?

I've tried to clarify this point.

You state that you do this by reviewing their whitepapers, and published/working papers. While many of the former exist, rigorous (academic) token economic research is mostly absent.

The presence/absence of rigorous (academic) token economic research is the subject of this survey.
How many papers are required to say "rigorous (academic) token economic research is mostly" complete? This depends on your idea of 'rigor' and 'complete'. If you know of an existing survey establishing what you claim, could you please point it out?

From the existing whitepapers, most parts focus on the usecases and initial distribution schemes. The token economics is mostly limited to some arbitrarly defined inflation rate which is split between collators and potentially stakers (if existing).

I currently share this assessment. But, I'm not persuaded this state-of-affairs is because richer ideas don't exist.

As another dimension of your analysis, you mention different types of tokens. I'd not expect much other tokens than utility tokens that pay for transaction fees, are used in governance for voting and/or might be used for staking.

As above.

Other token types are virtually absent as they'd constitute clear securities.

The (regulatory) thinking in this area/topic is muddled. I intend to leave aside the question of whether a token would be subject to a regulator's claim. Consequently, I've clarified that what is/not considered a security is out of scope.

You also state that you will not be answering "[...] any particular token-economy design question".

Correct, this is a survey, hence limited to what the existing literature addresses. Within the scope of the deliverables, I am not committing to solving any particular token-economy design question.

Further, I am also missing details on how you intend to analyse the situation with respect to the rational expectations equilibrium.

I use REE to delimit the scope of the general token-economy research literature. The REE framework naturally suggests some features of an economy, and I've now indicated where that is. I had given an outline of the approach when justifying the exclusion of cryptocurrencies.

Let me know if the changes don't address a particular point to your satisfaction.

[dsm-w3f]

@taqtiqa-mark thank you for your answers. After we started this application review, we approved a new template for research grants application. Would you mind adjusting your application to this new template? I think there will be a few changes but especially in the deliverables section, we will have a better structure. Regarding your answers:

• Rapid Review is ok as a methodology since time is always a constraint. Just make sure that this doesn't affect the quality of your review and state the approach in the methodology. I think you will be able to find proper guidelines to perform this kind of review.
• Researcher bias is more on how the researcher extracts data and analyses it since could be influenced by its background and beliefs than to set a fixed scope for data for analysis. Usually, research bias is reduced by having more than one researcher doing data analysis in an independent way and comparing the results. As this cannot be done when having only one researcher at least plan to declare this threat to the validity in the paper.

For now, I'll wait for my colleagues to circle back to their comments. Let me know if you plan to adjust the application to the new template.

[taqtiqa-mark]

For now, I'll wait for my colleagues to circle back to their comments. Let me know if you plan to adjust the application to the new template.

I'll also wait on their feedback before moving to the new template.

[Polkadot-Forum]

This pull request has been mentioned on Polkadot Forum. There might be relevant details there:

https://forum.polkadot.network/t/polkadot-the-centralized-decentralized-ecosystem/1412/7

[Noc2]

Sorry for the late response here. I missed the updates for some reason. First, I noticed that you changed the level to 2, but the application is still above 30k, see https://github.com/w3f/Grants-Program#rooster-level-3 Could you update this? I personally would still favor a smaller initial grant application for 30k or less. This way, we also get a better impression of your work and could potentially sign follow-up grants. Regarding the RFP, it was indeed already implemented a while ago, and we forgot to update it here. I just fixed it. The price itself on the RFP was copy-pasted from another RFP. In the end, we paid the following for it: https://github.com/w3f/Grants-Program/blob/master/applications/stardust.md, and the team actually worked a lot more on it than only two weeks. The on-chain IPFS grants @ 15K USD/month was highly controversial internally and was only accepted because of the other work by TDSoftware.

Regarding the research itself, I think one concern that we currently have is that researching the current state, especially for this amount, might not be so helpful. I agree that this might be the starting point, but ideally, as the next step (follow-up grant), potential solutions or improvements are researched/developed.

[keeganquigley]

Hi @taqtiqa-mark friendly reminder to look at the requested changes above. Thanks!

[taqtiqa-mark]

I've updated the application to use the new research template.
I've reduced the budget as requested, and update the scope accordingly.
Appreciate any feedback and suggestions.

[Noc2]

Thanks for the update. I'm happy to go ahead with it and mark it as ready for review.

[dsm-w3f]

I added some comments/requests in the body of the application. I think now the proposal is a more informal paper (working paper). Is that right? I made some comments considering the formalism of research papers. If the focus of the paper has changed, let me know and some of my comments regarding methodology could not be applicable. There are other comments that need to be fixed anyway.

[taqtiqa-mark]

I added some comments/requests in the body of the application. I think now the proposal is a more informal paper (working paper). Is that right? I made some comments considering the formalism of research papers. If the focus of the paper has changed, let me know and some of my comments regarding methodology could not be applicable. There are other comments that need to be fixed anyway.

@dsm-w3f , thanks for the detailed feedback. It will help if you can add Blocking: before each detail that is blocking approval, and break it into a separate paragraph.

Re the search - I'm surprised you had access, unless you are a resident of NSW? To confirm, they took about a week to respond? That was the time frame I was advised. Did they indicate which of the databases they searched?

[dsm-w3f]

@taqtiqa-mark thank you for your answer.

It will help if you can add Blocking: before each detail that is blocking approval, and break it into a separate paragraph.

I expect that all be resolved/answered before my approval.

Re the search - I'm surprised you had access, unless you are a resident of NSW? To confirm, they took about a week to respond? That was the time frame I was advised. Did they indicate which of the databases they searched?

I just used the link that you posted. For me is just a search engine, Is it something different from that? Why use a service that is not freely available to anyone? Any advantage to using this service?

[taqtiqa-mark]

I expect that all be resolved/answered before my approval.

I've resolved all the issues I can. I've asked @Noc2 to resolve the only open issue - unless you do so you're self.

Why use a service that is not freely available to anyone?

This is the debate about the subscription vs surveillance business models.

Any advantage to using this service?

These databases provide impact factors which are used in the selection criteria you have been reading for some time now. While flawed they are useful as an initial quality filter that is not biased against the newest research.

[dsm-w3f]

I'm happy to support you application.

[github-actions]

Congratulations and welcome to the Web3 Foundation Grants Program! Please refer to our Milestone Delivery repository for instructions on how to submit milestones and invoices, our FAQ for frequently asked questions and the support section of our README for more ways to find answers to your questions.

Before you start, take a moment to read through our announcement guidelines for all communications related to the grant or make them known to the right person in your organisation. In particular, please don't announce the grant publicly before at least the first milestone of your project has been approved. At that point or shortly before, you can get in touch with us at grantsPR@web3.foundation and we'll be happy to collaborate on an announcement about the work you’re doing.

Lastly, please remember to let us know in case you run into any delays or deviate from the deliverables in your application. You can either leave a comment here or directly request to amend your application via PR. We wish you luck with your project! 🚀

[taqtiqa-mark]

I expect a delay of a week or two wrt Milestone 1:

It has taken a while to disentangle what blockchain token economy features arise from non-discretionary chain properties (Substrate requirements) and what are discretionary (Polkadot implementation choices).

The good news is that, so far, the problematic features are discretionary and can be elided wlog. The bad news is the descriptions will have to be by reference to Substrate - otherwise the text will read as criticisms/refutation of claims that DOT is not a security, and distract from the objective - bringing to light tools/technology applicable to designing a token-economy.