Tokenization of the Common: An Economic Model of Multidimensional Incentives
Keywords: Tragedy of the Commons, Shared Resource, To- kens, Decentralised solution, Social Optimum, Blockchain technology, Decentralised Ledger Technology (DLT), Smart Contracts
TL;DR: We formulate a simple model which shows how tokenization can help overcome the commons tragedy
Abstract: The concept of the tragedy of the commons, originally rooted in economics, describes the depletion of shared resources due to self-interested actions by individuals. This work proposes a novel solution to address this economic challenge by leveraging tokens to capture its multidimensional nature. By utilising blockchain and DLTs, this decentralised approach aims to achieve a social optimum while promoting self-regulation. The paper presents a mathematical treatment of the tragedy of the commons, incorporating multi-dimensional tokens and exploring the divergence from the classic optimal solution, highlighting the potential of tokenisation in shaping a sustainable and efficient economy.
Submission Number: 17
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