2.3 Incentives

Introduction

Economics 101 teaches that incentives are the backbone of consumer choices. Economics assumes that agents are rational decision-makers according to the incentives of their surroundings. Ethereum is designed in such a way to promote integrous behavior and punish bad behavior for a sustainable model.

Learning Objectives

  • Understand the basics internet bonds and practical uses

  • Be able to describe and assess economic implications of internet bonds

Reading List

Key Points

  • Web 3.0

    • the third generation of internet services

    • distinguishes itself from Web 2.0 with its developments in machine learning, artificial intelligence, enhanced security, decentralized structure, and advanced connectedness

  • Internet Bond

    • decentralized bond structure made possible through the advent of Web 3.0 and Eth 2.0

    • require a deposit of 32 ETH as collateral, creating a contract that promises rewards based on participation in the network

Review Questions

  • How are incentives aligned in Ethereum to promote good behavior and punish bad behavior?