Economic Exploits and Risk Mitigation Strategies

Lisa J. Y. Tan
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Lisa J. Y. Tan: Economics Design

Chapter Chapter 6 in A Comprehensive Guide for Web3 Security, 2023, pp 119-131 from Springer

Abstract: Abstract This chapter delves into case studies related to token economics, highlighting risks, exploits, and potential solutions. It also discusses the opportunities and threats brought by artificial intelligence (AI) in the field of token economics. The first case study examines an economic exploit achieved through financial engineering and suggests risk adjustment as a potential solution. The second case study addresses risks associated with incentive mechanism design, proposing economy parameter adjustment as a solution. The third case study explores Bancor’s insurance mechanism exploited by Celsius and Bancor’s response to the issue. The chapter further examines the impact of AI on token economics, outlining its potential benefits and challenges. Ten key considerations for assessing economic risk metrics in token economics are presented, emphasizing the need for thorough analysis. Finally, the chapter underscores the importance of recognizing and addressing risks associated with token economics, given its growing significance in the evolving world of digital assets and Web3 technologies.

Keywords: Token economics case studies; Token risks and exploits; Artificial Intelligence (AI) in token economics; Financial engineering; Incentive mechanism design; Economy parameter adjustment; Bancor’s V2.1 Insurance Mechanism; Economic risk metrics; Token economics; Token engineering; Economy parameter adjustment; Bancor’s insurance mechanism; Economic risk metrics; Economic exploit; Bonding curve exploits (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:spr:fuobcp:978-3-031-39288-7_6

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DOI: 10.1007/978-3-031-39288-7_6

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