Cryptoeconomics basics. Part 1
What role does the crypto economy play in solving the global financial system's problems?
There was generally considered to be no way that a peer-to-peer network could be created in which consensus could be achieved, that stood equal to or superior to any existing system and had no significant vulnerabilities to attack or failure before the advent of Bitcoin.
There are many people who refer to this problem as the Byzantine General's problem because of its complexity. It is clear from this logical dilemma that it is crucial for various participants in distributed systems to come to an agreement in order for the system to function. As a result of the unreliability of some of the participants, the problem implies the network cannot properly function as a result of the inability to reach an agreement.
Satoshi Nakamoto solved the problem of economic incentives by creating Bitcoin, which introduced them into the peer-to-peer network.
- To reach consensus on the network's history and the current state of the network, decentralized networks have continue to rely on cryptography. In addition, the majority of networks are driven by economic incentives that act as a driving force for participants to behave in a particular manner within the network.
- Cryptography and economic incentives are synergized in such a way that we are able to create a new ecosystem of decentralized networks that are secure and stable.