The Principal Agent Problem
The principal-agent problem is a conflict in priorities between a person or group and the representative authorized to act on their behalf. An agent may act in a way that is contrary to the best interests of the principal.
Decentralized protocols have a unique super power of built-in incentives. Unlike like web2 with its opaque incentives that turn users into the product, crypto is being built on a new economic foundation of trust-minimized credibility. Incentives have enabled computers in decentralized networks to handle hundreds of billions of dollars of value without any single party controlling the network. However, delivering innovation to the user requires more resources than storage and compute. Protocols must finance a new set of intermediaries to provide execution, liquidity and distribution to compete in an increasingly crowded space. There is no one size fits all for incentives.
Just as Web2 revolutionized data science for growth, the field of mechanism design is evolving into an applied discipline tailored to decentralized systems. This transition from theory to practice in incentive design is pivotal for sustainable growth of decentralized systems. The key lies in developing tools and practices that can bridge the complexities of blockchains with desired community outcomes. The right tools will accelerate iteration and facilitate converging on new norms as social consensus.
Mekatek is on a mission to find the balance between individual opportunity and joint utility in the internet of blockchains. We are seeking collaboration of every form, from product focused industry partners to academics. Reach out to us here so we can grow the ecosystem together.