Modelling and simulation of token economic systems

TL;DR: Tokens are more than digital money, they are foundational to digital economic systems. Pior to coding, token models should be modelled and analysed. That requires an engineering discipline and supporting tools.

The aim of our proposal is to create an initial set of reproducible Nix Jupyter notebooks for modelling token-based micro-economies on EUTxO chains with cadCAD. Using Cardano chain data and with material translated to Japanese.

Project Duration: 3 Months

Project Cost: ₳170,193 (USD$64,248 @ ₳0.3775USD)

Team Members: Yohann Irani, Jack O'Brien

Proposal Solution

We are proposing to provide the initial set of supporting tools and knowledge to bootstrap token engineering in the Cardano ecosystem. Token engineering is the pragmatic application of science to economic problems using tokens and market mechanisms.

Rich token systems have complex interactions. The current approach to designing a token system is to copy a successful design and tweak it to come up with a set of parameters that you 'feel' are right. The approach is hit-or-miss, it could very well work however, may not be efficient or effective. It's like building a bridge, you can come up with a cool design based off ten other bridges. However the local context will be different and a strong wind causes the bridge to collapse. Our modern blockchain equivalent was the 2016 DAO Attack on Ethereum.

Copying previous designs is limiting and ideally you should validate and optimise a design before investing effort implementing it. The design of Cardano exemplifies a rigorous research led engineering project. We would like to apply this approach to the analysis, modelling and simulation of token-based micro-economic systems.

One open-source tool, specifically engineered for modelling and simulation of dynamic token-based systems is cadCAD (complex adaptive dynamics computer-aided design). cadCAD is a powerful tool which can be used to model complex systems and run simulations. Simulations such as Monte Carlo simulations with parameter sweeps and A/B testing can be performed. These provide insights into variability, parameter combinations and model comparisons, respectively. cadCAD and the associated practise of token engineering has been used extensively on Ethereum based projects, but only one project we are aware of exists in Cardano. We want to change that.

The core of our proposed solution is to implement and deliver four things:

1. An extensive Stake-pool cadCAD Model that demonstrates cadCAD and token-engineering tooling using a well known, real-world Cardano example of market mechanism - Stake-Pool revenue and rewards calculation.
2. Chain data availability in SQLite/BigQuery for use in the Stake-pool Model.
3. Documentation and tutorial video covering the design, implementation, and use of the Stake-pool model in cadCAD.
4. Proposal content documentation translated to Japanese, as the first non-english language. Our future plan is to support numerous Asian languages.

All code and tutorial content will be accessible and hosted on the tokenflows community website (tokenflows.xyz) and GitHub organisation (tokenflows). All tutorial text and subtitles will be translated to Japanese to make it accessible to that community.

Note: Our intention is to start building a community around token engineering practice. As such we are currently developing a website, tokenflows.xyz to be the central place to collect tutorials, code, and articles on EUTxO token engineering. The initial website will host this proposal and be available for community review. All proposal outputs will also be hosted on tokenflows.xyz

Depending on our overall progress we also have three stretch-goals we would like to achieve:

1. Implementing the Nix Flake on Windows WSL.
2. Setup a hosted environment for the stake-pool model using either AWS or Fly.io to make it easier to get started. Using Nix, DivNix and Terraform.
3. Translate the stake-pool notebook content into a Japanese version.

The aim is to bootstrap a token engineering community for the Cardano and EUTxO chains. Hence, the project will engage developers and engineers to understand the use of complex systems modelling in the UTxO environment. By doing so, they can apply token engineering to use tokens to coordinate actions.

Impact on the Cardano Community

To increase the value of ADA, we need to create more utility on Cardano. To do so, more advanced digital micro economies using tokens, beyond Cryptocurrencies and NFTs should be created. Transactions, Tokens and Metadata can be used for far more on-chain accounting applications in Layer 1 and 2, than most current projects demonstrate, enabling us to build advanced token-based ecosystems.

Ideally, we all want to design and build better things, including better decentralised organisations. We believe we can. Using tools for modelling and simulations we can analyse, design, and validate the requirements for smart-contract implementations. Using these tools we are more likely to meet a project's economic goals. Aside from IOG Research, there is little experience in Cardano's Project Catalyst ecosystem on how to design and engineer these digital micro-economies, hence the proposal is about improving both.

The success of this project will bring value in many ways to Cardano:

• Stake pool model for SPO's to calculate rewards by optimising parameters
• A diverse set of tools that are easy to setup and use make Cardano more accessible leading to greater value and utility for ADA
• Developers to build upon the models and use them for more in depth analysis
• As a result, creating a more attractive environment for quality developers to thrive in.

Our overall goal is to see TE adopted in more projects on Cardano, delivering optimised design solutions. Spreading awareness and building understanding of TE in an EUTxO environment will make mastering the basics for developers on Cardano simple and accessible.

Project Goals

• Knowledge Application: To see an increase in the application of token engineering modelling and simulation in the design and development of projects within the Cardano ecosystem (quantitative) and by observing the discourse in the community (qualitative).
• Content Creation: To produce a video tutorial on the modelling and simulation aspect of token engineering. The success of this objective will be measured by the completion and publication of one video tutorial complete with supporting docs and code, including Japanese text translation.

Tutorial output will be shared through Cardano and Token Engineering (TE) Academy Discord channels. We’ll also get distribution through our existing website, Youtube and Tiktok channels, and individual social media accounts. Word of mouth will also play a big role in spreading content. We will start distribution immediately after completing the content, and follow it with promotional content throughout the following months.

The first, main target audience will be developers in Cardano's ecosystem. Up-skilling those looking to learn and apply Token to their projects.

As people start mastering the concepts, demand for more advanced modelling and simulation techniques will validate the need for more to be created.

Project outputs will be translated into Japanese (subtitles) using services such as lokalise (increasing adoption and utility). There is ever increasing potential in our asian community, so we want to spread the knowledge as far as we can.

To measure the success of our project, we'll combine both qualitative and quantitative measures that reflect its direct and indirect impacts. Here's our plan:

1. Community Engagement: We will assess the quantity and quality of community interaction through different communication channels. This includes discussions, feedback, and questions related to our tutorial and notebook, which will provide insights into comprehension and application of the content.
2. GitHub Interactions: The GitHub insights to view the number of people raising issues, submitting Pull requests or forking the repo will give us a clear picture of active engagement and adoption of the content.
3. Video Metrics: We'll monitor the number of views for the video tutorial on Youtube, providing a direct measure of the interest and reach of our insightful content.
4. Progression of Token Engineering in Project Design: Over time, we expect to see token engineering progressively becoming part of the design process for future projects within Cardano, indicating the practice of validating and optimising token designs using modelling and simulation.

These metrics, taken together, will provide a realistic and comprehensive understanding of the direct outcomes and reach (impact) of our project.

Delivery Capability

We have spent the last few years getting a understanding of web3, token engineering, Haskell, Nix, Plutus.  We have experienced what its like to learn an immense amount of 'new to us', material in unfamiliar disciplines of computer science and computational engineering, economics, and law. Along with this, we have relevant knowledge from engineering and commercial music degrees, software engineering (Haskell/Plutus), commercial and Project Catalyst experience.

Perhaps the biggest reason that we can deliver on what we are outlining in this proposal is that we are already very familiar with both the tools, modelling, and the discipline. The challenge for us is turning what we know into a public published deliverable that others will be able to use without our direct assistance.

Yohann currently works as a token engineer & engineering consultant. He has completed Token Engineering, Python, and cadCAD courses (applying this to develop tools in Cardano). He was the project engineering manager on a successful $350k NZD project. Additionally, he's had prior experience as a math tutor, teaching high school & university students.

Jack has been a software engineer on Cardano for three years with experience writing Haskell and Plutus. He's contributed to Catalyst projects since fund 2, Co-Founder of the Eastern Town Hall community and has experience in audio and video content creation. He has trained many members of the Eastern Townhall in translation, using git and several other topics. Check out his previous content. (He has come a long way since then!)

• Minting Native Assets, 281 subscribers on Youtube with views 7.1k.

• Tik Tok with a 110 followers reaching up to 5.7k views.

Our wider team, who we will look to for advice and content validation, have been heavily involved in Catalyst since fund 2. They have worked on more than 10 related projects, led challenge teams and been catalysts and contributors to several community-led projects.

Relevant technical knowledge and experience, support from established Catalyst community members, teaching experience, and having recently studied TE, make delivering this project with high trust and accountability a safe bet.

Key Milestones

Milestone 1: A reproducible, reliable Jupyter Notebook environment.

Output: A DivNix Nix Flake installing all the necessary python packages needed to use cadCAD and access indexed chain data. The nix flake will be executable on MacOS, NixOS and Linux (Ubuntu) systems. Supporting documentation.

Acceptance criteria: Nix Flake code and documentation published on Github, accessible to the public.

Milestone 2: An extensive Stake-pool cadCAD Model that demonstrates cadCAD and token-engineering tooling using a well known, real-world Cardano example of a market mechanism: Stake-Pool revenue and rewards calculation.

Output: A cadCAD Stake-pool model delivered in a Jupyter Notebook.

Acceptance criteria: Python code and Notebook published on Github, accessible to the public.

Milestone 3: Description: Setting up Chain data availability for use in the stake-pool model and modifying the stake-pool model to use on-chain data of stake-pool activity from SQLite/BigQuery.

Output: An extension to the Nix flake and model Notebook to setup pre-computed summaries of on-chain data in SQLLite, and provide access to Google BigQuery for more timely data computation. Along with supporting documentation.

Acceptance criteria: Nix, Python, Notebook code modifications for the proposed features published on Github, accessible to the public.

Milestone 4: Description: Tutorial Documentation and tutorial video covering the design, implementation, and use of the Stake-pool model in cadCAD.

Workflow for this milestone: Research; Content creation - scripts, diagrams and animations; pre-production review; video production and post-production; Japanese subtitle translation; publishing and promotion.

Output: A video tutorial posted to youtube with Japanese subtitles and distribution/promotion of the content through various channels, with call to visit tokenflows.xyz.

Acceptance criteria: Tutorial video and documentation published, accessible to the public.

Final Milestone: Japanese translation of all project documentation.

Output: Japanese translated versions of documentation. Excluding embedded notebook commentary.

Acceptance criteria: Japanese translated documentation published on Github to the public.

Project Team

Our team are engaged on Discord and Cardano Forums. We have relationships with Project Catalyst Fund operational and technical team members and are involved in various communities.

Yohann Irani (Token Engineer, Content Creator): Bachelor of Engineering. 3+ years Industry experience in systems design and project management. Recent graduate of Python, cadCAD and token engineering courses. Working token engineer, developing a Cardano stake pool model using cadCAD and Jupyter notebooks. Developing DAO compensation plans into cadCAD models.

Jack O'Brien (Nix/Haskell and Media Production): Software engineer with experience in Haskell, Plutus, Nix, Rust and Wasm. A graduate of Massey University College of Creative Arts, in Commercial Music, Technology major. Experience in music and video production. Co-organised the Catalyst Eastern Town-hall; setting up and maintaining the translation pipeline and providing open-source training materials and workshops for the community. Studying Evolutionary, Institutional Economics, and Mechanism Design.

Budget and Costs

The requested budget is for our time and expenses for three months of the project from its commencement in March to June 2024 to deliver the tutorial video & relevant documentation for each milestone.

Our project will provide a high production value video, cadCAD model, standard developer environment and Japanese translations - each having their own set of deliverables and associated costs. The estimated costs include all overheads and are normalised at an hourly rate of ₳236, adjusted for the short-term intermittent nature of project funding. This rate accounts for a 10% project contingency and 20% uncertainty cost due to the volatility of ADA over the last six months (we've been using our skills to do the modelling!).

The software services and tools we plan to utilise are:

• AWS for data storage and indexing
• Craft for documenting
• Linear for project management
• Figma for designing
• OBS, keystroke pro, cursor pro and desktop curtain for video recording & presentation
• Davinci, Logic and Adobe After Effects for motion graphics, audio and video
• Lokalise (or similar) for translating video subtitles & docs to Japanese

These software costs are included\n in the budget for each milestone.

Value to the Cardano Ecosystem

Modelling and simulating token economies to design better use of tokens is valuable to the Cardano ecosystem. Token engineering crosses many disciplines- economics, math, design, engineering, software development, community building- important to realising a Web3 vision. It can be applied to all manner of coordination games, so a significant number of projects in Catalyst can use it for designing and engineering better community tokenomics. Hence, developing team skills and engineering better value creation systems for communities.

Several year's worth of full time work has gone into learning, applying and testing different modelling and simulation tools for the Cardano environment. The project's outputs will unlock the ability for many people to learn, use and develop the cadCAD models we have provided, along with all the backend and developer environment work.

Designing and building a complex model, all the back end work, content creation, especially useful and engaging content takes a lot of time. We ask for the funding to add polish to our work and produce code and content to share what we know. Our goal is to build a token engineering community of practise on Cardano, which ultimately will help drive the utility and value of Cardano.

Since digital content and software has infinite leverage, even if only 100 developers start using token engineering, the value created will be significant (for themselves, users of the tools and Cardano) and the impact will last for many years to come. With your support for this project, we can all look forward to reading about, and benefiting from the sophisticated incentive designs people have created in future Catalyst proposals.