Economics and Math of Token Engineering and DeFi


Economics and Math of Token Engineering and DeFi is a research based textbook for users in the space (crypto holders and defi users), as well as crypto protocol projects.

This book is a three-year work in progress that covers the evolution of economics, framework to designing systems and the math around the various mechanisms.

A case study is used to dive into the economics structure and apply the concepts.


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Economics is a science. It primarily examines how decisions are made, which alternatives provide greatest benefits to various stakeholders. Contrary to popular belief, economics is not about money. It has and continues to be about the study of allocation of scarce resources (behaviours). We enforce them through incentives and disincentives (punishments). 

The difference between economics (soft science) and physics (hard science) is that economics is continuously evolves because it is a study of human behaviours. As we moved from Web 1 to Web 2 and now Web 3, the economics 101 that we initially understood has changed.

While is important to be coding the tech infrastructure of Web 3.0 and having ideas of what Web 3.0 is like, an important aspect is the economics and incentive alignment of Web 3.0 users. It is easy to create a token or currency out of thin air. The token is only valuable when the economics make sense.

The aim of this book is to dive into the core foundational principles of economics in Web 3.0. We explore the evolution to economics, the change in principles we learnt in Econs 101, and the new environment that economics will exist in.

Then, we explore ways to apply these foundational principles in Web 3.0, with or without a token. We also tap into the general mathematics that defines the economic mechanisms.

You don’t need to be an economist or technologist to understand the book. We keep things high-level to digest the information, yet come from fundamental academic research.

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Reviewed in the United States on February 9, 2021 (Amazon)

 As a novice token ecosystem designer, I need to know the token playing field, but also what I don’t know. The first five chapters lays out the “why” token economics is here. The next five chapters lays out the “how” of market design and mechanisms. The remaining chapters describes how all this is and may unfold into a new economic model. I should note, much of the math in the latter chapters is a bit out of my reach, but the narrative and graphics kept me moving along with the book.


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Token Economics 201 Blueprint Course is the first course in the world that dives deep into the economics design and incentive mechanisms of a token-based self-sustaining ecosystem. Not just restricted to crypto protocol projects, they also works well in centralised platforms like Airbnb, Uber and Facebook. The course consolidates more than 1.5 years of economics research to build a framework to understand and represent the economics of such token-based ecosystems. 


About the author

Lisa JY Tan is the founder and lead economist at Economics Design, a research focused consultancy for digital ecosystems. In the academia world, she contributes to research work in various fields like math and economics, while having the practitioner exposure with startups and global businesses. She’s also one of the leaders in a United Nations x Stanford University project on regulating digital currencies.

She was one of the first few to research and educate on token economics, starting in 2018 London. Since then, she has a weekly podcast on the economics of token ecosystems, online course and have educated regulators, government and organisations in London, Singapore, Seoul, Geneva.

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