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Decoding Economic Risks in Web3: takeaways from Lisa JY Tan



At Nearcon 2023, Lisa JY Tan, the visionary behind Economics Design, delivered an illuminating discourse on the nuances of economic risks within the realm of Web 3. This conversation offered invaluable insights to founders, investors, and the wider community, equipping them with the knowledge needed to navigate the complex landscape of building robust ecosystems tied to tokenomics.

Economics Design is an esteemed organization committed to bolstering businesses in the development and supervision of primary market designs. Their vast expertise extends to crafting a diverse array of systems, such as token-based closed-loop systems, and designing comprehensive frameworks that cater to the needs of private entities, both in the business and social spheres.

At the core of their approach lies the integration of incentives. Diligently monitoring the efficacy of these systems, Economics Design actively pursues continuous improvement to ensure their long-term sustainability.

With their specialization in creating and fine-tuning market systems, Economics Design goes above and beyond to ensure efficiency and long-lasting viability.

Lisa spoke on how to build and analyze robust systems for pitching relevant ideas to investors. The focus is on economic risks in the context of Web 3.0, which involves token-based closed-loop systems and the development of business or social systems for private organizations.

Lisa introduces three types of risks in Web 3.0. The first is financial risk. Similar to traditional finance, it involves financial audits, P&L, and accounting to understand the financial risks a company faces. The next is technological risk. Specific to Web 3.0, it concerns smart contract audits to identify and address vulnerabilities in the code.

Lastly, there is economic risk. She said that this involves understanding the rules, behaviors, and interactions within the economic system being developed. This includes analyzing tokens as programmable money and the economic rules embedded in the system.

She noted the importance of economic risks in building a new world, where it’s not just about code and financial exploits but also about defining rules for how people can interact within the ecosystem.

Lisa introduced a framework with three pillars – market, mechanism design, and token design – to comprehensively analyze economic risk. Through examining legal and judicial risks, technological risks, and community and economic agents, we gain insights into the market perspective. This holistic approach allows for assessing economic risks effectively and making informed decisions. It provides a solid foundation for evaluating the potential challenges and opportunities within and outside our control.

Mechanism design has to do with governance, financials, and economic transactions, with a focus on user behavior, interaction, and retention, while token design involves examining the type of tokens in the ecosystem, understanding the intrinsic value they represent, and assessing the risks associated with that intrinsic value.

Lisa believes that economic risks should be a concern for everyone involved in the community, from active members to protocol creators and decision-makers. It is crucial to prioritize the creation of sustainable ecosystems to benefit both token holders and the overall economy in the long run.

Read also; Solana exec explains layer 1’s plan to transform stablecoins


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