Perfect Price Discovery and Blockchain

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 Perfect price discovery is a major challenge in economics.




The Internet is skewed up. The advertisement business model has become a terrible incentive model for generating revenue for content. 

The advertisement industry relies on views of the website. 

Clickbait content whether it is a vulgar joke or rumours or attention-seeking fake news gets more revenue than quality ones. 

Imagine how much Einstein's paper would get revenue if the business model was through advertisements. Only a few people would have read and could understand it, so Einstein would have not earned more than a few dollars. 


There are alternative models like blockchain where a developer can decide what they want to incentivize. (e.g. Quality content or echo chambers that reinforce their existing views due to confirmation biases)


One night after thinking till 1 am, I got a simple equation.


Take for example you want to incentivize a quality essay. 

Bounty for writing an essay is 1 token: Price now for 1 token is $100 if prices rise to $200 (2 times), then bounty will become 1÷2 ×√2 = 0.7, if it rises 3 times $300, then bounty will become 1÷3×√3 = 0.57 and so on. You can set the beginning price of any good.


The formula is

Initial Token / Price increase times * √Price increase times


The benefits of this model are it incentivizes to pump the prices of tokens by investors/participants,  and if the prices rise, more people get benefited (without minting a lot of tokens that devalues the token) than a few due to its quadratic nature. 


That is when prices double (2 times) two people will get 0.7*200 rather than a single one with minting of 1.4 coins. So, about twice the number of people will get the advantage.





Simulation Code:

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