Abstract
The long-term sustainability of decentralized networks hinges on well-designed token economics that can adapt to changing conditions while maintaining network security and user engagement. This paper presents a novel game-theoretic framework for dynamic token economics, aimed at enhancing the sustainability and resilience of decentralized networks. We develop a multi-agent model that incorporates adaptive token supply mechanisms, staking dynamics, and governance incentives. Our model allows for the simulation of various network scenarios, including rapid growth, market downturns, and shifts in user behavior. We introduce a 'sustainability index' that quantifies a network's ability to maintain security, liquidity, and user participation over time. Using this framework, we analyze the performance of different token economic designs under a range of conditions. Our results demonstrate that dynamic supply adjustment mechanisms, coupled with carefully calibrated staking rewards, significantly outperform static models in maintaining network health during extreme market events. We find that governance incentives play a crucial role in aligning long-term stakeholder interests with network sustainability. Interestingly, our simulations reveal an unexpected trade-off between short-term price stability and long-term network resilience. Token economic designs that prioritize price stability often struggle to adapt to major shifts in network usage or external economic conditions. In contrast, more flexible designs that allow for controlled volatility show greater capacity for long-term sustainability. We validate our theoretical findings against empirical data from several prominent blockchain networks, finding strong correlations between our sustainability index and real-world measures of network health and longevity.This research contributes to the growing field of cryptoeconomics by providing a rigorous framework for designing and evaluating dynamic token economies. Our findings have implications for the development of more sustainable and resilient decentralized networks, potentially paving the way for their broader adoption and integration into the global economic system.