Mechanism design, as elegantly put by Tim Roughgarden, a researcher at A16Z and professor at Columbia Univeristy, is inverse game theory and is the foundation to building and designing token mechanims that power cryptoeconomic systems. Game Theory is the study and optimization of a strategy for a fixed game and rules, whereas mechanism design is to build a game or mechanism that will have a desired output. Mechanism design was first foramlized in the 1950's and is a combination of Economics, Mathematics, and Computer Science to build and design complex and dynamic systems to try and achieve a specific response or output. In terms of cryptoeconomic systems, many articles and papers listed below highlights some of the early research around it and the complexities around building cryptoeconomic systems. In blockchain, tokens are the interactions between people, protocols, centralized and decentralized systems. In between all these variations, human behaviors is always a complex matter to build and model around. Typical patterns in the mechanism design space rarely focus on irrational and non-optimal behaviors, which is largely the human element. A keen focus on building systems that understand intent, expectations, and participants in a protocol or system are key to developing successful and sustainable protocols.
- Foundations of Cryptoeconomic Systems - Voshmgir, Zargham - One of the first formal academic papers on cryptoeconimcs systems and the interconnected systems that are involved within it.
- On Modeling Blockchain-enabled Economic Networks as Stochastic Dynamical System - Detailed analysis on how systems engineering principles can be introduced to model outputs for blochchain-based economic networks.
- Market Design: Auction and Matching by Guillaume Haeringer - University level textbook that goes over the basis of auctions, a primitive in designing markets.