# One Weird Trick to Good Tokenomics with Nihar Shah

- Channel: [Ethereum Denver](https://streameth.org/ethereum-denver)
- Date: 2023-10-07
- Duration: 17:52
- Watch: https://streameth.org/watch/yt-G15o611LVSI
- YouTube: https://www.youtube.com/watch?v=G15o611LVSI

## Description

"Tokenomics" often presents an operational headache to developers, who must answer a laundry list of complex questions around allocation, airdrops, Treasury management, emissions, governance, inflation, and so on. Even worse, tokenomics can serve as a financial distraction to developers, who spend cycles on engineering price pops than on engineering the protocol. This talk aims to provide a single and unifying "north star" to developers, i.e. a single and simple principle that they can use to answer each question in a consistent and farsighted manner. That principle is: "incentivize civic behavior sustainably" or more simply "solve externalities." The talk offers a four-step recipe for protocol developers to operationalize this principle: identify positive and negative externalities, identify the key actors, set up the redistribution mechanism, and calibrate the mechanism's sustainability. I work through examples like governance and airdrops, and I briefly illustrate how some major protocols have embodied this principle. With this, protocol designers can reduce the operational complexity and financial noise around tokenomics, and build for long-term success.

DAOS + Community Stage
Nihar Shah
Researcher, Jump Crypto
Jump Crypto
I'm an Economics Researcher at Jump Crypto, where I study a wide variety of topics around tokenomics, mechanism design, governance, and security. Much of my work is in support of our high-conviction projects like Wormhole (a cross-chain messaging protocol) and Pyth (a cross-chain oracle protocol). Prior to this, I was an Economist on Meta's Libra/Diem project, where I spent time designing mechanisms for the proposed stablecoin. Prior to that, I got my AB in Economics, AM in Statistics, and PhD in Economics from Harvard University. In my spare time, I am also an adjunct professor at the University of San Francisco, teaching in the Economics department.
https://twitter.com/theshah39