Lesson 3: Is blockchain's greatest invention economic rationality?

我为什么要上这堂课?

As we learned in the curriculum "Cryptocurrency," miners receive cryptocurrency as a reward for performing mining, which is essential for blockchain. This reward mechanism is said to be the greatest invention that made the blockchain possible. In this lesson, we will take a short break from the technical content and learn about the economics elements incorporated in blockchain.

在本课中,你将学习到什么?

  • The relationship between cryptocurrencies and public chains
  • The economic rationale for blockchain

Let's understand the relationship between cryptocurrencies and public chains

As you learned in Lesson 2, the characteristics of public chains include "Decentralized," "Trustless," and "Transparency.

These are common to all public chains, but there is one more thing that all public chains have in common.

They each have their own cryptocurrency, which is essential for the blockchain to work.


This is a cause-and-effect relationship: "blockchains do not have a specific administrator" -> "they are managed by mining" -> "there must be an incentive for mining" -> "cryptocurrency is paid as a reward for mining".

At this point, there is no public chain that does not require cryptocurrency as a reward, and no new mechanism has emerged to replace this reward mechanism.


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The greatest invention of the blockchain is economic rationality

Some of you may have wondered why cryptocurrency serves as a reward for mining.

In order to function as a reward, it must itself be worth something to receive.

Cryptocurrencies are literally currencies, and they function as rewards because they themselves have a value that can be converted into fiat currency.


Furthermore, this reward mechanism is connected to the economic rationale for using blockchains to prevent administrators (Miners) from committing fraud.

As we learned in the curriculum "Cryptocurrencies," the development status of the blockchain is a factor in determining the price of cryptocurrencies.

Therefore, if a miner commits fraud by using the blockchain he is mining, the price of the cryptocurrency he is receiving as a reward for mining that blockchain will fall.

"No one would want to lower the price of the cryptocurrency they receive as a reward.

This economic rationale, which makes good use of psychology and behavioral economics, is said to be the greatest invention of blockchain.


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