Paper 2022/1492

A Control Theoretic Approach to Infrastructure-Centric Blockchain Tokenomics

Oguzhan Akcin, The University of Texas at Austin
Robert P. Streit, The University of Texas at Austin
Benjamin Oommen, The University of Texas at Austin
Sriram Vishwanath, The University of Texas at Austin
Sandeep Chinchali, The University of Texas at Austin

There are a multitude of Blockchain-based physical infrastructure systems, ranging from decentralized 5G wireless to electric vehicle charging networks. These systems operate on a crypto-currency enabled token economy, where node suppliers are rewarded with tokens for enabling, validating, managing and/or securing the system. However, today's token economies are largely designed without infrastructure systems in mind, and often operate with a fixed token supply (e.g., Bitcoin). Such fixed supply systems often encourage early adopters to hoard valuable tokens, thereby resulting in reduced incentives for new nodes when joining or maintaining the network. This paper argues that token economies for infrastructure networks should be structured differently - they should continually incentivize new suppliers to join the network to provide services and support to the ecosystem. As such, the associated token rewards should gracefully scale with the size of the decentralized system, but should be carefully balanced with consumer demand to manage inflation and be designed to ultimately reach an equilibrium. To achieve such an equilibrium, the decentralized token economy should be adaptable and controllable so that it maximizes the total utility of all users, such as achieving stable (overall non-inflationary) token economies. Our main contribution is to model infrastructure token economies as dynamical systems - the circulating token supply, price, and consumer demand change as a function of the payment to nodes and costs to consumers for infrastructure services. Crucially, this dynamical systems view enables us to leverage tools from mathematical control theory to optimize the overall decentralized network’s performance. Moreover, our model extends easily to a Stackelberg game between the controller and the nodes, which we use for robust, strategic pricing. In short, we develop predictive, optimization-based controllers that outperform traditional algorithmic stablecoin heuristics by up to $2.4 \times$ in simulations based on real demand data from existing decentralized wireless networks.

Available format(s)
Publication info
Blockchain Token Economics Optimal Control Theory Game Theory
Contact author(s)
oguzhanakcin @ utexas edu
rpstreit @ utexas edu
baoommen @ utexas edu
sriram @ utexas edu
sandeepc @ utexas edu
2022-11-01: approved
2022-10-30: received
See all versions
Short URL
Creative Commons Attribution


      author = {Oguzhan Akcin and Robert P. Streit and Benjamin Oommen and Sriram Vishwanath and Sandeep Chinchali},
      title = {A Control Theoretic Approach to Infrastructure-Centric Blockchain Tokenomics},
      howpublished = {Cryptology ePrint Archive, Paper 2022/1492},
      year = {2022},
      note = {\url{}},
      url = {}
Note: In order to protect the privacy of readers, does not use cookies or embedded third party content.