Monopoly without a Monopolist: An Economic Analysis of the Bitcoin Payment System

Bitcoin provides its users with transaction-processing services which are similar to those of traditional payment systems. This article models the novel economic structure implied by Bitcoin’s innovative decentralized design, which allows the payment system to be reliably operated by unrelated parties called miners. We find that this decentralized design protects users from monopoly pricing. Competition among service providers within the platform and free entry imply no entity can profitably affect the level of fees paid by users. Instead, a market for transaction-processing determines the fees users pay to gain priority and avoid transaction-processing delays. The article (i) derives closed-form formulas of the fees and waiting times and studies their properties, (ii) compares pricing under the Bitcoin Payment System to that under a traditional payment system operated by a profit-maximizing firm, and (iii) suggests protocol design modifications to enhance the platform’s efficiency. The Appendix describes and explains the main attributes of Bitcoin and the underlying blockchain technology.

Decentralization of Political Design in China

Political posters, banners, and similar objects are extremely common in China. This article uses political design from contemporary China, particularly emphasizing the government's Chinese Dream campaign, to analyze what at first appears to be a paradox. The subjects of the various campaigns and the language they use are mandated by the central government and promoted through central and local publicity departments. However, the graphic aspects of these campaigns, such as the choice of colours, images, layout, and typeface, are much less strictly controlled, and are decided by local governments or authorities. This makes political design in China decentralized. Decentralized design is inconsistent with the principles of global marketing and with the PRC's reliance on set forms of political discourse, both of which rely on the assumption that uniformity will lead to more effective communication of messages and persuasion of the public. Evidence from local design campaigns indeed shows that Chinese political posters are often designed hastily and without expertise, resulting in strange and unpersuasive images. Despite this, the article shows that decentralized design is not paradoxical. This is largely because the Chinese party-state uses propaganda as a method of "signalling" its overall power, more than as a tool of indoctrination or persuasion about particular topics. The central government's reliance on incentives and metrics to regulate local authorities means that the production of propaganda is also a way in which local governments can signal their loyalty to the Centre.

Peer to party: Occupy the law

In this paper I infuse political and legal theory with peer to peer decentralized design features. This experiment studies how property and liability, two core legal institutions attached to individual persons, react and can be transformed (like chemical elements) when applied to a peer to peer, distributed design. This empirical and evolutionary approach of hacking the law, seen as a regulatory system, is then applied to the peer production of law itself, as a political advocacy method for achieving legal reform inspired by the peer to peer ethos.

Analyzing the Tradeoffs Between Economies of Scale, Time-Value of Money, and Flexibility in Design Under Uncertainty: Study of Centralized Versus Decentralized Waste-to-Energy Systems

This paper presents and applies a simulation-based methodology to assess the value of flexible decentralized engineering systems design (i.e., the ability to flexibly expand the capacity in multiple sites over time and space) under uncertainty. This work differs from others by analyzing explicitly the tradeoffs between economies of scale (EoS)—which favors designing large capacity upfront to reduce unit cost and accommodate high anticipated demand—and the time value of money—which favors deferring capacity investments to the future and deploying smaller modules to reduce unit cost. The study aims to identify the best strategies to design and deploy the capacity of complex engineered systems over time and improve their economic lifecycle performance in the face of uncertainty by exploiting the idea of flexibility. This study is illustrated using a waste-to-energy (WTE) system operated in Singapore. The results show that a decentralized design with the real option to expand the capacity in different locations and times improves the expected net present value (ENPV) by more than 30% under the condition of EoS α = 0.8 and discount rate λ = 8%, as compared to a fixed centralized design. The results also indicate that a flexible decentralized design outperforms other rigid designs under certain circumstances since it not only reduces transportation costs but also takes advantage of flexibility, such as deferring investment and avoiding unnecessary capacity deployment. The modeling framework and results help designers and managers better compare centralized and decentralized design alternatives facing significant uncertainty. The proposed method helps them analyze the value of flexibility (VOF) in small-scale urban environments, while considering explicitly the tradeoffs between EoS and the time-value of money.

The Value of Flexible Capacity Expansion Strategies in Design of Complex Decentralized Engineering Systems

This paper presents and applies a simulation-based methodology to assess the value of flexible decentralized engineering systems (i.e., the ability to flexibly expand the capacity in multiple sites over time and space). This work differs from others by analyzing explicitly the tradeoffs between economies of scale (EoS) — which favors building large capacity upfront to reduce unit cost and accommodate high anticipated demand — and the time value of money — which favors deferring capacity investments to the future and deploying smaller modules to reduce unit cost. The study aims to identify the best strategies to deploy capacity of complex engineered systems over time and improve their economic lifecycle performance in the face of uncertainty. This study is illustrated using a waste-to-energy system operated in Singapore. The results show that a decentralized design with the real option to expand the capacity in different locations and times improves the expected net present value by more than 20% under the condition of economies of scale α = 0.8 and discount rate λ = 8%, as compared to a fixed centralized design. The results also indicate that a flexible decentralized design outperforms other rigid designs under certain circumstances since it not only reduces transportation costs, but also has the advantage of flexible deployment strategies, such as deferring investment and avoiding unnecessary capacity. The results help designers and managers better compare centralized and decentralized design opportunities and to recognize the value of flexible decentralized designs in small-scale urban environments. The example also provides guidance for applying flexibility to a wider range of complex engineered systems and to determine the best strategies for deploying the capacity of systems in other urban contexts.

Behavioral Experimentation and Game Theory in Engineering Systems Design

Game-theoretic models have been used to analyze design problems ranging from multi-objective design optimization to decentralized design and from design for market systems (DFMS) to policy design. However, existing studies are primarily analytical in nature, which start with a number of assumptions about the individual decisions, the information available to the players, and the solution concept (generally, the Nash equilibrium). There is a lack of studies related to engineering design, which rigorously evaluate the validity of these assumptions or that of the predictions from the models. Hence, the usefulness of these models to realistic engineering systems design has been severely limited. In this paper, we take a step toward addressing this gap. Using an example of crowdsourcing for engineering design, we illustrate how the analytical game-theoretic models and behavioral experimentation can be synergistically used to gain a better understanding of design situations. Analytical models describe what players with assumed behaviors and cognitive capabilities would do under specified conditions, and the behavioral experiments shed light on how individuals actually behave. The paper contributes to the design literature in multiple ways. First, to the best of our knowledge, it is a first attempt at integrated theoretical and experimental game-theoretic analysis in design. We illustrate how the analytical models can be used to design behavioral experiments, which, in turn, can be used to estimate parameters, refine models, and inform further development of the theory. Second, we present a simple experiment to understand behaviors of individuals in a design crowdsourcing problem. The results of the experiment show new insights on using crowdsourcing contests for design.