The benefits of Economic Protocol Networks are obvious, but the best means to obtain and sustain those benefits often are not. That’s why we recommend the use of the qualitative PRESTO framework, first outlined by Stefanos Leonardos, Daniël Reijsbergen and Georgios Piliouras of Singapore University.
PRESTO is an acronym that describes a five-axis design space for EPNs, using the following dimensions:
- Optimality: Does the protocol solve the problem in a maximized way?
- STability: Does everyone follow the protocol?
- Efficiency: Does a protocol utilize its resources efficiently?
- Robustness: Does a protocol survive attacks and unexpected behavior?
- Persistence: Does a protocol recover after being forced out of equilibrium?
Optimality: Does the protocol solve the problem in a maximized way?
Optimality is the most foundational dimension for protocol design. It asks if two questions of an EPN at the highest level:
- Does the protocol fundamentally solve the problem it is designed to address?
- Does the protocol maximize outcomes for participants participating in it?
The Bitcoin and Ethereum networks are good examples of protocols that solve their stated problem and thus pass the fitness test. However, at this point in time, they do not solve it in an optimal way.
Stability: Does everyone follow the protocol?
This dimension deals with the question of whether network participants, especially purely self-interested actors, will consistently adhere to the protocol, and whether there are safeguards built into the system to encourage or enforce such adherence.
One such safeguard is simply the scale of the network. Stability in cryptoeconomic protocols increases when there’s a lot of activity (e.g. transactions) and when this activity is distributed across a large number of participants.
On networks where there isn’t a lot of activity and participation is concentrated among a small number of users, the network’s stability decreases and it becomes susceptible to disruptions like “51% attacks.”
Efficiency: Does a protocol utilize its resources efficiently?
The Efficiency dimension asks the question of how well a protocol utilizes its resources. The current iterations of the Bitcoin and Ethereum networks are both Proof of Work systems that tend to utilize more energy resources as network participation increases. Additionally, their relatively long block/transaction confirmation times can cause network users to not be able to transact with each other in a seamless and frictionless fashion.
A number of relatively new EPNs are trying to solve for the Efficiency criteria by using a different consensus protocol than Proof of Work. The most discussed solution is the switch from Proof of Work to Proof of Stake consensus.
Robustness: Can a protocol survive attacks and unexpected behavior?
This dimension looks at a network from two angles. Firstly, its resilience to malignant attacks, and secondly, its malleability in the face of behavior that is against the initial network design.
Persistence: Can a protocol recover?
If a protocol fails in one or more dimensions, it is more than likely that participants will leave, causing a multi-sided network to become asymmetrical — dominated by one type of participant — or, in a worst case, being abandoned entirely.
The persistence consideration therefore deals with the question of whether a network has built-in mechanisms to help it recover after being forced out of equilibrium.
There are a number of recent examples of traditional networks that have found a way to recover after risking imbalance or stagnation. For example, Facebook’s introduction of its mobile app and its acquisition of Instagram are examples of ways that operators were able to increase user participation in the network and total network value after a period of flattening growth.
When taking these factors into account, it becomes clear that games are natural candidates for the implementation of EPNs.
Want to learn more about the PRESTO framework and how it applies to crypto protocols? Read our in-depth article here.