3 post-COVID-19 fintech trends you should know about

Iwo Hachulski

29 Jun 2020
3 post-COVID-19 fintech trends you should know about

It is no doubt that fintech has been gradually implementing successive stages of the revolution in the banking services sector. The main beneficiaries of this state of affairs are, apart from fintech itself, consumers. Traditional banking adopts various strategies regarding the existing status quo, some banks, including Santander, are constantly investing heavily in the most promising fintech startups in order to then implement their solutions for their customers. Others - try to create their own unique products, which are then implemented by other players in the market. One of the best examples here is Bank PKO BP and the contactless payment system BLIK developed by the bank's IT department. The constantly ongoing time of the epidemic has changed many behaviors and habits. What mark has COVID-19 left on the modern financial services sector, a popular fintech? What prospects should we expect from a full opening of economies in a global context?

Extraordinary times require extraordinary solutions

Revaluation of priorities - this is probably the simplest and most rational way to describe the changes introduced by the coronavirus in our lives. Sanitary restrictions have forced the financial sector, like many others, to a new opening - and a look into the future from a completely different perspective. The need for full mobility introduced along with the full compatibility of the solutions used became, within a few weeks, a determinant of the effectiveness of the adaptation of both traditional banking and the fintech giants. 

However, it would be unfair to put them next to each other in this context - mainly due to the fact that it was not so much an unimaginable challenge for fintech to move almost 100 percent of their business into the digital world. This state of affairs is primarily due to the fact that the vast majority (and very often 100%) of fintech services offered within the framework of retail banking, for example, are available only online. The vast majority of them have decided on such a business model from the very beginning - on the one hand, they have focused on reducing the costs of running branches together with minimizing fixed costs and, as a result, full mobility, and on the other hand, they have often closed themselves off to clients currently almost exclusively connected with traditional banking. However, such a strategy has brought the expected results. Fintechs, although also often forced to make cuts - among others, Revolut announced the introduction of restrictions in the cheapest plan offered to customers and numerous layoffs in the Polish branch of the company - usually did not have to face the complicated task of transferring several thousand employees into remote operation almost overnight. Thus, they were able to focus on introducing specific solutions offered to their clients instead of dealing with their internal problems in the first place. For example, Starling Bank launched the "combined card" function, which enables the transfer of a second, "back-up" debit card linked to the customer's account to someone who can spend on their behalf. A team of developers from Fronted, Credit Kudos and 11:FS created Covid Credit for the self-employed, allowing access to financial aid for the most vulnerable people who are not covered by government support. A significant role is also slowly being played by fintech software houses, which offer IT services using the latest Fintech solutions such as Blockchain or AI.

Mobility and security above all

Due to health restrictions and recommendations, the volume of both card and phone payments increased slightly, for instance, in India it was about 5%. According to many experts in banking and social psychology, such a trend may last longer. According to the Mordor Intelligence report "Mobile Payments Market - Growth, Trends, and Forecast" (2020-2025) The use of m-payments will continue to grow strongly with an annual cumulative growth rate of as much as 26.93%. In Central Europe, this is mainly due to the still very young banking system, often developed from scratch only in the 1990s. For this reason, many behaviors are not so deeply rooted in society, which is thus much more susceptible to all kinds of innovation.

Another element that is hard not to mention is budgeting apps, i.e. applications for planning and controlling the budget. Although their popularity in Poland and other Central European countries is not as impressive as in the United States, this may gradually change due to the inevitable economic crisis caused by the coronavirus pandemic. Full control over one's own budget due to the difficult social and economic situation will undoubtedly become one of the priorities - thus bringing the possibility of a structured review of one's own spending to the fore. The applications differ in many ways, so that everyone can find something for themselves. Mint automatically categorizes transactions from credit and debit cards connected to the system and tracks them against a budget that can be adjusted and adapted to user's needs. Goodbudget, on the other hand, is mainly dedicated to couples - it is possible to share and fully synchronize the budget with another person in both iOS and Android.

Tandem and natural competition

Despite all the turmoil, the post-pandemic outlook for the coming months seems stable, although not as promising as previously expected. According to Ron Shevlin, Managing Director of Fintech Research at Cornerstone Advisors, the era of fintech experimentation is slowly coming to an end. The indicators that will gain in importance are primarily the number of accounts funded and their percentage in relation to the total number of application downloads. In his opinion, in the case of mainly B2B-oriented fintechs, the crucial benchmarks will be more operational, such as improved speed, cycle time and lower costs.

Moreover, there is a large disparity within the banking sector environment itself. There is continued optimism among the largest fintechs. By February 2020, Revolut already had less than 11 million users. According to the owners' forecasts, the number of users is expected to reach 13.07 million by the end of June, and then increase by about 20%, to reach 16.45 million by December 2020. The second largest player, N26, has already exceeded 5 million users in January, thus maintaining almost exponential growth and significantly exceeding the company's forecasts.

The situation is different for traditional banks, whose financial situation has often deteriorated. According to analyses of the International Monetary Fund, in addition to the immediate challenges posed by the COVID-19 outbreak, the relentless period of low interest rates may put further pressure on bank profitability in the forthcoming years. This may be a cause for concern, mainly due to the fact that it is the constant development of both traditional and modern banking that may be the key to recover from the crisis. A unique banking tandem also guarantees a greater choice of available services for the customer, and thus more competition and increased innovation in the fight for each costumer. 

What is more, smaller fintechs also face considerable problems. According to the latest CB Insights report, the value of contracts signed by fintech in Q1 2020 decreased by as much as 35% compared to Q4 2019. Better-invested and profitable fintechs are in a much better position, especially in the context of depletion of investment funds and hence increased competition in the fight for any funds for further development. The problems of some may paradoxically become a pain for others, thus worsening the situation of the sector and, consequently, often of the entire economy. 

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Applying Game Theory in Token Design

Kajetan Olas

16 Apr 2024
Applying Game Theory in Token Design

Blockchain technology allows for aligning incentives among network participants by rewarding desired behaviors with tokens.
But there is more to it than simply fostering cooperation. Game theory allows for designing incentive-machines that can't be turned-off and resemble artificial life.

Emergent Optimization

Game theory provides a robust framework for analyzing strategic interactions with mathematical models, which is particularly useful in blockchain environments where multiple stakeholders interact within a set of predefined rules. By applying this framework to token systems, developers can design systems that influence the emergent behaviors of network participants. This ensures the stability and effectiveness of the ecosystem.

Bonding Curves

Bonding curves are tool used in token design to manage the relationship between price and token supply predictably. Essentially, a bonding curve is a mathematical curve that defines the price of a token based on its supply. The more tokens that are bought, the higher the price climbs, and vice versa. This model incentivizes early adoption and can help stabilize a token’s economy over time.

For example, a bonding curve could be designed to slow down price increases after certain milestones are reached, thus preventing speculative bubbles and encouraging steadier, more organic growth.

The Case of Bitcoin

Bitcoin’s design incorporates game theory, most notably through its consensus mechanism of proof-of-work (PoW). Its reward function optimizes for security (hashrate) by optimizing for maximum electricity usage. Therefore, optimizing for its legitimate goal of being secure also inadvertently optimizes for corrupting natural environment. Another emergent outcome of PoW is the creation of mining pools, that increase centralization.

The Paperclip Maximizer and the dangers of blockchain economy

What’s the connection between AI from the story and decentralized economies? Blockchain-based incentive systems also can’t be turned off. This means that if we design an incentive system that optimizes towards a wrong objective, we might be unable to change it. Bitcoin critics argue that the PoW consensus mechanism optimizes toward destroying planet Earth.

Layer 2 Solutions

Layer 2 solutions are built on the understanding that the security provided by this core kernel of certainty can be used as an anchor. This anchor then supports additional economic mechanisms that operate off the blockchain, extending the utility of public blockchains like Ethereum. These mechanisms include state channels, sidechains, or plasma, each offering a way to conduct transactions off-chain while still being able to refer back to the anchored security of the main chain if necessary.

Conceptual Example of State Channels

State channels allow participants to perform numerous transactions off-chain, with the blockchain serving as a backstop in case of disputes or malfeasance.

Consider two players, Alice and Bob, who want to play a game of tic-tac-toe with stakes in Ethereum. The naive approach would be to interact directly with a smart contract for every move, which would be slow and costly. Instead, they can use a state channel for their game.

  1. Opening the Channel: They start by deploying a "Judge" smart contract on Ethereum, which holds the 1 ETH wager. The contract knows the rules of the game and the identities of the players.
  2. Playing the Game: Alice and Bob play the game off-chain by signing each move as transactions, which are exchanged directly between them but not broadcast to the blockchain. Each transaction includes a nonce to ensure moves are kept in order.
  3. Closing the Channel: When the game ends, the final state (i.e., the sequence of moves) is sent to the Judge contract, which pays out the wager to the winner after confirming both parties agree on the outcome.

A threat stronger than the execution

If Bob tries to cheat by submitting an old state where he was winning, Alice can challenge this during a dispute period by submitting a newer signed state. The Judge contract can verify the authenticity and order of these states due to the nonces, ensuring the integrity of the game. Thus, the mere threat of execution (submitting the state to the blockchain and having the fraud exposed) secures the off-chain interactions.

Game Theory in Practice

Understanding the application of game theory within blockchain and token ecosystems requires a structured approach to analyzing how stakeholders interact, defining possible actions they can take, and understanding the causal relationships within the system. This structured analysis helps in creating effective strategies that ensure the system operates as intended.

Stakeholder Analysis

Identifying Stakeholders

The first step in applying game theory effectively is identifying all relevant stakeholders within the ecosystem. This includes direct participants such as users, miners, and developers but also external entities like regulators, potential attackers, and partner organizations. Understanding who the stakeholders are and what their interests and capabilities are is crucial for predicting how they might interact within the system.

Stakeholders in blockchain development for systems engineering

Assessing Incentives and Capabilities

Each stakeholder has different motivations and resources at their disposal. For instance, miners are motivated by block rewards and transaction fees, while users seek fast, secure, and cheap transactions. Clearly defining these incentives helps in predicting how changes to the system’s rules and parameters might influence their behaviors.

Defining Action Space

Possible Actions

The action space encompasses all possible decisions or strategies stakeholders can employ in response to the ecosystem's dynamics. For example, a miner might choose to increase computational power, a user might decide to hold or sell tokens, and a developer might propose changes to the protocol.

Artonomus, Github

Constraints and Opportunities

Understanding the constraints (such as economic costs, technological limitations, and regulatory frameworks) and opportunities (such as new technological advancements or changes in market demand) within which these actions take place is vital. This helps in modeling potential strategies stakeholders might adopt.

Artonomus, Github

Causal Relationships Diagram

Mapping Interactions

Creating a diagram that represents the causal relationships between different actions and outcomes within the ecosystem can illuminate how complex interactions unfold. This diagram helps in identifying which variables influence others and how they do so, making it easier to predict the outcomes of certain actions.

Artonomus, Github

Analyzing Impact

By examining the causal relationships, developers and system designers can identify critical leverage points where small changes could have significant impacts. This analysis is crucial for enhancing system stability and ensuring its efficiency.

Feedback Loops

Understanding feedback loops within a blockchain ecosystem is critical as they can significantly amplify or mitigate the effects of changes within the system. These loops can reinforce or counteract trends, leading to rapid growth or decline.

Reinforcing Loops

Reinforcing loops are feedback mechanisms that amplify the effects of a trend or action. For example, increased adoption of a blockchain platform can lead to more developers creating applications on it, which in turn leads to further adoption. This positive feedback loop can drive rapid growth and success.

Death Spiral

Conversely, a death spiral is a type of reinforcing loop that leads to negative outcomes. An example might be the increasing cost of transaction fees leading to decreased usage of the blockchain, which reduces the incentive for miners to secure the network, further decreasing system performance and user adoption. Identifying potential death spirals early is crucial for maintaining the ecosystem's health.

The Death Spiral: How Terra's Algorithmic Stablecoin Came Crashing Down
the-death-spiral-how-terras-algorithmic-stablecoin-came-crashing-down/, Forbes


The fundamental advantage of token-based systems is being able to reward desired behavior. To capitalize on that possibility, token engineers put careful attention into optimization and designing incentives for long-term growth.


  1. What does game theory contribute to blockchain token design?
    • Game theory optimizes blockchain ecosystems by structuring incentives that reward desired behavior.
  2. How do bonding curves apply game theory to improve token economics?
    • Bonding curves set token pricing that adjusts with supply changes, strategically incentivizing early purchases and penalizing speculation.
  3. What benefits do Layer 2 solutions provide in the context of game theory?
    • Layer 2 solutions leverage game theory, by creating systems where the threat of reporting fraudulent behavior ensures honest participation.

Token Engineering Process

Kajetan Olas

13 Apr 2024
Token Engineering Process

Token Engineering is an emerging field that addresses the systematic design and engineering of blockchain-based tokens. It applies rigorous mathematical methods from the Complex Systems Engineering discipline to tokenomics design.

In this article, we will walk through the Token Engineering Process and break it down into three key stages. Discovery Phase, Design Phase, and Deployment Phase.

Discovery Phase of Token Engineering Process

The first stage of the token engineering process is the Discovery Phase. It focuses on constructing high-level business plans, defining objectives, and identifying problems to be solved. That phase is also the time when token engineers first define key stakeholders in the project.

Defining the Problem

This may seem counterintuitive. Why would we start with the problem when designing tokenomics? Shouldn’t we start with more down-to-earth matters like token supply? The answer is No. Tokens are a medium for creating and exchanging value within a project’s ecosystem. Since crypto projects draw their value from solving problems that can’t be solved through TradFi mechanisms, their tokenomics should reflect that. 

The industry standard, developed by McKinsey & Co. and adapted to token engineering purposes by Outlier Ventures, is structuring the problem through a logic tree, following MECE.
MECE stands for Mutually Exclusive, Collectively Exhaustive. Mutually Exclusive means that problems in the tree should not overlap. Collectively Exhaustive means that the tree should cover all issues.

In practice, the “Problem” should be replaced by a whole problem statement worksheet. The same will hold for some of the boxes.
A commonly used tool for designing these kinds of diagrams is the Miro whiteboard.

Identifying Stakeholders and Value Flows in Token Engineering

This part is about identifying all relevant actors in the ecosystem and how value flows between them. To illustrate what we mean let’s consider an example of NFT marketplace. In its case, relevant actors might be sellers, buyers, NFT creators, and a marketplace owner. Possible value flow when conducting a transaction might be: buyer gets rid of his tokens, seller gets some of them, marketplace owner gets some of them as fees, and NFT creators get some of them as royalties.

Incentive Mechanisms Canvas

The last part of what we consider to be in the Discovery Phase is filling the Incentive Mechanisms Canvas. After successfully identifying value flows in the previous stage, token engineers search for frictions to desired behaviors and point out the undesired behaviors. For example, friction to activity on an NFT marketplace might be respecting royalty fees by marketplace owners since it reduces value flowing to the seller.

source: https://www.canva.com/design/DAFDTNKsIJs/8Ky9EoJJI7p98qKLIu2XNw/view#7

Design Phase of Token Engineering Process

The second stage of the Token Engineering Process is the Design Phase in which you make use of high-level descriptions from the previous step to come up with a specific design of the project. This will include everything that can be usually found in crypto whitepapers (e.g. governance mechanisms, incentive mechanisms, token supply, etc). After finishing the design, token engineers should represent the whole value flow and transactional logic on detailed visual diagrams. These diagrams will be a basis for creating mathematical models in the Deployment Phase. 

Token Engineering Artonomous Design Diagram
Artonomous design diagram, source: Artonomous GitHub

Objective Function

Every crypto project has some objective. The objective can consist of many goals, such as decentralization or token price. The objective function is a mathematical function assigning weights to different factors that influence the main objective in the order of their importance. This function will be a reference for machine learning algorithms in the next steps. They will try to find quantitative parameters (e.g. network fees) that maximize the output of this function.
Modified Metcalfe’s Law can serve as an inspiration during that step. It’s a framework for valuing crypto projects, but we believe that after adjustments it can also be used in this context.

Deployment Phase of Token Engineering Process

The Deployment Phase is final, but also the most demanding step in the process. It involves the implementation of machine learning algorithms that test our assumptions and optimize quantitative parameters. Token Engineering draws from Nassim Taleb’s concept of Antifragility and extensively uses feedback loops to make a system that gains from arising shocks.

Agent-based Modelling 

In agent-based modeling, we describe a set of behaviors and goals displayed by each agent participating in the system (this is why previous steps focused so much on describing stakeholders). Each agent is controlled by an autonomous AI and continuously optimizes his strategy. He learns from his experience and can mimic the behavior of other agents if he finds it effective (Reinforced Learning). This approach allows for mimicking real users, who adapt their strategies with time. An example adaptive agent would be a cryptocurrency trader, who changes his trading strategy in response to experiencing a loss of money.

Monte Carlo Simulations

Token Engineers use the Monte Carlo method to simulate the consequences of various possible interactions while taking into account the probability of their occurrence. By running a large number of simulations it’s possible to stress-test the project in multiple scenarios and identify emergent risks.

Testnet Deployment

If possible, it's highly beneficial for projects to extend the testing phase even further by letting real users use the network. Idea is the same as in agent-based testing - continuous optimization based on provided metrics. Furthermore, in case the project considers airdropping its tokens, giving them to early users is a great strategy. Even though part of the activity will be disingenuine and airdrop-oriented, such strategy still works better than most.

Time Duration

Token engineering process may take from as little as 2 weeks to as much as 5 months. It depends on the project category (Layer 1 protocol will require more time, than a simple DApp), and security requirements. For example, a bank issuing its digital token will have a very low risk tolerance.

Required Skills for Token Engineering

Token engineering is a multidisciplinary field and requires a great amount of specialized knowledge. Key knowledge areas are:

  • Systems Engineering
  • Machine Learning
  • Market Research
  • Capital Markets
  • Current trends in Web3
  • Blockchain Engineering
  • Statistics


The token engineering process consists of 3 steps: Discovery Phase, Design Phase, and Deployment Phase. It’s utilized mostly by established blockchain projects, and financial institutions like the International Monetary Fund. Even though it’s a very resource-consuming process, we believe it’s worth it. Projects that went through scrupulous design and testing before launch are much more likely to receive VC funding and be in the 10% of crypto projects that survive the bear market. Going through that process also has a symbolic meaning - it shows that the project is long-term oriented.

If you're looking to create a robust tokenomics model and go through institutional-grade testing please reach out to contact@nextrope.com. Our team is ready to help you with the token engineering process and ensure your project’s resilience in the long term.


What does token engineering process look like?

  • Token engineering process is conducted in a 3-step methodical fashion. This includes Discovery Phase, Design Phase, and Deployment Phase. Each of these stages should be tailored to the specific needs of a project.

Is token engineering meant only for big projects?

  • We recommend that even small projects go through a simplified design and optimization process. This increases community's trust and makes sure that the tokenomics doesn't have any obvious flaws.

How long does the token engineering process take?

  • It depends on the project and may range from 2 weeks to 5 months.