Evolving Trust with Applied Game Theory: Recent White Paper Update Describes Trust Creation through Smart Contracts
When we set out to build the Civic Decentralized Identity Verification Marketplace, we decided that the system would not rely on oracles or centralized decision makers that become single points of failure. Instead, we’ve steadily focused on building a set of rules that would enable every marketplace participant to act with each others’ best interest in mind, as if it were their own.
The token behavior model we have designed focuses on the mandatory goal alignment between Requesters, Validators and Users. It creates a set of rewards and punishments that places malicious actors not just in a zero-sum game, but in a spiraling decay cycle which quickly leads them to exponential losses. To adequately incentivize the actors, we decided to look at staking from a completely different angle compared to traditional crypto approaches.
The Civic token behavior model is created to ensure that Validators (trustworthy Identity Verification Providers) and Requesters (entities seeking to verify the information about a given User) have the incentives to behave correctly without the need for central authorities to govern the relationship. The behavior model is geared towards improving the fidelity and quality of the network.
Questions & Context
When we built the Token Behavior Model for the Marketplace, we started with the following questions in mind:
- How can the system be regulated without any central authority?
- How can the system force all actors to behave as expected or better?
- Does it matter if Validators are not truthful?
- What is the level of accuracy required?
- How can the network ensure that Validators are truthful?
- How can the Marketplace ensure maximum privacy for its actors?
We assumed that there will be bad actors trying to cheat both Requesters and Validators in the network, and focused our efforts to create trust and regulate the exchanges between the two remaining parties.
The Civic Token Behavior Model
The Civic token behavior model focuses on enabling trust without a centralized party governing the ecosystem. The proposed model requires a Validator to hold a defined minimum amount of CVC tokens in order to be an active participant in the Marketplace. In order to ensure that the Validators have a stake and can pay a penalty, they must maintain a minimum stake that secures them against expected claims; similar concepts are in place for Requesters. This mechanism ensures that both players are led to a Nash equilibrium every time there is a transaction in the Marketplace.
The Civic token, or CVC, is intended to allow participants in the ecosystem to transact in ID verification-related services, while ensuring network integrity. This ecosystem will reduce the overall costs of identity verification, remove inefficiencies, enhance security and privacy, greatly improve user experience and disrupt the current identity verification supply chain.
This newly released white paper is an extension of the original Civic white paper and expands on the design of the token economy of the digital identity ecosystem. The paper characterizes the network in terms of actors, behaviors and potential network attack vectors, and offers solutions and mitigation strategies to create the aforementioned trust via incentives.
The white paper contains a series of mathematical models for applying game theory and economic incentives to our Identity Verification Marketplace. Unlike other proof of stake models that provide monetary rewards, our model demonstrates how a token (like CVC) can be designed to be a utility token without burning tokens or providing dividends.