Token Economics


According to Civil founder Matthew Iles: “Everyone who owns tokens will become a member of the Civil community, and will get the right to vote on the principles enshrined in the constitution and the adjudication of disputes.”

zareef1992’s Q: “And why would token holders attach value to these tokens specifically (e.g, are there any reasons for thinking that the same outcome could be achieved without use of tokens? Or via a centralised service provider instead of on a public network?)”

According to Civil founder Matthew Iles: "It has the potential to help realign the incentives that underlie the journalism business. Instead of having to cater to billionaire owners or a hedge fund, newsrooms like Popula can be supported directly by members paying with Civil tokens. Those tokens can also be used by newsrooms to pay writers (although that’s not a requirement).

The idea behind these incentives is that good and honest journalism will be rewarded, and fake or malicious journalism will be penalized. In addition to those benefits, the “distributed ledger” that is the core of a cryptocurrency is open and transparent, so that every transaction can be seen by all, and everyone who uses it has their own copy. That makes it difficult to tamper with, or at least makes it obvious when it has been."


Concur with you. Crypto’s inherent economic nature will always attract profit-seekers using different loopholes and ways to derive profit without providing value. Especially with the lack of standard and regulations and technological maturity … Therefore will need more talented good people to outplay the “snakes”.


This is an interesting point. I had a couple of follow up questions:

  1. Is there strong evidence to indicate that newsrooms (more generally, instead of as an exception) cater to views/interests of billionaire owners or hedge funds as opposed to the consumers of news, or what the interests of these owners or hedge funds are?
  2. If the newsrooms are now being paid by the token owners, does that not redirect the bias from that held by “hedge funds/billionaire owners”, to those held by the “citizens”? Does civil have any mechanisms in place to ensure token holders themselves are free from any adverse biases ?

On 1, I find some evidence to the contrary, so will challenge that claim.

Claim: Newsrooms in the US generally tend to cater to the interests of their owners, or hedge funds that finance them, and civil token can be used to better align the interest of newsrooms and consumers of news**

Analysis: The following research by Stanford economists attempted to identify drivers of “ideological slants” that newspapers demonstrate.

  • They developed a slant index which measures “the frequency with which newspapers use language that would tend to sway readers to the right or to the left on political issues”, and “focus on newspapers’ news (rather than opinion) content, because of its centrality to public policy debates and its importance as a source of information to consumers.”
  • They estimated consumer demand for newspaper, in which “a consumer’s utility from reading a newspaper depends on the match between the newspaper’s slant” - this is done using zip code-level data on newspaper circulation, which shows that, e.g., right-wing newspapers circulate relatively more in zip codes with a higher proportion of Republicans, even within a narrowly defined geographic market.
  • “Treating newspapers as local monopolists”, they “compute the slant that each newspaper would choose if it independently maximized its own profits. Variation in slant across newspapers is strongly related to the political makeup of their potential readers and thus to our estimated profit-maximizing points.” - This suggests newspapers are indeed catering to what their consumers demand from them
  • They “find little evidence that the identity of a newspaper’s owner affects its slant. After controlling for geographic clustering of newspaper ownership groups, the slant of co-owned papers is only weakly (and statistically insignificantly) related to a newspaper’s political alignment. Direct proxies for owner
    ideology, such as patterns of corporate or executive donations to political parties, are also unrelated to slant” - This suggests that newspapers are not heavily influenced by the political views of the owners

Based on the evidence, I do not think Civil is solving a relevant problem here.


  • One could argue that there is media bias in specific jurisdictions which tend to reinforce the political ideologies that are already held by consumers. This would makes it difficult for consumers to have a more balanced view which would have been a more pertinent value add. I would be keen to learn if Civic attempts to address that problem instead.
  • One could also challenge the relevance of newspaper circulation given the continued growth of digital media. It would also be interesting to learn if Civic attempts to direct news traffic in a specific way.

Stake: Challenge - 50 CRED


zareef’s Q1. Is there strong evidence to indicate that newsrooms (more generally, instead of as an exception) cater to views/interests of billionaire owners or hedge funds as opposed to the consumers of news, or what the interests of these owners or hedge funds are? A1. Yes. According to Institutional Investor: “Since 2010 hedge funds and private equity firms have been targeting legacy media companies. The investors acquire newspapers at low prices, then cut costs in the hope of selling at better multiples. But the state of the news business hasn’t improved, leading some firms to continue making cuts, leaving fewer and fewer reporters in place.” Another evidence by the New York Times “Today, members of a new Gilded Age are again in control of many of the country’s most venerable media outlets. Only now, it is tech entrepreneurs, casino magnates and hedge fund billionaires who are seizing control of the press, simply by writing a check.”

Q2. If the newsrooms are now being paid by the token owners, does that not redirect the bias from that held by “hedge funds/billionaire owners”, to those held by the “citizens”? Does civil have any mechanisms in place to ensure token holders themselves are free from any adverse biases? A2 Yes, that’s why Civil has similar mechanisms as TruStory. Everybody in the community who has CVL tokens can stake/vote if a news on Civil is true or not. They also have “the Civil Constitution, which is sort of their code of standards and ethics. If anyone in the community of token-holders feels that a news organization does not meet the standards in the constitution, […] they can challenge that newsroom by staking tokens and that triggers a vote.” According to Coindesk “After a newsroom is started, token holders can challenge any newsroom’s adherence to the constitution at any time, but they’ll have to stake a lot of tokens, which they might not get back should they be proven wrong, to do so. Other token holders will be able to vote their tokens in these challenges.”

FYI: It’s Civil, not Civic. Civic is a cybersecurity blockchain startup.


Claim : Bitcoin’s adoption rate as a universal medium of exchange in UK and US is still trivial

Ahead of the analysis, it is important qualify what “trivial” adoption rates constitutes. The analysis assumes in order for the adoption rate to not be considered as trivial:

  1. Major retailers (e.g., measured by sales volumes, brand recognition) should accept bitcoin as a form of payment, or use it as a bridge currency to settle payments
  2. Proportion of transaction volumes settled by in bitcoin must be comparable to competitor payment forms (e.g, transactions that are settled in fiat)


1. A submission by Bank of England to Treasury Select Committee that “No major UK high street or online retailer accepts Bitcoin, although there are around 500 independent shops that may do – an average of less than one per town. Only a handful of the top 500 US online retailers accept Bitcoin.”
2. By deduction, given independent shops will capture a small portion of total fiat payments, Bitcoin payments are not yet high compared to other forms of payment.
3.. At a macro level, a survey (released January 2019) conducted by BIS (bank which governs central banks globally) reveals no central banks reported any significant or wider public use of cryptocurrencies for either domestic or cross-border payments in their jurisdictions.

My Stake: BACK Claim - 50 CRED


Claim: Once block rewards turn 0 (when bitcoin exceeds its issuance limit), to make it uneconomical for block producers to engage in a double spend attack, the average transaction fees must amount to 8.3%.

Source: BIS - Beyond the doomsday economics of cryptocurrencies in proof of work -


  • Bank for International Settlements (BIS) is a central bank owned by 60 central banks around the world, and aims to enforce monetary and financials stability globally - it regularly releases research papers on matters that they deem relevant to their cause.`
  • In January 2019, they released a paper titled, “BIS - Beyond the doomsday economics of cryptocurrencies in proof of work” which discussed the economics how bitcoin achieves “payment finality” - a gurantee that a payment will not be reversed, especially unethically - a critical attribute that enforces trust in payment systems
  • As part of the discussion, the paper presents a model to showcase that a double spending attack, which repudiates payment finality, can be profitable, and therefore only under certain conditions can the double spend attack be prevented, and the reliability of the payment system be enforced. These conditions are important for a user of bitcoin payemnt system as they need to be aware of the rules under which the system can be deemed as reliable
  • One such condition they propose is that, once block rewards cease, the average transaction fees (average transaction cost as a percentage of transaction amount) must amount to 8.3% (under certain set of assumptions) to make it uneconomical for block producers to engage in a double spend attack,

I will argue that the condition used to derive transaction amount, which assumes that dishonest miner can double spends all transactions in the block (irrespective of whether if he/she owns all private keys in that block), is incorrect - these do not generally negate the overall conclusions of the paper, but rather only generate incorrect numbers for transaction fees needed to prevent double spend attacks - this can present an overly negative view for bitcoin payment system. A range of assumptions have been laid out in the paper to support this claim - i present only relevant assumptions below, and analyse those which can be deemed as incorrect.


To come to the conclusion, the paper presents the equlibrium conditiions that must exist in bitcoin market. In particular:

  1. Equilibrium condition for honest miners: If we assume mining process is competitive, miners will continue to mine until they break even, and the average expenses of computational work equal block rewards plus transaction fees (i.e., revenues from mining)


image- Equation 1

  1. Equilibrium condition for disincentiving double spend attacks from dishonest miner: This requires a bit more context. A user of the bitcoin system would would want to prevent double spend attacks if they wish to deem the payment system is reliable. Miners can engage in double spend attacks by investing in enough computational power such that they are mining on the longest chain (the mechanics of why this is this the case are relayed in the paper), and will continue to attack as long as the benefits of attacking outweigh the gains.
  • The benefits to a miner from engaging in a double spend attack are 1) the amount of bitcoin double spent and 2) the mining revenues (block rewards + transaction fees) gained from validating the block which had the double spend transaction.
    image - Equation 2

  • Conversely, the cost of an attack are the cost of electricity consumed in generating substantial computational power (to be able to present the longest chain), and the potential loss in value realised if bitcoin price falls following a double spend attack. Assuming the the equipment generating computational power can be rented:
    image - Equation 3

  • Since the dishonest miner must also compete with other miners, we must assume that , in the event of an attack, the cost of computational power must be at least equal to cost born by other miners to break even, and hence equations 1 and 3 must hold at the same time. Inserting Equation 1 into 3 makes it:
    image - Equation 4

  • Finally, a miner is disincentivised from attacking if Cost>Gain. If we rearrange equations 2 and 4, this means:
    image - Equation 5
    The above illustrates that the total mining revenues (which are the transaction fees, when block rewards become 0)
    gained by honest miners (i.e., the cost of forgery) must be sufficiently high to discourage dishonest miners from investing in rented equipment to out compete them.

  • Rearranging above equation further, and taking some addtional minor assumptions, Equation 5 can be allow us to focus on the transaction fees as a percentage of transaction amounts needed to sustain double spend attacks:
    image - Equation 6

  • Assuming some values about above parameters then allows the paper to conclude that the right hand side of above equation, which is being defined as the average transaction fees, needs to be greater that 0.083 (8.3%) to make it greater than the gain from an attack, and thereby to make it uneconomical for a dishonest miner to double spend.

Challenge: In this above equation, to qualify the right hand side of the equation as “average transaction fees”, one must that assume the amount double spent is equal to the amount of all bitcoins in the “dishonest” block (i.e., the block which has a double spend transaction). However:

  • Successfully completing a double spend attack will require other miners to form consensus around the dishonest miners chain.
  • Formation of consensus around a blockchain requires all the miners to firstly agree that the transactions in the block are all valid even before they check that chain is the longest.
  • A transaction will be deemed valid if, at a minimum, the underlying bitcoins are being spent by the owners of those bitcoins (those who own private keys).
  • If a dishonest miner attempts to double spend transactions using bitcoins to which he/she does not have private keys, the transaction will be rejected by all other miners even if the amount of computational work performed on it is greater than the rest (i.e., even if it were the “longest chain”)
  • To successfully complete a double spend attack, a rational dishonest miner, therefore, will only attempt to double spend transactions in the block to which he has a private key, which may be a small proportion of the total transactions in the block.

The average transaction fee in above equation should therefore be defined as percentage of transaction fees a percentage of amount that was double in the “dishonest” block, as opposed to total amount in the “dishonest” block

Status: Challenge Claim - 50 CRED


Why is that? How is that assumption implicit in the equation?


For the left hand side to be considered as “average transaction fees”, the numerator and denominator will need to be associated with the same set of transactions. The numerator is associated with all transactions in the block (as they have been defined as total mining revenues from mining a block). I therefore concluded that the denominator is associated with all transactions in the block as well. It is implicit in the commentary that follows the condition, as well as from commentary shared in the executive summary:

From commentary on condition:

From Executive Summary: