We respond to a recent short paper by de Motjoye et el. on privacy issues with Covid-19 tracking. Their paper, which we discuss here, is structured around three "toy protocols" for the design of an app which can maximise the utility of contact tracing information while minimising the more general risk to privacy. On this basis, the paper proceeds to introduce eight questions against which they should be assessed. The questions raised and the protocols proposed effectively amount to the creation of a game with different categories of players able to make different moves. It is therefore possible to analyse the model in terms of optimal game design.

Positions on a blockchain updated by Proof-of-Work (PoW), most prominently Bitcoin, earn zero return similar to holdings in cash [27]. This implies a vanishing short rate, which clashes with 'conventional' interest rate models, which take a non-zero short rate to be a 'primitive', i.e. a necessary building block for term structure, discount rates and a requirement to flexibly model pay-off structures. In a paper by Brody et al.[3] it was shown how to overcome this difficulty.For blockchains with Proof-of-Stake (PoS) updating, e.g. Ethereum is in the process of switching from PoW to PoS, staked tokens have a non-zero yield, which relates a largely deterministic return to the amount committed. In addition, validators are able to exploit maximal/miner extractable value (MEV) linked to the ability to select and order transactions from the Mempool for blockchain inclusion, but also incur in the process obligations. Non-staked tokens can participate in DeFi or gain convenience yield from immediate accessibility, which can for example pay for imminent blockchain fees. The risk-adjusted benefits for the marginal investor in these three forms of token usage have to match to avoid runaway effects. The relevant return data for staked Ethereum is presented in section 2.Besides conventional fixed income products there are other areas of DeFi where yield-like returns exist. Decentralised exchanges (DEXs) provide such an opportunity to liquidity providers (LPs), who lock-up token pairs in pools to allow liquidity takers (LTs) to switch between them for a fee. The LPs garner the fees but are short an option associated with exchange rate fluctuations. This will be discussed in section 3.DEXs are alternative liquidity sources with universal access. A natural extension of the crypto-anarchist ideals set forth in the cypherpunk movement of the 90s and crystallised in Bitcoin by Satoshi Nakamoto. By Removing the middleman, as well as any form of control, DEXs are furthermore a response to failures of legacy finance. On centralised exchanges (CEXs) users are required to transfer custody of their assets to a third party, which entails risk. The temporary freezing of assets as well as the collapse of exchanges, e.g. Mt Gox of Japan in 2014, has shown that this risk is non-negligible. DEXs are increasingly coming under official scrutiny, as they circumvent money laundering rules, and mix assets without regard for regulations.Another area of interest is modelling. For the cryptocurrency interest-rate derivatives market to bloom, pricing, replication and hedging need to function smoothly. Models are required that are convincing and common to market participants. This is a necessary but not sufficient condition for the establishment of a capital efficient crypto fixed income market. A way to evaluate a simplified version of these loans without the detailed examination of the liquidation mechanisms, which differ from platform to platform, is given in section 4.A proposal for a crypto product linking collateral not to notional but exposure i...

The paper highlights some commonalities between the development of cryptocurrencies and the evolution of ecosystems. Concepts from evolutionary finance embedded in toy models consistent with stylized facts are employed to understand what survival of the fittest means in cryptofinance. Stylized facts for ownership, trading volume and market capitalization of cryptocurrencies are selectively presented in terms of scaling laws.