Welfare approximation refers to the estimation of the overall economic well-being or utility derived by participants within a digital asset ecosystem or decentralized protocol. This involves quantifying the benefits and costs experienced by users, liquidity providers, and other stakeholders, often through economic modeling and empirical analysis. It serves to assess the system’s impact on its community.
Context
The concept of welfare approximation is central to the design and evaluation of decentralized autonomous organizations and protocol governance mechanisms. Discussions often involve how to fairly distribute value and minimize negative externalities for all participants. Future research aims to develop more sophisticated metrics and simulation tools to accurately assess and optimize the welfare outcomes of complex blockchain systems.
Introducing the SAKA mechanism, this work circumvents TFM impossibility results by integrating MEV searchers to align incentives and guarantee approximate welfare.
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