**4. Smart Token Economics**

The running case of Section 2.1 shows that the M2X Economy is a complex, distributed, and socio-technical framework that requires a novel approach for developing the monetary economy. We infer that the traditional financial system is not suitable and lacks the utility for consideration in the M2X Economy. An important reason is that an integration of the financial legacy technology does not scale and perform for a context such as the running case in Figure 1 and additionally, to technically support the incentives mechanisms between the human user termed Alice and the smart autonomous devices being the cars, traffic lights, toll gates, and charging stations, we require programmable monetary units, which fiat-currencies are not, e.g, as a code extension of an ERC20-token smart-contract template (https://eips.ethereum.org/EIPS/eip-20 accessed on 4 November 2021). Consequently, the novel domain of token economics [39] emerges to compensate for the deficiencies of the legacy fiat-currency system. Informally, a token economy in an M2X Economy that employs smart-contract blockchain technology, is characterised by encouraging desirable behavior by the human and artificial agents and infrastructure involved by offering rewards and optionally also penalties in the form of crypto tokens.

We stress that established schools of thought of economics do not typically assume that a monetary unit is programmable and connected as such to a socio-technical application system context as Section 2.1 describes, where the automated complex governance of incentives mechanisms is essential for P2P interactions between humans, smart autonomous devices, and infrastructure. On the other hand, a set of standard-token smart contracts are available, initially offered by Ethereum, that allow for flexible instantiations into diverse token types [40], e.g., tokens for a platform, that play a role of a security, or facilitate transactions, enable specific platform-utility use, e-governance tokens for complex voting

mechanisms, reputation tokens, and so on (https://tinyurl.com/token-types accessed on 10 November 2021).

As token economics based on smart-contract blockchain technology is an emerging computer-science driven scientific discipline, we infer that the programmable nature of crypto tokens requires a novel development methodology that is integrated with the M2X system design from the very inception. In earlier research [41], we discover that no suitable methodology exists for developing blockchain distributed applications (DApps), which is relevant too for an M2X context. Consequently, the distributed agent-oriented modeling (DAOM) method [42] fills this gap, being the first blockchain-DApp development method that also integrates the foundation for the development of a DApp-specific token economy being integrated with the system functionalities.

While due to page limitations, we refer interested readers to several use cases [43,44], where the DAOM method follows a set of briefly described model-driven design steps. First, the functional and quality goals, together with human and artificial software agents are organized into a so-called goal model where transparent gray rectangles with tokentype labels denote smart-contract blockchain application in a DApp. Next, based on a set of heuristics, a component-diagram architecture is deduced from the goal model where blockchain-involving components are also gray colored, corresponding to the specific requirements of derivation. The addition in the component-diagram architecture is the specification of the information-exchange channels between components, and components to human and artificial software agents. Based on this conceptual DApp understanding, DAOM next prescribes the specification of so-called on-chain transaction sets that are a tuple comprising an ID, short description and agents involved per respective transaction evaluation. It is important to specify this on-chain transaction set given the expenses of transaction validations [45], e.g., per proof-of-work (PoW), proof-of-staking (PoS), and so on. Finally, the set of information-exchange protocols between components, and components with human and artificial software agents, is expressed either in sequence diagrams, or in a graph-based notation such as business process model and notation (BPMN) [46] in which the IDs of respective on-chain transactions are embedded.

Note that the DAOM method is inherently technology agnostic and allows subsequently for deducing a technology stack with a considerable blockchain subset for a detailed token-economics establishment to govern the incentive mechanisms and a rapid Dapp development. At the same time, extension work is required to develop DAOM further for full applicability in an M2X context. More concretely, since smart autonomous devices are an essential part of M2X, being software agents embedded in hardware, further modeling notations must be adopted into the DAOM method for designing specifically the behavior of the P2P-communicating smart autonomous devices and also the smart-contract instantiations that constitute the respective token types to govern the incentive mechanisms. A promising option is to consider agent-based computational economics [47] in combination with a future extended DAOM method for M2X-focused smart-token economics development.
