## 3 Web3 and Metaverse
### Viable Economy
#### 3.4.3 Third Generation (gen 3)  
This is the state-of-the-art token economics that is currently seen in the industry. This generation (gen 3) has at least the first two and some of the other following attributes:  
* **Modern Token Supply and Control Model:** Almost all the gen one and most of the gen two projects are using fixed token supplies. The introduction of the PoS protocol allows for a more modern token supply model. Such models may use an Inflationary model (increasing the supply of tokens based on the assumption that it is needed to keep the costs low and support the users) or a Deflationary model (using a burn mechanism to get rid of tokens to make the remaining tokens more valuable), or a combination of both. It also includes a monetary flow control mechanism to increase or decrease the amount of capital in and out of the system [69]. For example, the decentralized finance (DeFi) platform provided by Ethereum incentivizes capital inflow to the ecosystems while disincentivizing capital outflow [74]. * **Smart Contracts:** Smart contracts are defined by IBM as \"_Smart contracts are simply programs stored on a blockchain that run when predetermined conditions are met. They typically are used to automate the execution of an agreement so that all participants can be immediately certain of the outcome, without any intermediary's involvement or time loss. They can also automate a workflow, triggering the next action when conditions are met_\" [23]. Cardano is an example that has implemented Smart Contracts into its economy [75]. * **Perks and Incentive Pools:** There would be rewards and credits given out on a distribution curve to incentives anyone that in any way can help the project. For instance, developers who use the project and its tokens to build decentralized apps are given these incentives. Instead of having developers focus on apps to generate profit, these rewards incentivize them to build apps that benefit the well-being of the whole ecosystem [69]. For instance, XRP offers such incentives for its developers [76]. * **Token Burning and Decay Mechanism:** Both are essential mechanisms for making the remaining tokens more valuable. Thus, they are a sort of deflationary mechanism to control unintended inflation. In the first one (burning), the network will burn specific tokens (either a portion of all tokens or some pre-defined tokens) to control inflation. Decay could also be in the form of fewer block rewards after a pre-defined amount of time, mined tokens, or mined blocks. For instance, in Bitcoin, the reward per block will reduce after a predetermined number of blocks [69]. * **Liquidity Pool--Lending and Market Making:** In the real-world market, traders make money by providing or offering liquidity/capital. These pools are designed to create incentives for users to create permanent or temporary required liquidity/capital for products/services or tokens. Rules in these pools are clear, and there will be no fine print [69]. An Example is Kyber, a liquidity hub for Crypto trading and DeFi [77]. * **Insurance Pools:** These pools are designed to protect the system against risks such as catastrophic exploits, hacking, 51% attacks, etc. The pools can be managed by the network (consensus), a council, a foundation, or even a company with the main purpose of moving tokens in a scalable and continuous manner [69]. A great example is Nexus Mutual which is focused on protecting against failures of smart contracts [78]. * **Inter-chain Operability and Inter-Chain Messaging:** These capabilities enable apps on a chain to interact and exchange and messages with other apps on different chains that may even be using completely different technologies [69]. The Cross-Chain Interoperability Protocol (CCIP) aims to establish a universal connection between hundreds of private and public blockchain networks by providing a generalized infrastructure for unlocking messages and token transfers and empowering cross-chain applications for all on-chain ecosystems [79].