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Incentive Flaw in a Decentralized System
A new decentralized file storage network is proposed. Users pay a single, upfront fee to have their files stored 'permanently'. Individuals acting as 'storage providers' receive a portion of this fee for agreeing to store a copy of the file. The protocol only governs the initial payment and file transfer. Based on the economic principles that govern such networks, identify the primary long-term risk to the network's integrity and explain the rational behavior this incentive structure encourages in the storage providers.
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Economics
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Economy
The Economy 1.0 @ CORE Econ
CORE Econ
Introduction to Microeconomics Course
Analysis in Bloom's Taxonomy
Cognitive Psychology
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Blockchain
Cryptocurrencies
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A decentralized file storage network rewards 'providers' for hosting user files. The system verifies storage by randomly checking for a file's existence once per day. To cut operational costs, a group of providers begins storing only a small, frequently-checked portion of each user's data, deleting the rest. This behavior goes undetected for some time, leading to significant data loss across the network. Which economic principle best explains this design flaw?