Blockchain Papers

Cho‐Hoi Hui, Chi‐Fai Lo, Po-Hon Chau, Andrew L. Wong

No abstract is available for this record.

Peter Zimmerman

I present a model of cryptocurrency price formation that endogenizes both the financial market for coins and the fee-based market for blockchain space. A cryptocurrency has two distinctive features: a price determined by the extent of its usage as money, and a blockchain structure that restricts settlement capacity. Limited settlement space creates competition between users of the currency, so speculative activity can crowd out monetary usage. This crowding-out undermines the ability of a cryptocurrency to act as a medium of payment, lowering its value. Higher speculative demand can reduce prices, contrary to standard economic models. Crowding-out also raises the riskiness of investing in cryptocurrency, explaining high observed price volatility.

Varghese S. Jacob, Sailendra Prasanna Mishra, Suresh Radhakrishnan

No abstract is available for this record.

Luisanna Cocco, Roberto Tonelli, Michele Marchesi

The objective of this paper is to simulate the trading of the currency pair BTC/USD, investigating through the theory of the genetic algorithms the best sets of trading strategies, simulating through a realistic order book the bitcoin price formation, and reproducing a bitcoin price series that exhibits some stylized facts found in real-time price series. In this artificial market model two kinds of agents, Chartists and Random traders, perform trading. Chartists trade through the application of trading rules. Specifically, a part of Chartists trades applying the best sets of trading rules selected by a genetic algorithm that simulates a trading system, based on four technical analysis indicators, searching for parameters of each indicator that guarantee the highest profits in the training period; the remaining part trades applying trading rules choosing their parameters in a random way. On the contrary random trader's trade without applying any trading strategy, issuing in a random way sell or buy orders. Results show that the best sets of rules found to guarantee the highest profits both in the training and in the testing periods, and perform well also in the artificial market model where the Chartists who adopt the best sets of trading rules are able to achieve higher profits.

Joshua R. Hendrickson, William J. Luther

No abstract is available for this record.

Cameron Harwick, James Caton

Despite the past decade’s rapid innovation in adapting blockchain technology to new uses, financial intermediation remains elusive except in basic and highly collateralized forms. We introduce the concept of the technical frontier to delimit the kinds of interactions that can feasibly be structured algorithmically among pseudonymous agents, as on a blockchain, and show that lending and financial intermediation – unlike monetary exchange – lie outside it, even in simple forms. The path forward for truly blockchain-native financial applications, therefore, must involve the integration of real-world identity information in order to disincentivize defection. We discuss several potential technologies for doing so, and conclude that such integration is possible without compromising pseudonymity, provided real-world identity is available in the breach.

Pierpaolo Benigno, Linda Schilling, Harald Uhlig

We analyze a two-country economy with complete markets, featuring two national currencies as well as a global (crypto)currency. If the global currency is used in both countries, the national nominal interest rates must be equal and the exchange rate between the national currencies is a risk-adjusted martingale. Deviation from interest rate equality implies the risk of approaching the zero lower bound or the abandonment of the national currency. We call this result Crypto-Enforced Monetary Policy Synchronization (CEMPS). If the global currency is backed by interest-bearing assets, additional and tight restrictions on monetary policy arise. Thus, the classic Impossible Trinity becomes even less reconcilable.

Ioanid Roşu, Fahad Saleh

Do the rich always get richer by investing in a cryptocurrency for which new coins are issued according to a proof-of-stake (PoS) protocol? We answer this question in the negative: Without trading, the investor shares in the cryptocurrency are martingales that converge to a well-defined limiting distribution and, hence, are stable in the long run. This result is robust to allowing trading when investors are risk neutral. Then, investors have no incentive to accumulate coins and gamble on the PoS protocol but weakly prefer not to trade. This paper was accepted by Kay Giesecke, finance.

Peter K. Hazlett, William J. Luther

No abstract is available for this record.

Aleksander Berentsen

No abstract is available for this record.

Andrés Solimano

The development of new digital technologies in the areas of cryptography, distributed ledgers and mobile phones is affecting the way money is used for economic transactions. Electronic payments systems are rapidly replacing the use of cash. New powerful distributed ledger technologies, operated on a peer-to-peer decentralized basis is leading to the rapid expansion of digital money, with bitcoin being the most prominent digital currency (although there are more than one-thousand different crypto-currencies).

Karl Weinmayer, S. Gasser, Alexander Eisl

No abstract is available for this record.

Christie Smith, Aaron Kumar

We introduce the distributed ledger (blockchain) technology of crypto‐currencies. We examine the ‘monetary’ attributes of crypto‐currencies, and describe some of the reasons they have been adopted. The paper discusses the mechanics of Bitcoin – the original crypto‐currency – to illustrate the fundamental elements of decentralized crypto‐currencies. We then provide a high‐level summary of the implications of crypto‐currencies for consumers, financial systems, and for monetary and regulatory authorities. We argue that crypto‐currencies are unlikely to supplant traditional fiat currencies and we anticipate an enduring role for financial intermediaries in facilitating credit.

Donato Masciandaro

Abstract This article analyses ongoing changes in the supply of alternative media of payments (MOPs). The comparison between old (cash and deposits) and new (cryptocurrencies and central bank digital currencies) MOPs is based on a novel definition of money where a MOP has three properties: the first two are the standard functions of medium of exchange (liquidity costs) and store of value (opportunity costs) and the third is the novel function of store of information (privacy costs). Given such properties and that the evolution of the different MOPs likely depends on individual preferences, the relevance of experimental economics is highlighted.

Robert J. Kirkby

Abstract Current generations of cryptocurrencies are not money, but future ones may be. While Bitcoin performs poorly as a store of value, it is actually on par with the Venezuelan bolívar over the last decade, and the Argentinian peso over the decade from 1986. I evaluate arguments in favour of central banks issuing digital fiat currency—intended to replace cash—and digital fiat money—intended to replace money more broadly. Digital fiat currency appears a natural step forward, but digital fiat money would be a bad idea as it makes the central bank responsible for the entire money supply.

Boualem Djehiche, Julian Barreiro‐Gomez, Hamidou Tembiné

No abstract is available for this record.

Claudio Borio

This essay examines in detail the properties of a well functioning monetary system - defined as money plus the mechanisms to execute payments - in both the short and long run, drawing on both theory and the lessons from history. It stresses the importance of trust and of the institutions needed to secure it. Ensuring price and financial stability is critical to nurturing and maintaining that trust. In the process, the essay addresses several related questions, such as the relationship between money and debt, the viability of cryptocurrencies as money, money neutrality, and the nexus between monetary and financial stability. While the present monetary system, with central banks and a prudential apparatus at its core, can and must be improved, it still provides the best basis to build on.

Simon Trimborn, Wolfgang Karl Härdle

The cryptocurrency market is unique on many levels: Very volatile, frequently changing market structure, emerging and vanishing of cryptocurrencies on a daily level. Following its development became a difficult task with the success of cryptocurrencies (CCs) other than Bitcoin. For fiat currency markets , the IMF offers the index SDR and, prior to the EUR, the ECU existed, which was an index representing the development of European currencies. Index providers decide on a fixed number of index constituents which will represent the market segment. It is a challenge to fix a number and develop rules for the constituents in view of the market changes. In the frequently changing CC market, this challenge is even more severe. A method relying on the AIC is proposed to quickly react to market changes and therefore enable us to create an index, referred to as CRIX, for the cryptocurrency market. CRIX is chosen by model selection such that it represents the market well to enable each interested party studying economic questions in this market and to invest into the market. The diversified nature of the CC market makes the inclusion of altcoins in the index product critical to improve tracking performance. We have shown that assigning optimal weights to altcoins helps to reduce the tracking errors of a CC portfolio, despite the fact that their market cap is much smaller relative to Bitcoin. The codes used here are available via www.quantlet.de .

Вадим Маркович Розин, Liudmila Golubkova

No abstract is available for this record.

A. Priya, Shruti Garg

Analysis of any currency is done to identifying and quantifying uncertainties, estimating their impact on results. Cryptocurrency, as an encrypted peer-to-peer organize for encouraging digital bargain is created in 2008. i.e., Bitcoin is the most prominent example. It characterizes their exchange rates versus U.S Dollar by fitting parametric dispersions to them. Then analyze the Blockchain (BC), the introduced technology behind the Bitcoin cryptocurrency system, considered both alluring and critical for ensuring enhanced security and privacy for diverse applications in many domains. Another new investment opportunity, new cryptocurrencies known as altcoins. This altcoinuses similar cryptography technology but employs different algorithmic design. Cryptocurrencies may revolutionize digital trade markets by making a free streaming exchange framework without fees. Bitcoin has presenteda SWOT (Strength, Weakness, Opportunity, and Threat) analysis, which lights up a few of the later occasions and developments, that may influence whether Bitcoin contributes to a move in the financial ideal model.

Nina Yan, Tingting Tong, Hongyan Dai

A Supply Chain Finance (SCF) system involving and a commercial bank and a capital-constrained retailer is designed in the imperfect capital market with non-zero bankruptcy costs. A decentralized borrower-lender game is analyzed, and the optimal centralized strategy is developed for SCF from the perspective of multi-attribute utility (MAU) maximization, including maximizing the expected profit and the service level, as well as minimizing the bankruptcy cost. Furthermore, we analytically and numerically explore the coordination condition for SCF and conclude that the bank financing scheme with a suitable combination of decision preferences can realize coordination, even super coordination. Through sensitivity analyses and numerical experiments, we discuss the impacts of the borrower's initial capitals on the upstream firm's pricing decision and dig out why he has incentives to support the retailer's choice of adopting SCF. The findings of this study reveal that the capital-constrained retailer would require more initial capital when maximizing MAU than maximizing the expected profit, and thus the equilibrium order quantity and the bankruptcy risk would also be higher. Moreover, based on a suitable combination of decision preferences, our proposed bank financing scheme can realize coordination, even super coordination.

Dominik Pikutić

Ovaj rad predstavlja ekonomsku analizu kriptovaluta sa slobodnog gledišta. Rad analizira primjenjivost ekonomije na ;kriptovalute; i obratno. Od posebnog interesa je evolucija novca, konkurencija među ;sredstvima razmjene; i koncept novčane ponude. Može se zaključiti da bi u teoriji kriptovalute mogle biti bliže idealu sadašnjeg novca (načina plaćanja) nego bilo koje ostalo sredstvo i ;način plaćanja;, ili čak i zlato, a lako je moguće da će se razviti u tu poziciju. U radu je većinom korišten ;bitcoin; kao nekakav osnovni i općeniti primjer kriptovaluta (uglavnom zato što je prvi oblik kriptovaluta, a i najkorišteniji je oblik kriptovalute). Valjalo bi napomenuti da ;digitalni novac; ne stvaraju ekonomisti nego programeri, što ukazuje na to da su kriptovalute i ostale vrste digitalnog novca drugačije od ostalih sredstava razmjene, a pogotovo po tome što su "digitalne" (nema im fizičkog oblika), te samim time ih ne posjedujemo kao fizički novac, nego kao iznos na računu, koji se može razmjeniti u određeni fizički oblik sredstva razmjene (npr. dolara).

János Flesch, Arkadi Predtetchinski, William D. Sudderth

No abstract is available for this record.

Prateek Goorha

In this note, I return to Coase (1937), on its 80th anniversary, to assess whether its logic and insight can be reconciled with the blockchain revolution. I argue that, indeed, it can, and propose the existence of a third method of organizing economic activity in a specialized exchange economy, in addition to the two that Coase considered. I call it the cryptographic stigmergy. If there be such merit in the argument here, let it be dedicated to the memory of Ronald Coase.