Questions tagged [cryptocurrency]

Questions involving crypto currencies, crypto coins and tokens traded via the distributed ledger technology (blockchain) and its functioning aspects, as well as the valuation, exchange and issuance of new cryptocurrencies.

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Why are cryptos recognized as a "currency"?

My question is pretty straightforward: Why a "payment" with cryptos is recognized as a "payment" (at least in the US) and thus you need to pay taxes over it? My question come from ...
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How are the rates between two currencies (fiat and cryptocurrecies) determined? [duplicate]

How are the exchange rate between two countries determined? For example how is exchange rate between the dollar and the euro established? My guess is it has to do with some form of demand/supply but I ...
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Do 'liquidity pools' effectively determine market price?

First, lets be clear - I'm not pitching a crypto here, and I'm not seriously interested in Safemoon, which seems to be a pyramid scheme. However, I was investigated Safemoon, and discovered this ...
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Does it make sense to talk about Bitcoin 'inflation' when little to no goods and services are listed in Bitcoin currency?

I think of inflation as a generalized increase in the price levels of a basket of goods and services. I should add that my understanding presumes that inflation should be measured in the same currency ...
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How does the size of the largest cryptocurrency compare to the largest traditional currency?

'Money' has evolved throughout economic history, and has included moving from: barter economies (i.e. no 'Money' - simple trading of final goods/services) commodity money - money whose intrinsic ...
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Why is deflation bad for economy? [duplicate]

As now many people are talking about the inflation of US dollar on the account of the COVID-19 pandemic and the printing of trillions of US dollar bills, the price of decentralized cryptocurrencies ...
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1answer
55 views

Cryptocurrencies: Is it possible to estimate price from market cap?

I'm looking at a website that figures out the potential price of a coin if it had a certain market cap. I'm not sure I understand the underlying calculations though. It's well established that: ...
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3answers
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Do leverage pools force net negative outcomes? How are leveraged futures profits payed?

Pre-note: Although I am trying to make this question general, in the case that there are any ambiguities, I would like to direct this question toward cryptocurrency futures trading platforms that ...
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If Bitcoin becomes a globally accepted store of value, would it be liable to the same problems that mired the gold standard?

I am reading this article here that explains why bitcoin is a better store of value than gold. In sum, here are some of the reasons proposed: If someday a "bitcoin standard" does come to ...
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1answer
72 views

Is it possible to peg a cryptocurrency to a stock or bond index?

What if the creators of a new cryptocurrency gave out new units of the cryptocurrency in exchange for shares of a stock or bond index fund, held these shares in reserves, and allowed owners of the ...
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131 views

How can a currency be tied to a commodity like energy?

To make a stable (crypto)currency it basically needs to be tied to a thing of value that can not be just flooded onto the market with minimal effort. I think energy is the ideal thing to tie a ...
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Does locking donations on an account for an extended amount of time (50 years) make sense?

Let currency C be a reward proportional to amount of carbon offsets (or any other social good). I am trying to invent a way to reward (to stimulate social good) holders of this currency. Let M be &...
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Why would a CBDC (Central Bank Digital Currency) be good for the economy?

I've read about CBDC, how it could be a cryptocurrency like digital payment system, that could replace fiat currencies. But what I don't get is what value would it give to the economy? Someone who ...
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Stable coin values

(not sure this is the right stack exchange to ask crypto-economics questions, if not please direct :) ) Why are stable coin values not exactly the value they're pegged against? For example as of this ...
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2answers
72 views

If a fluctuating cryptocurrency becomes the new world coin, would it stop fluctuating?

An often mentioned criterium for money is that it should be a unit of account. It could be argued that cryptocurrencies don't satisfy this requirement. The argument is that businesses like bakers ...
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Can we stabilise the price of a cryptocurrency?

Currently, the volatile price of cryptocurrencies such as Bitcoin means that they are currently poor stores of value and therefore are unlikely to achieve mass adoption. What can be done to stabilise ...
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Why is there a need for multiple cryptocurrencies?

Why can't all blockchains use the same cryptocurrency like Bitcoin? Why do each of them have to invent a new cryptocurrency?
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Whats the math behind calculating the price of cryptocurrency through supply and demand?

"The value of currencies (including most popular cryptocurrencies) is set by a market. Price rises or falls until the supply and demand of the currency are equalized" Why exchange rates of national ...
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Why exchange rates of national currency are usually stable, where as cryptocurrency like bitcoin and ethereum is highly volatile?

Exchange rate of national currency like US dollar or INR don't fluctuate much during a month or year, but the exchange rate of cryptocurrency like bitcoin is highly volatile even in a single day. What ...
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131 views

Facebook's Libra - Why would it vary in value

Facebook has come up Libra its version of crypto-currency. The unique feature of Libra is the "reserve" which backs Libra. The reserve is supposed to be held in stable global currencies (USD, GBP, ...
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225 views

bonding curves and the market

This question is related to economics on the blockchain. Bonding curves are becoming popular; however, it is a bit concerning that the price on an asset is predetermined by a mathematical function. ...
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1answer
65 views

Effect of a Deflationary Cryptocurrency

Wikipedia lists Deflation as a bad thing, but I'm assuming that the article makes the assumption that the currency is a fiat currency (as opposed to cryptocurrency). I understand the general principle ...
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Why doesn't the central bank extend loans directly?

I've been thinking about the credit theory of money lately and how it creates money. Since Banks look for sufficient reserves after extending a loan, and since the central bank always loans out money ...
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What determines a new cryptocurrency's initial value?

I understand that a cryptocurrency has no intrinisc value, and that therefore its value is determined strictly by market forces, i.e. supply and demand. I "get" (more or less) that this is how it ...
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Can we get rid of banknotes and coins?

this is more a theoretical question, nowadays with Internet, Debit/Credit cards and Cryptocurrencies, why should we keep printing/making more physical money? granted not everybody has access to ...
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How does the dollar value of all bitcoin compare with the total cost of the electricity required to generate it?

The world's Bitcoin mining in the aggregate uses surprisingly large amounts of electricity. Princeton computer scientist Arvind Narayanan estimates that Bitcoin mining now uses about five gigawatts ...
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Venezuela Petro Cryptocurrency

As I understand it, a primary feature / requirement of cryptocurrency is that it is not controlled by a government actor: it is decentralized. If this is true and the Petro is controlled by a ...
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Devaluation of Venezuelan Bolívar - Will it increase or fight hyperinflation?

According to recent news, Venezuela is lopping 5 zeros out of its regular Bolívar, and devaluing it, and pegging it to a cryptocurrence issued by Venezuela, to fight the economic situation (...
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Why do large financial institutions make international transactions in digital currency?

I've heard that blockchain technology has been used extensively by financial institutions when making international transactions to eachother, with speed and transparency and cryptographic security ...
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106 views

Is any aspect of the cryptocurrency adoption violating a widely held economic tenet?

This is not a homework question. I am merely interested. As an academic discipline, Economics refers to various laws and widely held beliefs including, but not exclusive to; Production precedes ...
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2answers
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What is a suitable exponential to model a currency or cryptocurrency price increase?

I would like to model a supply and demand cryptocurrency market, not necessarily for Bitcoin, but for any coin. My difficulty is that I don't know what exponential factor might be realistic to do so. ...
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How can a crypto currency crash affect liquidity?

To the best of my knowledge, no bank will allow a borrower to provide crypto as collateral for a loan. So, if the price of crypto crashes to zero, there shouldn't be any liquidity issues because no ...
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458 views

Are cryptocurrencies a ponzi scheme or a bubble?

Several users in this forum have addressed bitcoin and other cryptocurrencies as ponzi schemes. Bitcoins have several uses which could legitimate its value as a currency, but also have received ...
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74 views

Crypto-tokens: how do they function in a latter stage of company?

I am newbie to cryptocurrencies and just read an article about ICO (Initial Coin Offerings). However, I didn’t quite get the functioning and role of tokens. Lets say there is a company that plans to ...
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How can I change this formula to better calculate the reward of some financial movements? (avoiding to consider maturation)

I am here to ask you a suggestion about how to correctly handle this situation related to how to calculate the earned money into an financial investment. Here you can find a basic Excel sheet related ...
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142 views

Theoretical market capitalisation of a crypto currency?

Here’s the context. I want to know what the theoretical market capitalisation (say eg $US / Bitcoin times Q the number of coins - it doesn’t have to be Bitcoin) of a crypto currency? Assume that the ...
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How can lending be feasible on blockchain?

Given the fact that mostly all cryptocurrencies have a permanently set supply, they will invariably rise in value as cryptocurrency transactions rise. Even if cryptocurrency deflation cools off from ...
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1answer
150 views

Currency Value Formula

I recently have gained interest in the way currency value is derived in crypto-currencies and have researched the ins and outs of supply and demand. Is there a particular mathematical formula to ...
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1answer
121 views

Is a lack of "rules" dangerous for cryptocurrency

An issue/disadvantage that the gold standard had was a lack of mechanisms that forced economies to abide by the rules of the game. As a result, they could at any time de-monetize gold and therefore ...
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141 views

How do economic and financial policies in government deal with cryptocurrencies?

Given the decentralized nature of cryptocurrencies like bitcoin and ethereum, how can centralized organisations like banks and the government create policies around it without changing the way ...
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The potential dilution of cryptocurrencies

What is to stop the value of cryptocurrencies being diluted by the emergence of other cryptocurrencies? For example, according to Wikipedia, Bitcoin was 80% of the crypto market cap in 2016, but this ...
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176 views

What are the differences between cryptocurrencies and digital currencies backed by CBs?

Given all the hype around the cryptocurrencies like bitcoin, ethereum, etc., I'm wondering what are the main differences between those and a possible digital currency, backed by a central bank, in a ...
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How are cryptocurrencies reported in GDP?

Apparently the total market value of cryptocurrencies is currently close to $118 billion. Is any of this reflected in GDP figures over the years? For example, if I start mining bitcoin today, I will ...
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Does an instant settlement system (such as blockchains) eliminate the possibility for short selling?

My understanding is that a short sell is possible because you can sell positions you don't have and then buy at a later point to cover your position (with the price hopefully being more favorable) to ...
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272 views

Is it valid to compare cryptocurrencies by using their smallest divisible unit?

I'd like to compare the relative value (in USD) of three cryptocurrencies: Bitcoin, Ethereum, and IOTA. (See spreadsheet below.) Specifically, I'm comparing the price of each currency's smallest unit ...
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1answer
181 views

Optimal pricing for Crypto-Currency Exchanges

I have a general understanding of game theory, and want to try to apply it to crypto-currency exchanges, which are completely decentralised systems. I come from a finance background so I will define ...
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113 views

Effects of Decentralized Currency

What effects could the growing use (and abuse) of Decentralized crypto-currency have on the rest of the world economy? For example, one cause for concern is the simplicity of laundering the currency. ...
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Scholarly papers on Cryptocurrencies/Electronic Money

Does anyone know of any peer-reviewed papers on the topic of Cryptocurrency or Electronic Money and its acceptance and practice in the financial market? Thanks!
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Financial Smart Contract on Ethereum: can an Ether Futures contract be priced in Ether?

BACKGROUND This is more in the wheel-house of economics than programming, but after a few different titles, I thought it best not to skirt around the root of my question OR create a oddly phrased USD ...
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Why is deflation not considered the opposite of inflation?

In this article from 2013 on bitcoin, the author casually states the importance of knowing that "deflation is not the opposite of inflation", without expanding or elaborating. I'm sure that there are ...