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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25
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4answers
2k views

From an economics perspective, what are the ramifications of a currency with fixed money supply?

I'm thinking specifically of bitcoins. What are the pros and cons of having a fixed number of coins, as opposed to more "normal" currencies? Would the currency have no inflation?
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4answers
902 views

What benefits does Bitcoin (i.e. cryptocurrency) offer?

I really, really like moderate inflation. I live in Sweden where the interest rates just went negative because we are on the brink of deflation, and the rate of inflation we have now is far too low. ...
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1answer
341 views

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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3answers
320 views

What determines the exchange rate of two fiat currencies if the supply of each is known?

In this blog post, economist Steve Landsburg posed a question about the value of Bitcoin which he didn't know the answer to. Imagine a future in which Bitcoins (or some other non-governmental ...
5
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3answers
323 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 ...
5
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1answer
349 views

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 ...
3
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1answer
941 views

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 ...
3
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1answer
170 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 ...
2
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4answers
89 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 ...
2
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2answers
357 views

Does Dogecoin or Bitcoin have a more appropriate rate of monetary inflation?

The supply of new Bitcoins and Dogecoins is depicted in the graph below. The Bitcoin inflation rate is currently higher than the Dogecoin rate, but it reduces sharply to a rate close to zero. It ...
2
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3answers
113 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 ...
2
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1answer
112 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 ...
2
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1answer
198 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 ...
2
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1answer
65 views

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 ...
2
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0answers
28 views

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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0answers
29 views

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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2answers
126 views

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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3answers
53 views

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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3answers
135 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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1answer
85 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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1answer
64 views

what alternatives can possibly back a new currency

A currency can be backed by a trusted issuing authority, by a scarce resource or by the scarcity of its money base (eg bitcoin). Are there any other known working alternatives.
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1answer
65 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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1answer
127 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
49 views

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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1answer
45 views

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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1answer
41 views

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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0answers
12 views

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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0answers
53 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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0answers
305 views

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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1answer
104 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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3answers
125 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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2answers
48 views

Can a currency with constraints on the amount a person can posses boost the economy?

So there was the following proposition: Create a currency with the following contraints: Each person may only own x amount of this currency. Gaining more of this currency is not allowed. Using a ...
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3answers
56 views

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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1answer
36 views

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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1answer
71 views

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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1answer
68 views

Smart contracts in Dollars

In last years I have read a lot about "Smart contracts". But I cannot understand why we need bitcoin for this? The old-fashioned US Dollar are not used in Smart Contracts?
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3answers
49 views

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 ...
0
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1answer
61 views

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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0answers
29 views

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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2answers
110 views

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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1answer
31 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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1answer
50 views

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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1answer
327 views

Friedman k% applied to cryptocurrency

Follow on to this question: Would a cryptocurrency with a base that expanded at a fix rate face fewer difficulties than one with a stagnant base? Edit: I'm referring specifically to the issues ...