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Economic Simulation of Cryptocurrencies and Their Control Mechanisms

Mainelli, Michael R; Leitch, Matthew; Demetis, Dionysios

Authors

Michael R Mainelli

Matthew Leitch



Abstract

A cryptocurrency needs a relatively stable value if it is to fulfill the traditional functions of money and be useful as a currency. To achieve this, controls are needed within the ecosystem of the cryptocurrency. Although a simulation cannot predict future currency rates or other variables exactly, it is argued that a model that simulates a range of challenging behavior can be a useful testbed for control schemes. To illustrate and explore this idea, an agent-based economic model was used to simulate the early period of a hypothetical cryptocurrency and test two control mechanisms. The results suggest that this approach may be fruitful and that it may be important to include more than just coin minting within the control scheme. An economic simulation model is likely to be a valuable tool in developing and regulating effective cryptocurrency systems.

Citation

Mainelli, M. R., Leitch, M., & Demetis, D. (2019). Economic Simulation of Cryptocurrencies and Their Control Mechanisms. Ledger, 4, 48-67. https://doi.org/10.5915/LEDGER.2019.130

Journal Article Type Article
Acceptance Date May 8, 2019
Publication Date May 24, 2019
Deposit Date Dec 13, 2019
Publicly Available Date Dec 13, 2019
Journal Ledger
Electronic ISSN 2379-5980
Publisher University of Pittsburgh, University Library System
Peer Reviewed Peer Reviewed
Volume 4
Pages 48-67
DOI https://doi.org/10.5915/LEDGER.2019.130
Keywords Cryptocurrency; Economic simulation; Blockchain; Control
Public URL https://hull-repository.worktribe.com/output/3292104
Publisher URL https://ledgerjournal.org/ojs/index.php/ledger

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