Economic Simulation of Cryptocurrencies and Their Control Mechanisms

Authors

  • Michael R. Mainelli Z/Yen Group
  • Matthew Leitch The Ridgeway Expertise Company Ltd
  • Dionysios Demetis University of Hull

DOI:

https://doi.org/10.5195/ledger.2019.130

Keywords:

Cryptocurrency, Economic simulation, Blockchain, Control

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.

Author Biographies

Michael R. Mainelli, Z/Yen Group

Director

Matthew Leitch, The Ridgeway Expertise Company Ltd

Director

Dionysios Demetis, University of Hull

Lecturer in Management Systems

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Published

2019-05-24

How to Cite

Mainelli, M. R., Leitch, M., & Demetis, D. (2019). Economic Simulation of Cryptocurrencies and Their Control Mechanisms. Ledger, 4. https://doi.org/10.5195/ledger.2019.130

Issue

Vol. 4 (2019)

Section

Research Articles

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