A Monetary Model of Blockchain
Anna Almosova
No 2018-008, IRTG 1792 Discussion Papers from Humboldt University of Berlin, International Research Training Group 1792 "High Dimensional Nonstationary Time Series"
Abstract:
The recent emergence of blockchain-based cryptocurrencies has received a considerable attention. The growing acceptance of cryptocurrencies has led many to speculate that the blockchain technology can surpass a traditional centralized monetary system. However, no monetary model has yet been de- veloped to study the economics of the blockchain. This paper builds a model of the economy with a single generally acepted blockchain-based currency. In the spirit of the search and matching literature I use a matching function to model the operation of the blockchain. The formulation of the money demand is taken from a workhorse of monetary economics - Lagos and Wright (2005). I show that in a blockchain-based monetary system money demand features a precautionary motive which is absent in the standard Lagos-Wright model. Due to this precautionary money demand the monetary equilibrium can be stable for some calibrations. I also used the developed model to study how the equilibrium return on money is
Keywords: Blockchain; Miners; Cryptocurrency; Matching function (search for similar items in EconPapers)
JEL-codes: E40 E41 E42 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (21)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:irtgdp:2018008
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