Can We Stabilize the Price of a Cryptocurrency?: Understanding the Design of Bitcoin and Its Potential to Compete with Central Bank Money

Mitsuru Iwamura, Yukinobu Kitamura (), 行伸 北村, Tsutomu Matsumoto and Kenji Saito

Hitotsubashi Journal of Economics, 2019, vol. 60, issue 1, 41-60

Abstract: Although Bitcoin was designed as a payment vehicle and as a store of value, it seems unlikely that currencies provided by central banks are at risk of being replaced, primarily because of the market price instability of Bitcoin. We diagnose the instability as being a symptom of the lack of flexibility in the Bitcoin supply schedule - a predetermined algorithm in which the proof of work is the major driving force. This paper explores the problem of instability from the viewpoint of economics, and suggests a new monetary policy for stabilizing the values of Bitcoin and other cryptocurrencies.

Keywords: Bitcoin; cryptocurrency; currency competition; Friedrich A. Hayek; proof of work (search for similar items in EconPapers)
JEL-codes: B31 E42 E51 (search for similar items in EconPapers)
Date: 2019
References: View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/30361/HJeco0600100410.pdf

Related works:
Working Paper: Can We Stabilize the Price of a Cryptocurrency?: Understanding the Design of Bitcoin and Its Potential to Compete with Central Bank Money (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:hit:hitjec:v:60:y:2019:i:1:p:41-60

DOI: 10.15057/30361

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