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Blockchain mechanism and distributional characteristics of cryptos

Min-Bin Lin, Kainat Khowaja, Cathy Yi-Hsuan Chen and Wolfgang Härdle ()

No 2020-027, IRTG 1792 Discussion Papers from Humboldt University of Berlin, International Research Training Group 1792 "High Dimensional Nonstationary Time Series"

Abstract: We investigate the relationship between underlying blockchain mechanism of cryptocurrencies and its distributional characteristics. In addition to price, we emphasise on using actual block size and block time as the operational features of cryptos. We use distributional characteristics such as fourier power spectrum, moments, quantiles, global we optimums, as well as the measures for long term dependencies, risk and noise to summarise the information from crypto time series. With the hypothesis that the blockchain structure explains the distributional characteristics of cryptos, we use characteristic based spectral clustering to cluster the selected cryptos into five groups. We scrutinise these clusters and find that indeed, the clusters of cryptos share similar mechanism such as origin of fork, difficulty adjustment frequency, and the nature of block size. This paper provides crypto creators and users with a better understanding toward the connection between the blockchain protocol design and distributional characteristics of cryptos.

Keywords: Cryptocurrency; price; blockchain mechanism; distributional characteristics; clustering (search for similar items in EconPapers)
JEL-codes: C00 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-cwa and nep-pay
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Related works:
Working Paper: Blockchain mechanism and distributional characteristics of cryptos (2021) Downloads
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