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Linda Schilling & Harald Uhlig (CREST & Chicago) – “Some Simple Bitcoin Economics”
March 19, 12:15 am - 1:30 pm
CREST Microeconomics Seminar :
Time: 12:15 pm – 1:30pm
Date: 19th March 2019
Place: Room 3001.
Linda Schilling & Harald Uhlig (Chicago) – “Some Simple Bitcoin Economics”
In an endowment economy, we analyze coexistence and competition between traditional fiat money (Dollar) and cryptocurrency (Bitcoin). Agents can trade consumption goods in either currency or hold on to currency for speculative purposes. A central bank ensures a Dollar inflation target, while Bitcoin mining is decentralized via proof-of-work. We analyze Bitcoin price evolution and interaction between the Bitcoin price and monetary policy which targets the Dollar. We obtain a fundamental pricing equation, which in its simplest form implies that Bitcoin prices form a martingale. We derive conditions, under which Bitcoin speculation cannot happen, and the fundamental pricing equation must hold. We explicitly construct examples for equilibria
Roxana Fernandez Machado (CREST), Marie Laure Allain (CREST), and Linda Schilling (CREST)
food provided, no registration needed