Economic Simulation of Cryptocurrencies and Their Control Mechanisms

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

Economic simulation of cryptocurrencies

Cryptocurrencies have the potential to become effective currencies that give a higher level of macroeconomic control, thanks to the information that is available about holdings and transactions, and the potential for automated control mechanisms. However, these cryptocurrencies need to be designed properly and tested before launch. This paper reports the early results of an economic model that simulates a variety of behaviors by economic agents and some simple control mechanisms. An economic simulation model is likely to be a valuable tool in developing effective cryptocurrency systems and interacting with regulators