Monopoly Without a Monopolist: An Economic Analysis of the Bitcoin System [pdf]
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Re: Monopoly Without a Monopolist: An Economic Analysis of the Bitcoin System [pdf]
#2On a related note there was a paper presentation on the economics analysis of the blockchain from the Toulouse School of Economics a few months back.
[1] Presentation http://econ.sciences-po.fr/sites/default/files/file/melissa/...
[2] Presentation https://www.tse-fr.eu/sites/default/files/TSE/documents/doc/...
Re: Monopoly Without a Monopolist: An Economic Analysis of the Bitcoin System [pdf]
#3Abstract:
Many crypto-currencies, Bitcoin being the most prominent, are reliable electronic payment systems that operate without a central, trusted authority. They are enabled by blockchain technology, which deploys cryptographic tools and game theoretic incentives to create a two-sided platform. Profit maximizing computer servers called miners provide the infrastructure of the system. Its users can send payments anonymously and securely. Absent a central authority to control the system, the paper seeks to understand the operation of the system: How does the system raise revenue to pay for its infrastructure? How are usage fees determined? How much infrastructure is deployed?
A simplified economic model that captures the system’s properties answers these questions. Transaction fees and infrastructure level are determined in an equilibrium of a congestion queueing game derived from the system’s limited throughput. The system eliminates dead-weight loss from monopoly, but introduces other inefficiencies and requires congestion to raise revenue and fund infrastructure. We explore the future potential of such systems and provide design suggestions.
Re: Monopoly Without a Monopolist: An Economic Analysis of the Bitcoin System [pdf]
#4From the conclusion which I thought was really interesting:
> Bitcoin is not regulated. It cannot be regulated. There is no need to regulate it because as a system it is committed to the protocol as is and the transaction fees it charges the users are determined by the users independently of the miners’ efforts.
> Bitcoin’s design as an economic system is revolutionary and therefore would merit an economist’s attention and scrutiny even if it had not been functional. Its apparent functionality and usefulness should further encourage economists to study this marvelous structure.
Re: Monopoly Without a Monopolist: An Economic Analysis of the Bitcoin System [pdf]
#5That is a very 2015 view - now days people don't buy bitcoin for its use in transactions, they buy bitcoin because it keeps going up. The more it goes up the less people are likely to spend it. We don't need many miners if people never spend it.
Here is one high profile example http://avc.com/2017/08/store-of-value-vs-payment-system/
(of course when it starts to go back to zero people will all try to sell and the infrastructure wont be there)
PS: The paper deals with a very interesting problem about how miners are paid. I dont want to take away from it. Just that I feel the whole BTC environment has taken a new turn that makes the problem less of an issue.
Re: Monopoly Without a Monopolist: An Economic Analysis of the Bitcoin System [pdf]
#6That is a very 2015 view - now days people don't buy bitcoin for its use in transactions, they buy bitcoin because it keeps going up. The more it goes up the less people are likely to spend it. We don't need many miners if people never spend it. Here is one high profile example http://avc.com/2017/08/store-of-value-vs-payment-system/ (of course when it starts to go back to zero people will all try to sell and the inf…
> people don't buy bitcoin for its use in transactions
I'd beg to differ.. sure there is definitely a percentage of HODL'ers but to say people don't use it in transactions is straight up lunacy.
https://blockchain.info/charts/n-transactions?timespan=all https://blockchain.info/charts/trade-volume?timespan=all
Re: Monopoly Without a Monopolist: An Economic Analysis of the Bitcoin System [pdf]
#7That is a very 2015 view - now days people don't buy bitcoin for its use in transactions, they buy bitcoin because it keeps going up. The more it goes up the less people are likely to spend it. We don't need many miners if people never spend it. Here is one high profile example http://avc.com/2017/08/store-of-value-vs-payment-system/ (of course when it starts to go back to zero people will all try to sell and the inf…
I think this is mostly correct, but I see it a bit differently. This initial wave of speculation is slowly building up network utility. Use cases like micro-transactions or Web payments become more and more viable as the network size grows. Eventually enough people own Bitcoin that it makes sense for it to be baked into a browser for micropayments, and for it to be used in lieu of Venmo/PayPal. Speculation is the boot loader for real utility
Re: Monopoly Without a Monopolist: An Economic Analysis of the Bitcoin System [pdf]
#8That is a very 2015 view - now days people don't buy bitcoin for its use in transactions, they buy bitcoin because it keeps going up. The more it goes up the less people are likely to spend it. We don't need many miners if people never spend it. Here is one high profile example http://avc.com/2017/08/store-of-value-vs-payment-system/ (of course when it starts to go back to zero people will all try to sell and the inf…
> people don't buy bitcoin for its use in transactions I'd beg to differ.. sure there is definitely a percentage of HODL'ers but to say people don't use it in transactions is straight up lunacy. https://blockchain.info/charts/n-transactions?timespan=all https://blockchain.info/charts/trade-volume?timespan=all
Well, don't these charts only reflect new people buying Bitcoin (as an investment)?
https://blockchain.info/pt/charts/n-unique-addresses?timespa...
Re: Monopoly Without a Monopolist: An Economic Analysis of the Bitcoin System [pdf]
#9That is a very 2015 view - now days people don't buy bitcoin for its use in transactions, they buy bitcoin because it keeps going up. The more it goes up the less people are likely to spend it. We don't need many miners if people never spend it. Here is one high profile example http://avc.com/2017/08/store-of-value-vs-payment-system/ (of course when it starts to go back to zero people will all try to sell and the inf…
I think this is mostly correct, but I see it a bit differently. This initial wave of speculation is slowly building up network utility. Use cases like micro-transactions or Web payments become more and more viable as the network size grows. Eventually enough people own Bitcoin that it makes sense for it to be baked into a browser for micropayments, and for it to be used in lieu of Venmo/PayPal. Speculation is the boo…
Micropayments are not that feasible when the fees per transaction are in the multiple dollars, surely?
Re: Monopoly Without a Monopolist: An Economic Analysis of the Bitcoin System [pdf]
#10Earlier quoted context omitted.
I think this is mostly correct, but I see it a bit differently. This initial wave of speculation is slowly building up network utility. Use cases like micro-transactions or Web payments become more and more viable as the network size grows. Eventually enough people own Bitcoin that it makes sense for it to be baked into a browser for micropayments, and for it to be used in lieu of Venmo/PayPal. Speculation is the boo…
Micropayments are not that feasible when the fees per transaction are in the multiple dollars, surely?
Not on the blockchain. This is what Lightning Network and other Layer 2 technologies seek to enable: nearly-free micropayments.