Monopoly without a monopolist : An economic analysis of the bitcoin payment system

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dc.contributor Bank of Finland Huberman, Gur Leshno, Jacob D. Moallemi, Ciamac 2017-09-05T09:30:01Z 2017-09-05T09:30:01Z 2017
dc.identifier.isbn 978-952-323-186-3
dc.identifier.issn 1456-6184
dc.description.abstract Owned by nobody and controlled by an almost immutable protocol the Bitcoin payment system is a platform with two main constituencies: users and profit seeking miners who maintain the system's infrastructure. The paper seeks to understand the economics of the system: How does the system raise revenue to pay for its infrastructure? How are usage fees determined? How much infrastructure is deployed? What are the implications of changing parameters in the protocol? 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.
dc.format.extent 56
dc.language.iso ENG
dc.subject Bitcoin
dc.subject lohkoketju
dc.subject virtuaaliraha
dc.subject virtuaalivaluutta
dc.subject.other Bitcoin
dc.subject.other blockchain
dc.subject.other queueing
dc.subject.other two-sided markets
dc.subject.other market design
dc.subject.other cryptocurrency
dc.title Monopoly without a monopolist : An economic analysis of the bitcoin payment system
dc.type Paper
dc.identifier.urn URN:NBN:fi:bof-201709051593
dc.subject.jel D40
dc.subject.jel D20
dc.subject.jel L10
dc.subject.jel L50 Bank of Finland Research Discussion Papers
dc.series.year 2017
dc.series.number 27/2017
dc.series.sortingnumber 0027 5.9.2017
dc.subject.yso valuutta
dc.subject.yso maksuvälineet
dc.subject.yso raha
dc.subject.yso maksujärjestelmät
dc.type.okm D4

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