Money, Cryptocurrency, and Monetary Policy

Kang, Kee-Youn; Lee, Seungduck

doi:10.2139/ssrn.3303595

Cited by 11 publications

(14 citation statements)

References 26 publications

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“…Fernández-Villaverde and Sanches (Forthcoming) study cryptocurrencies as privately issued currencies by adding currency-providing entrepreneurs to the Lagos and Wright (2005) model and analyze whether currency competition can achieve price stability and efficient allocation. Kang and Lee (2019) study competition between central bank-issued money and cryptocurrency and study how monetary policy affects welfare and economic activities related to the use of cryptocurrency.…”

Section: Literature Reviewmentioning

confidence: 99%

Cryptocurrency and double spending history: transactions with zero confirmation

Kang

2022

Econ Theory

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We develop a general equilibrium model of cryptocurrency to study a double spending prevention mechanism without payment confirmations. Agents trade cryptocurrency using a digital wallet, and the cryptocurrency system provides a means to verify a wallet's double spending history. Double spending can be prevented without payment confirmations under some conditions if a wallet has a good reputation for transaction history. As the difficulty of mining work increases, incentives for double spending decrease. We provide new insights into the properties of Bitcoin transaction fees, quantitatively assess the current Bitcoin system, and evaluate the welfare gain from fast transactions without payment confirmations.

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Section: Literature Reviewmentioning

confidence: 99%

Cryptocurrency and double spending history: transactions with zero confirmation

Kang

2022

Econ Theory

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“…Both studies find that, apart from the unique steady-state equilibrium, there exists a continuum of equilibria in which the value of the cryptocurrency first grows and then bursts gradually over time. Other studies employing New Monetarist models to study cryptocurrencies include Zhu and Hendry (2018); Fernández-Villaverde and Sanches (2019); Lotz and Vasselin (2019); Kang and Lee (2019); Yu (2021).…”

Section: Related Literaturementioning

confidence: 99%

The Equilibrium Value of Bitcoin

Radwanski¹

2021

SSRN Journal

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“…23 Under the current Bitcoin system, it takes 60 minutes on average for a transaction to be almost 99.9% secured against double spending risk (see Baklanova et al (2017) and Kang and Lee (2019)). this case.…”

Section: Cryptocurrency Growth Rate γ and Welfarementioning

confidence: 99%

“…Weber (2016) assesses the potential to create input and output legitimacy for Bitcoin as a payment system and as a monetary system in comparison to current practice. Kang and Lee (2019) study competition between central bank-issued money and cryptocurrency and study how monetary policy affects welfare and economic activities related to the use of cryptocurrency.…”

Section: Introductionmentioning

confidence: 99%

“…SeeEasley et al (Forthcoming) for an analysis of transaction fees in Bitcoin based on the strategic interaction of users and miners. However, we assume that f is fixed because its level has remained stable at a low level since it was invented in 2009 (seeChiu and Koeppl (2017) andKang and Lee (2019)). Furthermore, the cryptocurrency system can always determine the transaction fee rate.…”

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confidence: 99%

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Cryptocurrency, Delivery Lag, and Double Spending History

Kang

2019

SSRN Journal

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We develop a general equilibrium model of cryptocurrency to study the optimal design of a cryptocurrency system. Agents trade cryptocurrency using digital wallets, and the cryptocurrency system provides verification of a digital wallet's history of double spending attempts. Delaying the delivery of goods until payment information is confirmed in the blockchain prevents double spending. However, double spending can be prevented without a delivery lag under some conditions if a wallet has a good reputation in terms of its history of double spending attempts. In particular, as the difficulty of mining work rises, the incentive to engage in double spending with a good wallet decreases. We study the optimal design of the cryptocurrency system in terms of the difficulty of mining work and the supply of cryptocurrency and evaluate the welfare gain that would be captured if the current Bitcoin system adopted the optimal cryptocurrency system.

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Money, Cryptocurrency, and Monetary Policy

Cited by 11 publications

References 26 publications

Cryptocurrency and double spending history: transactions with zero confirmation

Cryptocurrency and double spending history: transactions with zero confirmation

The Equilibrium Value of Bitcoin

Cryptocurrency, Delivery Lag, and Double Spending History

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