Price Formation in an Artificial Market: Limit Order Book Versus Matching of Supply and Demand

Raberto, Marco; Cincotti, Silvano; Dose, Christian; Focardi, Sergio M.; Marchesi, Michele

doi:10.1007/3-540-27296-8_20

Cited by 12 publications

(7 citation statements)

References 17 publications

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“…Economics of mining has also been modeled in [21] [22], where the model is used for simulating the price clearing mechanism in the market using a virtual order book similar to that presented in [23]. Another trial on understanding economics of Bitcoin through simulations with an artificial market is found in [24], using the terminology and strategies of actual tradings.…”

Section: Models Of Economicsmentioning

confidence: 99%

How to make a digital currency on a blockchain stable

Saito

Iwamura

2019

Future Generation Computer Systems

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Bitcoin and other similar digital currencies on blockchains are not ideal means for payment, because their prices tend to go up in the long term (thus people are incentivized to hoard those currencies), and to fluctuate widely in the short term (thus people would want to avoid risks of losing values).The reason why those blockchain currencies based on proof of work are unstable may be found in their designs that the supplies of currencies do not respond to their positive and negative demand shocks, as the authors have formulated in our past work.Continuing from our past work, this paper proposes minimal changes to the design of blockchain currencies so that their market prices are automatically stabilized, absorbing both positive and negative demand shocks of the currencies by autonomously controlling their supplies. Those changes are: 1) limiting re-adjustment of proof-of-work targets, 2) making mining rewards variable according to the observed over-threshold changes of block intervals, and 3) enforcing negative interests to remove old coins in circulation. We have made basic design checks and evaluations of these measures through simple simulations.In addition to stabilization of prices, the proposed measures may have effects of making those currencies preferred means for payment by disincentivizing hoarding, and improving sustainability of the currency systems by making rewards to miners perpetual.

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Section: Models Of Economicsmentioning

confidence: 99%

How to make a digital currency on a blockchain stable

Saito

Iwamura

2019

Future Generation Computer Systems

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“…Raberto et al [27], and Cincotti et al [9] studied the long-run wealth of traders characterized by different trading strategies. Moreover, Raberto et al [28] presented an extension of the GASM including a limit order book mechanism for price formation. They demonstrated that the main stylized facts in financial market can be reproduced as a consequence of the limit order book, not introducing any assumption on agents behavior.…”

Section: Related Workmentioning

confidence: 99%

Using an artificial financial market for studying a cryptocurrency market

Cocco

Concas

Marchesi

2015

J Econ Interact Coord

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Abstract-This paper presents an agent-based artificial cryptocurrency market in which heterogeneous agents buy or sell cryptocurrencies, in particular Bitcoins. In this market, there are two typologies of agents, Random Traders and Chartists, which interact with each other by trading Bitcoins. Each agent is initially endowed with a finite amount of crypto and/or fiat cash and issues buy and sell orders, according to her strategy and resources. The number of Bitcoins increases over time with a rate proportional to the real one, even if the mining process is not explicitly modelled.The model proposed is able to reproduce some of the real statistical properties of the price absolute returns observed in the Bitcoin real market. In particular, it is able to reproduce the autocorrelation of the absolute returns, and their cumulative distribution function. The simulator has been implemented using object-oriented technology, and could be considered a valid starting point to study and analyse the cryptocurrency market and its future evolutions.

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“…We have seen in this section that time series obtained with our model exhibit the same statistical properties as real data sets. This results improve the preliminary ones obtained by (Raberto, Cincotti, Dose, Focardi, and Marchesi 2005). This shows that our asynchronous and continuous auction model is able to reproduce most of markets characteristics without making any asumption on agents behaviors or on an external world model.…”

Section: Methodssupporting

confidence: 80%

“…In consequence, we choose to illustrate the use of our generic market simulation framework by implementing a simple asynchronous double auction model following our formalism. This model can be linked up to the one used in (Raberto, Cincotti, Dose, Focardi, and Marchesi 2005). We will detail in this section how each module is defined according to the formalism we presented before.…”

Section: An Example Of Application: the Market Component As Double Aumentioning

confidence: 99%