Questions tagged [economic-theory]

About Bitcoin as it might be discussed in economics class, e.g. supply, demand and price in theory.

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2 answers
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Could OFAC create a soft fork?

If OFAC demanded that no US entity build on top of a block with a sanctioned TX included, would it cause a soft fork?
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The competitive practicality of Bitcoin

Bitcoin is to be trustless by the thousands of nodes, but is this no more trustless than the Federal Reserve system? An account size in 8b on each device is a feasible alternative with absolute ...
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One address 2+ private keys. Bitcoin future

Since bitcoin uses cryptography algorithms to create private and public keys there is a possibility it could repeat. Person 1: L54w...KraG -> bc1...kq4 Person 2: L3mV...JU8G -> bc1...kq4 So ...
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Can bitcoin protocol be changed to add economic incentives to validating nodes?

We all want more decentralized bitcoin network and more people to run nodes. However, as we know that things are driven more by market economics rather than philanthropic or feel good factors. Similar ...
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How interest payment work in lending under bitcoin standard?

In Fiat Standard lending creates money. Whenever the debt is fully paid the monetary supply increases (principal + interest). What happens under bitcoin standard? Assume all the bitcoin has been mined ...
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1 answer
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How will a common guy use Lightning Network when BTC hits 10 mln$?

If BTC hits 10mln$ and transactions fees will be horrendous denominated in $, how a "common guy" will be able to opt in using Bitcoin, if even opening LN channel will be too expensive then ...
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What literal thing is determining the price of Cryptos / stocks? [duplicate]

Yes, supply and demand I know. But what literal thing is determining the price. When I see the price changing every second on Coinbase or Robinhood, what is controlling that. Is it an algorithm? What ...
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Can dust outputs become an economic problem?

I'm thinking about actually economic problems, not about UTXO set size. One example would be: Bitcoin adoption gets global and the value of a Bitcoin gets to be ridiculously high, let's say $100,000,...
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Do most small miners join mining pools? Is "pay-per-share" the dominant approach?

Is it correctly understood that most individual/small miners join mining pools? Is "pay-per-share" (or some variations thereof) the most popular mining pool approach, which means that the ...
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4 answers
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Who is paying for the running costs of Bitcoin?

Bitcoin mining will consume around 70TWh for 2020 (~3 nuclear power plants). As far as I know, electricity is paid using fiat money. If 1 kWh costs 0.1 $, without counting hardware costs, that means ...
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How is a USD-chained currency like Tether economically possible?

(I'll try my best to keep it relevant to Bitcoin, but feel free to close it if it seems inapplicable to Bitcoin trading. It's more about economics) Say there's a currency whose supply is controlled (...
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Who is the target audience?

I can not stop asking myself the question, what problem does bitcoin actually solve? Before you accuse me of being lazy and not doing any research, here is my thought process: You want to have a ...
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What is the incentive to use bitcoin due to transaction fees?

Apologies for any naivety in the question, as my understanding of the subject is still basic. My understanding is that once all the coins have been mined, the incentive for miners comes solely from ...
3 votes
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Will cryptocurrencies that have a finite supply (like 21m btc) cause deflation?

I figured out that cryptocurrencies can cause a deflationary spiral, since the cap is the same (eg. 21m BTC) but the economy is growing. That would only happen if all coins are mined. But deflation ...
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Is the 51% attack the only technical reason no country will adopt Bitcoin as a state currency? [closed]

Is the 51% attack the only technical reason no country will adopt Bitcoin as a state currency? Lets suppose a country with GDP size less than 300 Billion USD adopt the Bitcoin as an official currency. ...
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"stable-coins": A formal definition?

In crypto-currency news, we might heard about term of "stable-coins". Can we define a stable-coin as follows: A crypto-currency that is pegged to a fiat / formal currency to minimize the ...
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If Bitcoins aren't tied to a conventional currency, how did they get so valuable? [duplicate]

I would appreciate it if someone could provide me with some insightful information.
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2 votes
1 answer
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How does Bitcoin get over the capital controls problem?

So, people now talk about Bitcoin as a store of value instead of as a currency. I'm confused as to how central banks will respond to this? Right now, bitcoin is not widespread. Assuming bitcoin ...
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How can loans work with bitcoin?

Before answering this question please go through this scenario Let's assume that we have now become a bitcoin-only economy and nearly all bitcoins have been mined. Now, someone wants to do business ...
4 votes
5 answers
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Where exactly is the scarcity?

In discussions on the intrinsic value of BTC, one often reads the claim that BTC is scarce because the maximum amount of BTC that can ever exist is 21 million BTC. I find this explanation rather ...
1 vote
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What has the nonaggression principle to do with bitcoin trading?

In the Introductory page of the book 'Attack of the 50 foot Blockchain', the author says (in reference to Ross Ulbricht) : A young physics student starts a revolutionary new marketplace based on ...
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What is the source of bitcoin value?

From what I understood, the economic intrinsic value of Bitcoin as a currency is based on the "CPU-work" required to produce them. That is what makes Bitcoin rare enough to qualify as a currency. Is ...
2 votes
4 answers
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What is the advantage of a market-specific cryptocurrency?

Reading this article, http://nakamotoinstitute.org/mempool/the-coming-demise-of-altcoins/, I wonder why there would be a separate coin for each market, like a coin just for buying bananas, marijuana, ...
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Block chain and its uses cases for a non-financial asset market

So i have been reading a lot about block chain technology and its use cases in the finance and cryptocurrecncy markets. One thing that guarantees blockchain's success in the cryptocurrency market is ...
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Who receives the money when a bitcoin is purchased? [duplicate]

Where does the real money when someone buys a bitcoin? I understand that if you buy from someone or an exchange you are paying them in real money but who gets the money for a newly mined bitcoin?
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Mining = Printing money

Recently I got in a discussion with my brother over what bitcoin is and what mining is. He had never heard of it so I had to do my best to explain it all from the beginning. I had trouble explaining ...
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How would debt work in a bitcoin only economy, and why would anyone ever spend?

Been keeping track of BTC for a while and have always had these nagging questions about its feasibility as the "future" of currency. I like all the not tracked, no third party involvement, etc (i.e. ...
3 votes
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Should USD savers be concerned about the rising popularity of cryptocurrencies? [closed]

I recently took an interest in cryptocurrencies. Mostly, I'm interested Ethereum and Smart Contracts, but all the news about Bitcoin's rising price has prompted me to study currencies and economics ...
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Will I double my money after a bitcoin hard fork?

Could anyone please explain to me how this fork will work? Examples would be greatly appreciated. The way I'm understanding is, if I have 1 BTC on Coinbase, they will match it. So after the fork I ...
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How to obtain inputs and outputs of a bitcoin block more quickly, using JSON RPC or similar

Currently, it takes me almost 1.5 hours to obtain all inputs and outputs of a bitcoin block from January using JSON RPC. At this pace, it will take a significant amount of time to go all the way back ...
1 vote
1 answer
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What benefit of Bitcoin (to governments) outweighs the cost of not being able to control the value of a fiat currency?

I've read some books about finance / economics, and one of the things I've read is that governments often like having the ability to control the value of their own fiat currency. This allows them to ...
2 votes
2 answers
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Why bitcoin is not inflationary? [duplicate]

I understand that a lot of people today stack Bitcoin instead of spending them and that makes sense because there is a limited number of bitcoins. However, I think that for bitcoin to be a real ...
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Can an altcoin be worth less than 1 satoshi (0.00000001 BTC)?

I have a friend who thinks that it's safe to invest in any altcoin that approaches 1 satoshi (0.00000001 BTC) in value, because there will always be someone who is willing to buy it at that price, and ...
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Exchange-based vs over-the-counter (OTC)

I read an article about China ban on exchange, which mentions that ... the ban on exchange-based cryptocurrency trades will not extend to over-the-counter (OTC) transactions. I am confused over ...
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If cryptocurrencies have no intrinsic value, how do they originate?

In theory, anyone could create an infinite quantity of their own cryptocurrency right now. However, if you were to do this, it would have no value and, thus, it would be useless. Since value comes ...
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Would free energy cause a market collapse?

Consider a world where energy is free and plentiful. Bitcoin, and other cryptocurrencies, are given value since they are 'proof' of work. This work comes at the cost of: a. time b. energy By ...
-1 votes
1 answer
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Bitcoin usage over time: investment vs spending

1) Some people buy bitcoins as a method to invest/save money, other also spend them directly for purchasing stuff "here and now". First question is how ever can we estimate the ratio: ...
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1 answer
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Bitcoin boom and bust - Inherent instability of Bitcoin

I'd like to put the a question to the community regarding the inherent stability/instability of Bitcoin. I hope it's not off-topic since it's more a economics-type question. So, here's the scenario in ...
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Why does bitcoin have a value? [duplicate]

I got this pretty good question the other day - why does bitcoin have a value at all? After all it's nothing - who is willing to pay for nothing?
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What would happen to the world if Bitcoin were the only allowed currency? [closed]

Could a world economy be based solely on Bitcoin? I mean the only mean to pay would be bitcoin. From the point of view of economy would this be possible or would all the economy collapse? Could we ...
2 votes
2 answers
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Halving reward, price effects? [duplicate]

What is the case after halving reward takes place: Would bitcoin price gets double, since its harder to mine? Would Blockchain introduces more blocks (e.g: 1/5mins)?
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1 answer
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Will people not spending their Bitcoin cause Bitcoin to fail? [duplicate]

Everyone I know that owns Bitcoin (including myself) seems to plan to sit on it until it becomes widely accepted/used and the price sky rockets to a ridiculously high value (100000 dollars each). It's ...
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Selection of dependent variables - Time series regression on Bitcoin Price in USD

We are doing a time series regression project to identify the variables that impacts the bitcoin price in USD. We came up with the following explanatory variables: 1) GDPs of US, Canada, Europe, ...
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Economic effect of Bitcoin

I am an accounting student and I recently read about bitcoins, I was wondering if anybody could clear up my questions from my basic understanding of the bitcoin system. Since Bitcoins on a whole, ...
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How do transaction volume and block reward relate?

As an example, assume a block has 10 transactions with a total value of 1BTC. Does a miner get 25 BTC for validating and committing that 1BTC? What's the economics of this model?
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Inheritance and Bitcoins

A basic economic property of any currency is the ability to hold its value in the long term. While Bitcoin's ability to hold its value is evident, since there is no central authority to control the ...
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Can transactions scale sufficiently to compensate the diminishing block reward by fees?

Today, the bitcoin network is secured by massive computing power, which is expended in the process of mining. The miners are rewarded by newly mined bitcoins, plus transactions fees. The security of ...
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How to get paid providing full node services?

I run a full node. I would like to get paid for the services I provide. How can I go about getting that to happen?
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Can a cryptocurrency exist in a closed system?

I am developing a online game that requires a realistic economy and currency. I know I can create a new crypto coin currency with out much effort. What I am unclear on, is it possible for me to mine ...
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Relationship between concentration of bitcoin wealth and foreign exchange value?

Is there a relationship between the equality of wealth of bitcoin holders, and it's foreign exchange value? E.g. if there is a large transfer of bitcoin to a single owner, should this influence its ...