Join the Department of Economics for a critical discussion of bubbles in crytocurrency markets.
Speaker: Andis Sofianos, Durham University
Abstract
They investigate how key features associated with the Proof-of-Work consensus mechanism of Bitcoin (commonly referred to as mining) affect pricing.
In a controlled laboratory experiment, they observe that price bubble formation can be attributed to mining.
Moreover, overpricing is more pronounced if the mining capacity is centralised to a small group of individuals.
The order book data reveal that miners seem to play a crucial role in bubble formation.
Further probing the mechanism in a second study, they find that both mining costs and decisions jointly with the sluggish rate of supply of the asset contribute to the bubble formation.
Their results demonstrate that erratic pricing is an inherent feature of cryptocurrencies based on a mining protocol, thus, seriously limiting any prospects for such assets becoming a medium of exchange.
About the speaker
Andis Sofianos is an ;Associate Professor of Economics at Durham University.
He was previously a Postdoctoral Fellow at the University of Heidelberg and completed his PhD at the University of Warwick.
His research interests are in Experimental Economics, particularly the impact of individual characteristics, like personality traits and intelligence on strategic interactions.
His current work is focused on cooperation, belief updating and cryptocurrency pricing.
His work has been published in world-leading journals such as the Review of Economics Studies, Journal of Political Economy and the Journal of Economic Theory.
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