A theory of optimum cryptocurrency scope

【Author】 Marthinsen, John; Gordon, Steven

【Source】ECONOMICS OF INNOVATION AND NEW TECHNOLOGY

【影响因子】2.213

【Abstract】Robert Mundell (1961. "A Theory of Optimum Currency Areas." The American Economic Review 51 (4): 657-665) framed the fixed-versus-flexible exchange rate controversy in a novel way when he focused attention on currency areas and the ingredients necessary for a group of nations to form an optimal currency area (OCA). This paper proposes an analogous theory for cryptocurrencies, called optimal currency scope (OCS), and explains the conditions necessary for an OCS to exist. In contrast to an OCA, which is defined by its non-overlapping geographic areas, an OCS is defined by its multiple-overlapping attributes and the needs they solve, which we call scope. Scopes are not geographic and have fuzzy boundaries; so, the possibility of competing currencies in a single scope needs to be considered. The central issues surrounding an OCS are the optimal number and magnitude of currency attributes, rather than whether nations should adopt fixed versus fluctuating exchange rates. Similar to the findings since Mundell first introduced his OCA Theory, we find that the optimum number of cryptocurrency attributes and, therefore, the optimal number of cryptocurrencies must be determined empirically rather than theoretically.

【Keywords】Anonymity; clearing time; cryptocurrency; currency attributes; distributed ledger; diversification; economies of scale; fiat currency; financial crimes; geographic borders; hedge; international mobility; legal tender; liquidity; medium of exchange; Mundell; network effects; optimal currency area; optimal currency scope; price transparency and flexibility; protectionism; pseudonymity; regulation; single global cryptocurrency; single global currency; smart contracts; store of value; tokens; trade integration; transaction costs; unbanked and underbanked; unit of account; utility; volatility

【发表时间】2019 17-Feb

【收录时间】2022-01-02

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