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Some Insights into the Development of Cryptocurrencies


  • Andreas Hanl

    () (University of Kassel)


Cryptocurrencies such as Bitcoin might revolutionize the economy through enabling peer-to-peer based transactions by abolishing the need for a trusted intermediary. As for now, Bitcoin remains to be the best recognized cryptocurrency, in particular in terms of market capitalization. However, as this paper shows, there are plenty of alternatives. This paper outlines the historical roots which have led to the creation of privately emitted, cryptography based digital currencies. Additionally, this paper discusses future possible hurdles of the development of cryptocurrencies and outlines features which might infl uence the success of a cryptocurrency. Insights into the beginning of cryptocurrency development are gained by analysis of the publicly available DOACC dataset. The paper does so by providing an overview of the techniques and mechanisms used by cryptocurrencies. It shows that newly created cryptocurrencies tend to be very similar in some properties in the early stages but new features and more diversity developed in more recent years. Additionally, newly created cryptocurrencies tend more and more to create a fixed number of coins before the initial announcement in order to sell these in Initial Coin Offerings. Even when the amount of premining increases over years, it remains at lower levels on the aggregate.

Suggested Citation

  • Andreas Hanl, 2018. "Some Insights into the Development of Cryptocurrencies," MAGKS Papers on Economics 201804, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  • Handle: RePEc:mar:magkse:201804

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    References listed on IDEAS

    1. Marie Briere & Kim Oosterlinck & Ariane Szafarz, 2013. "Virtual Currency, Tangible Return: Portfolio Diversification with Bitcoin," Working Papers CEB 13-031, ULB -- Universite Libre de Bruxelles.
    2. William J. Luther, 2016. "Cryptocurrencies, Network Effects, And Switching Costs," Contemporary Economic Policy, Western Economic Association International, vol. 34(3), pages 553-571, July.
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    4. David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-337, May.
    5. Liebowitz, S J & Margolis, Stephen E, 1995. "Path Dependence, Lock-in, and History," Journal of Law, Economics, and Organization, Oxford University Press, vol. 11(1), pages 205-226, April.
    6. Neil Gandal & Hanna Halaburda, 2014. "Competition in the Cryptocurrency Market," Working Papers 14-17, NET Institute.
    7. repec:sol:spaper:2013/226296 is not listed on IDEAS
    8. John P. Conley, 2017. "Blockchain and the Economics of Crypto-tokens and Initial Coin Offerings," Vanderbilt University Department of Economics Working Papers 17-00008, Vanderbilt University Department of Economics.
    9. Ali, Robleh & Barrdear, John & Clews, Roger & Southgate, James, 2014. "The economics of digital currencies," Bank of England Quarterly Bulletin, Bank of England, vol. 54(3), pages 276-286.
    10. Barrdear, John & Kumhof, Michael, 2016. "The macroeconomics of central bank issued digital currencies," Bank of England working papers 605, Bank of England.
    11. Dong He & Karl F Habermeier & Ross B Leckow & Vikram Haksar & Yasmin Almeida & Mikari Kashima & Nadim Kyriakos-Saad & Hiroko Oura & Tahsin Saadi Sedik & Natalia Stetsenko & Concha Verdugo Yepes, 2016. "Virtual Currencies and Beyond; Initial Considerations," IMF Staff Discussion Notes 16/3, International Monetary Fund.
    12. Ben Fung & Hanna Halaburda, 2016. "Central Bank Digital Currencies: A Framework for Assessing Why and How," Discussion Papers 16-22, Bank of Canada.
    13. Andreas Hanl & Jochen Michaelis, 2017. "Kryptowährungen — ein Problem für die Geldpolitik?
      [Cryptocurrencies: A Monetary Policy Problem?]
      ," Wirtschaftsdienst, Springer;German National Library of Economics, vol. 97(5), pages 363-370, May.
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    More about this item


    Cryptocurrency; Bitcoin; Blockchain; Cryptography; Digital Money; E-Money;

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System

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