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Some Insights into the Development of Cryptocurrencies

Author

Listed:
  • Andreas Hanl

    () (University of Kassel)

Abstract

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
    as

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    File URL: http://www.uni-marburg.de/fb02/makro/forschung/magkspapers/paper_2018/04-2018_hanl.pdf
    File Function: First 201804
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    References listed on IDEAS

    as
    1. William J. Luther, 2016. "Cryptocurrencies, Network Effects, And Switching Costs," Contemporary Economic Policy, Western Economic Association International, vol. 34(3), pages 553-571, July.
    2. repec:spr:wirtsc:v:97:y:2017:i:5:d:10.1007_s10273-017-2145-y is not listed on IDEAS
    3. David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-337, May.
    4. 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.
    5. Neil Gandal & Hanna Halaburda, 2014. "Competition in the Cryptocurrency Market," Working Papers 14-17, NET Institute.
    6. 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.
    7. Ben Fung & Hanna Halaburda, 2016. "Central Bank Digital Currencies: A Framework for Assessing Why and How," Discussion Papers 16-22, Bank of Canada.
    8. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    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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