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An Agent Based Model to Analyze the Bitcoin Mining Activity and a Comparison with the Gold Mining Industry

Author

Listed:
  • Luisanna Cocco

    (Department of Electric and Electronic Engineering, University of Cagliari, 09123 Cagliari, Italy)

  • Roberto Tonelli

    (Department of Mathematics and Computer Science, University of Cagliari, 09124 Cagliari, Italy)

  • Michele Marchesi

    (Department of Mathematics and Computer Science, University of Cagliari, 09124 Cagliari, Italy)

Abstract

In this paper, we present an analysis of the mining process of two popular assets, Bitcoin and gold. The analysis highlights that Bitcoin, more specifically its underlying technology, is a “safe haven” that allows facing the modern environmental challenges better than gold. Our analysis emphasizes that crypto-currencies systems have a social and economic impact much smaller than that of the traditional financial systems. We present an analysis of the several stages needed to produce an ounce of gold and an artificial agent-based market model simulating the Bitcoin mining process and allowing the quantification of Bitcoin mining costs. In this market model, miners validate the Bitcoin transactions using the proof of work as the consensus mechanism, get a reward in Bitcoins, sell a fraction of them to cover their expenses, and stay competitive in the market by buying and divesting hardware units and adjusting their expenses by turning off/on their machines according to the signals provided by a technical analysis indicator, the so-called relative strength index.

Suggested Citation

  • Luisanna Cocco & Roberto Tonelli & Michele Marchesi, 2019. "An Agent Based Model to Analyze the Bitcoin Mining Activity and a Comparison with the Gold Mining Industry," Future Internet, MDPI, vol. 11(1), pages 1-12, January.
    • Handle: RePEc:gam:jftint:v:11:y:2019:i:1:p:8-:d:194404
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    References listed on IDEAS

    as
    1. Luisanna Cocco & Michele Marchesi, 2016. "Modeling and Simulation of the Economics of Mining in the Bitcoin Market," PLOS ONE, Public Library of Science, vol. 11(10), pages 1-31, October.
    2. Luisanna Cocco & Andrea Pinna & Michele Marchesi, 2017. "Banking on Blockchain: Costs Savings Thanks to the Blockchain Technology," Future Internet, MDPI, vol. 9(3), pages 1-20, June.
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    Cited by:

    1. Misha Perepelitsa & Ilya Timofeyev, 2022. "Self-sustained price bubbles driven by digital currency innovations and adaptive market behavior," SN Business & Economics, Springer, vol. 2(3), pages 1-15, March.
    2. Rico-Peña, Juan Jesús & Arguedas-Sanz, Raquel & López-Martin, Carmen, 2023. "Models used to characterise blockchain features. A systematic literature review and bibliometric analysis," Technovation, Elsevier, vol. 123(C).
    3. Rubaiyat Ahsan Bhuiyan & Afzol Husain & Changyong Zhang, 2023. "Diversification evidence of bitcoin and gold from wavelet analysis," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-36, December.
    4. Nishant Sapra & Imlak Shaikh & Ashutosh Dash, 2023. "Impact of Proof of Work (PoW)-Based Blockchain Applications on the Environment: A Systematic Review and Research Agenda," JRFM, MDPI, vol. 16(4), pages 1-29, March.

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