Cryptoeconomics December 2, 2019 guha.jayachandran@sjsu.com What - - PowerPoint PPT Presentation

▶
cryptoeconomics
SMART_READER_LITE
LIVE PREVIEW

Cryptoeconomics December 2, 2019 guha.jayachandran@sjsu.com What - - PowerPoint PPT Presentation

Dec 30, 2022 498 likes •747 views

Project poster session on Wednesday Reports Final review next Monday MyCourseEval open; also another review next Monday Questions from last Monday Cryptoeconomics December 2, 2019 guha.jayachandran@sjsu.com What is Money?

slide-1
SLIDE 1
  • Project poster session on Wednesday
  • Reports
  • Final review next Monday
  • MyCourseEval open; also another review next Monday
  • Questions from last Monday
slide-2
SLIDE 2

Cryptoeconomics

December 2, 2019

guha.jayachandran@sjsu.com

slide-3
SLIDE 3

What is Money?

Many things through history:

  • Shekels measure of weight
  • Shells
  • Gold/silver coins
  • Paper receipts
  • Dollar (fiat today)
slide-4
SLIDE 4

What is Money?

slide-5
SLIDE 5

What is Money?

“Any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context”

slide-6
SLIDE 6

What is Money?

Jevons 1875:

  • medium of exchange
  • unit of account
  • store of value
  • standard of deferred payment (subsumed by previous ones)
slide-7
SLIDE 7

Is Cryptocurrency Money?

  • Legal
  • Practical
slide-8
SLIDE 8

What is Money?

  • Fungibility?
  • Stability?
slide-9
SLIDE 9

Why is Money Worth Something?

slide-10
SLIDE 10

Faith

  • We believe money has value, so it has value
  • If faith is lost (due hyperinflation, for example), can enter a

downward spiral

slide-11
SLIDE 11

Inflation

Decrease in purchasing power of currency Increase in prices

slide-12
SLIDE 12

Modern Monetary Theory

  • Heterodox economic theory that has recently gotten

attention

  • Highly controversial as it argues governments can print

money (up to a limit) without any bad consequence

  • Argues that money gets value because of taxes
slide-13
SLIDE 13

Money Supply

  • M0: Coins and cash
  • M1: M0 plus demand deposits (checking accounts)
  • M2: M1 plus savings accounts under $100,000
  • MZM, M3, M4 too
slide-14
SLIDE 14

Fractional Reserve Banking

  • Bank lends more than it has in deposits
  • “Run on the bank” a potential problem
  • FDIC insurance mitigates this in the U.S.
  • Central bank sets reserve requirement
  • Banks create most money
slide-15
SLIDE 15

Money Supply

U.S. M0: ~$3,000,000,000,000 U.S. M1: ~$15,000,000,000,000

slide-16
SLIDE 16

Consider Forks Again

slide-17
SLIDE 17

Protocol Design

  • Learn from economics, don’t ignore it
  • How many coins, fixed or variable supply
  • Game theory of people maximizing value
  • Fungibility
  • Velocity
  • Many more
slide-18
SLIDE 18

Why No 51% Attack

slide-19
SLIDE 19

Why No 51% Attack

The argument: If you believe the system is rigged, will you want BTC? If people lose confidence in BTC, what happens to the value of the attackers’ holders?

slide-20
SLIDE 20

Velocity

  • Equation of exchange from economics: MV=PT (M=

money supply, V= velocity of money, P= average price level of goods, T= number of expenditures)

  • Intuitively, how much is money moving around
  • What happens to P as velocity changes
  • One model
slide-21
SLIDE 21

Stable Coins

  • Maintain a stable value relative some peg (dollar, basket,

etc.)

  • How?
  • Reserve
  • Mint and burn
  • Other?
slide-22
SLIDE 22

DeFi

  • Decentralized finance
  • Lending, options, futures, etc.
  • Offer relatively high returns at the moment, with varying

levels of risk

slide-23
SLIDE 23

Economics

  • Don’t ignore traditional economics
  • Many cryptocurrency analogs of traditional financial

instruments possible

  • Many new experiments possible with cryptocurrency to

test economic theories

  • New context