Optimal cryptocurrency areas

  1. a central bank as currency issuer with defined economic goals (e.g. inflation, unemployment) and the power to control money supply in order to influence economic wellbeing, and
  2. somewhat homogenous economic regions, speak: distinct geographic areas.
A cryptocurrency region. Photo by Michael on Unsplash
  1. Preferences over the institutional framework of exchange. If we could keep the network of exchange partners constant, this component will guide us towards picking our preferred currency based on technical characteristics alone. Strictly speaking, this is not a network effect.
  2. Global network effects. This is the scaling component — we generally prefer to have as many other participants which whom we can interact. This is also because functional transactional networks require a minimum size to be feasible.
  3. Local (pairwise) network effects. In a network of millions, we will only interact with a very small fraction of the participants. This is even more true for so–called indirect networks, where we will interaction with concentrated intermediaries, such as exchanges.

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Oliver Beige

Oliver Beige

I write about how technology shapes the world we live in.

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