Establishing cryptocurrency equilibria through game theory

DOI10.3934/MATH.2019.3.420zbMATH Open1484.91096arXiv1805.10128OpenAlexW2943919553WikidataQ127940920 ScholiaQ127940920MaRDI QIDQ2127751FDOQ2127751

Authors: Carey Caginalp, Gunduz Caginalp 

Publication date: 21 April 2022

Published in: AIMS Mathematics (Search for Journal in Brave)

Abstract: Optimization methods are used to determine equilibria of investment in cryptocurrencies. The basic assumptions involve existence of a core group (the "wealthy") that fears the loss of substantial assets through government seizure. Speculators constitute another group that tends to introduce volatility and risk for the wealthy. The wealthy must divide their assets between the home currency and the cryptocurrency, while the government decides on the probability of seizing a fraction the assets of this group. Under the assumption that each group exhibits risk aversion through a utility function, we establish the existence and uniqueness of Nash equilibrium. Also examined is the more realistic optimization problem in which the government policy cannot be reversed, while the wealthy can adjust their allocation in reaction to the government's designation of probability. The methodology leads to an understanding the equilibrium market capitalization of cryptocurrencies.

Full work available at URL: https://arxiv.org/abs/1805.10128

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zbMATH Keywords

optimizationgame theorymathematical financecryptocurrency

Mathematics Subject Classification ID

Applications of game theory (91A80) 2-person games (91A05) Financial applications of other theories (91G80)

Cites Work

• Game theory
• Stock market bubbles in the laboratory
• Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities
• Mathematical game theory and applications
• Asset flow and momentum: deterministic and stochastic equations
• Initial cash/asset ratio and asset prices: An experimental study

Cited In (6)

• Gödel semantics of fuzzy argumentation frameworks with consistency degrees
• Asset tokenization and related problems
• Fairness in ERC token markets: a case study of CryptoKitties
• On stablecoin price processes and arbitrage
• Governmental taxation of households choosing between a national currency and a cryptocurrency
• Ergodic Mean-Payoff Games for the Analysis of Attacks in Crypto-Currencies

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