Pricing of Mining ASIC and Its Implication to the High Volatility of Cryptocurrency Prices

9 Pages Posted: 8 May 2019

See all articles by Yoshinori Hashimoto

Yoshinori Hashimoto

BUIDL, Ltd.

Shunya Noda

Vancouver School of Economics, University of British Columbia

Date Written: April 8, 2019

Abstract

Mining application-specific integrated circuit (ASIC) is an essential facility for mining in Proof-of-Work (PoW) based blockchain systems. This paper regards ASIC as a financial asset and proposes a theoretical estimate of the pricing of ASIC. We show that the payouts from ASIC can be replicated by an integral of European call options. Hence, the value of ASIC is increasing in the volatility of the cryptocurrency price. Our results imply that miners may prefer to keep the high volatility to maintain the value of their ASIC; thus, they may refuse the proposals and innovations for stabilizing the price. In this sense, the high volatility of the PoW-based cryptocurrency price might be intrinsic.

Keywords: Blockchain, Cryptocurrency, Bitcoin, Volatility, Mining

Suggested Citation

Hashimoto, Yoshinori and Noda, Shunya, Pricing of Mining ASIC and Its Implication to the High Volatility of Cryptocurrency Prices (April 8, 2019). Available at SSRN: https://ssrn.com/abstract=3368286 or http://dx.doi.org/10.2139/ssrn.3368286

Yoshinori Hashimoto

BUIDL, Ltd. ( email )

12-10, Sakuragaoka, Shibuya-ku
Neutrino
Tokyo, 150-0031
Japan

Shunya Noda (Contact Author)

Vancouver School of Economics, University of British Columbia ( email )

6000 Iona Dr
Vancouver, British Columbia V6T 1L4
Canada

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