Cryptocurrency Architecture and Interaction With Market Shocks

46 Pages Posted: 8 May 2019

See all articles by Shaen Corbet

Shaen Corbet

Dublin City University ; University of Waikato - Management School

Charles James Larkin

Institute for Policy Research (IPR), University of Bath; Trinity College Dublin

Brian M. Lucey

Trinity Business School, Trinity College Dublin; Ho Chi Minh City University of Economics and Finance; Jiangxi University of Finance and Economics

Andrew Meegan

Dublin City University Business School

Samuel Vigne

Trinity College (Dublin) - Trinity Business School

Date Written: April 10, 2019

Abstract

Blockchain technology appears to be ready to revolutionise a broad number of industries. However, the blockchain itself contains a number of inefficiencies and areas for improvement, namely: transaction fees and transaction speeds. Directed acyclic graphs (DAGs) address, and improve on these inefficiencies and a number of digital currencies utilising this technology have already begun to appear. This paper provides an explanation of the technology behind DAG-based assets, while identifying and highlighting strategic advantages that DAGs possess over traditional blockchains. We conduct a GARCH volatility analysis of a range of blockchain-based and DAG-based cryptocurrencies in the aftermath of a range of market shocks. We find that DAG-based assets become increasingly responsive to market shocks as they mature. Such behavior mirrors that of established cryptocurrencies such as Bitcoin, Ethereum and Litecoin, providing evidence that DAG-based cryptocurrencies now share similar characteristics to traditional blockchain-chain based products.

Keywords: Digital Currencies; Cryptocurrency; Blockchain; Directed Acyclic Graphs; GARCH

JEL Classification: G12

Suggested Citation

Corbet, Shaen and Larkin, Charles James and Lucey, Brian M. and Meegan, Andrew and Vigne, Samuel, Cryptocurrency Architecture and Interaction With Market Shocks (April 10, 2019). Available at SSRN: https://ssrn.com/abstract=3369527 or http://dx.doi.org/10.2139/ssrn.3369527

Shaen Corbet

Dublin City University ( email )

Dublin 9
Ireland

University of Waikato - Management School ( email )

Hamilton
New Zealand

Charles James Larkin

Institute for Policy Research (IPR), University of Bath ( email )

10 West
Claverton Down
Bath, BA2 7AY
United Kingdom

Trinity College Dublin ( email )

AAP College Green
Dublin 2
Ireland

Brian M. Lucey (Contact Author)

Trinity Business School, Trinity College Dublin ( email )

The Sutherland Centre, Level 6, Arts Building
Dublin 2
Ireland
+353 1 608 1552 (Phone)
+353 1 679 9503 (Fax)

Ho Chi Minh City University of Economics and Finance ( email )

59C Nguyen D├Čnh Chieu
6th Ward, District 3
Ho Chi Minh City, Ho Chi Minh 70000
Vietnam

Jiangxi University of Finance and Economics ( email )

South Lushan Road
Nanchang, Jiangxi 330013
China

Andrew Meegan

Dublin City University Business School ( email )

Dublin 9
Ireland

Samuel Vigne

Trinity College (Dublin) - Trinity Business School ( email )

Aras an Phiarsaigh
College Green
Dublin, Leinster D2
Ireland

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