Flexible Majority Rules for Cryptocurrency Issuance

CER-ETH – Center of Economic Research at ETH Zurich Working Paper 19/322

23 Pages Posted: 25 Jun 2019 Last revised: 24 Aug 2019

See all articles by Hans Gersbach

Hans Gersbach

ETH Zurich - CER-ETH -Center of Economic Reseaarch; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Date Written: June 1, 2019

Abstract

We suggest that flexible majority rules for currency issuance decisions foster the stability of a cryptocurrency. With flexible majority rules, the voteshare needed to approve a particular currency issuance growth is increasing with this growth rate. By choosing suitable parameters for these flexible majority rules, we show that optimal growth rates can be achieved in simple settings. Moreover, with flexible majority rules, changes in the composition of growth-friendly and growth-adverse agents only have a comparatively moderate impact on growth rates, and extreme growth rates are avoided. Finally, we show that optimal money growth rates are realized if agents entering financial contracts anticipate ensuing inflation rates determined by these flexible majority rules.

Keywords: digital currency, central bank, voting, majority rule, flexible majority rules

JEL Classification: D72, E31, E42, E52, E58

Suggested Citation

Gersbach, Hans, Flexible Majority Rules for Cryptocurrency Issuance (June 1, 2019). CER-ETH – Center of Economic Research at ETH Zurich Working Paper 19/322. Available at SSRN: https://ssrn.com/abstract=3406656 or http://dx.doi.org/10.2139/ssrn.3406656

Hans Gersbach (Contact Author)

ETH Zurich - CER-ETH -Center of Economic Reseaarch ( email )

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CESifo (Center for Economic Studies and Ifo Institute)

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Centre for Economic Policy Research (CEPR)

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United Kingdom

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