Essays in Cryptocurrency
Date
2025-05-09
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
ORCID
Type
Thesis
Degree Level
Doctoral
Abstract
This thesis examines key aspects of the cryptocurrency ecosystem, focusing on Bitcoin mining, transaction
fees, and the structural relationship between Tether and Bitcoin. The first chapter provides an overview of
how these studies are interconnected.
The second chapter examines the welfare implications of entry barriers in Bitcoin mining, extending
a monetary search framework to incorporate entry costs. The analysis shows that barriers to entry lead
to moderate welfare gains by reducing competition, which lowers mining costs. These gains stem from
cost savings rather than improvements in transaction settlement times, highlighting the trade-offs between
competition and efficiency in maintaining the network’s security and value.
The third chapter investigates the determinants of Bitcoin transaction fees, focusing on the strategic role
of miners and the dynamics of competition. Empirical evidence demonstrates that increased competition
among miners reduces average fees but raises total fees by confirming more transactions. Additionally, as
block rewards decrease, users offer higher fees to compensate for lost miner revenue. The study emphasizes
the significance of endogenous factors, such as waiting times and mining costs, in shaping the fee structure
and provides insights into the complex interplay between miner behavior and the economics of the Bitcoin
network.
The final chapter explores the relationship between Tether and Bitcoin, analyzing Tether’s price volatility
and the impact of arbitrage on stability. The study identifies triangular arbitrage as a crucial mechanism
maintaining Tether’s price peg. It reveals that demand shocks in Tether markets can drive up Bitcoin
prices in the short term and, unexpectedly, shows that the circulating supply of Tether responds more to
Bitcoin market price differentials than to conditions in its own market. Together, these chapters provide a
comprehensive view of the economic mechanisms governing cryptocurrency ecosystems, offering new insights
into market structure, miner behavior, and stablecoin dynamics.
Description
Keywords
Stablecoin Pegging Mechanism, Price Volatility, Stablecoins, Bitcoin Mining, Transaction Fees, Double-spending, Entry Costs
Citation
Degree
Doctor of Philosophy (Ph.D.)
Department
Economics
Program
Applied Economics