Dynamics of mining markets: Equilibrium implications for professional and casual miners

Authors

• Luca Pezzo, University of New Orleans
• Lei Wang, University of New Orleans
• Seungho Shin, Francis J. Noonan School of Business
• Duygu Zirek, Montclair State UniversityFollow

Document Type

Preprint

Publication Date

8-1-2023

Journal / Book Title

Global Finance Journal

Abstract

We design a simple equilibrium model to analyze the dynamics of the mining market in the presence of professional and casual miners. The model endogenously recovers two major unobservable drivers: the supply of computing power, and the dynamics of the fixed costs of mining. We calibrate the model to the market of Bitcoin and Ethereum and find that positive shocks to the supply of computing power (technological enhancements) translate into positive price shocks, and the benefits of these hikes are creamed off by professional miners. We also find that fixed costs are inversely related to technological enhancements, decrease at an exponential rate (which is twice as big for Bitcoin), and are the smallest during periods when professional miners have a monopoly.

DOI

10.1016/j.gfj.2023.100866

MSU Digital Commons Citation

Pezzo, Luca; Wang, Lei; Shin, Seungho; and Zirek, Duygu, "Dynamics of mining markets: Equilibrium implications for professional and casual miners" (2023). Department of Accounting and Finance Faculty Scholarship and Creative Works. 158.
https://digitalcommons.montclair.edu/acctg-finance-facpubs/158

Published Citation

Pezzo, L., Wang, L., Shin, S., & Zirek, D. (2023). Dynamics of mining markets: Equilibrium implications for professional and casual miners. Global finance journal, 57, 100866.