The Bitcoin StandardResearch

After the publication of The Bitcoin Standard, Dr. Ammous started writing a monthly research bulletin to subscribers in which he applies the analytical framework of the book to studying more complex questions about the economics of bitcoin. These papers are now available for purchase, and they form the basis for the ECO31 online course offered by Dr. Ammous on this website. To stay informed of new publications by Dr. Ammous, sign up to the mailing list at the bottom of this page.

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This paper expands on the concept of layered scaling as discussed in The Bitcoin Standard. The popularity of bitcoin as hard money is likely to far exceed its capacity for on-chain transactions, necessitating the development of second layer solutions. Custody and credit allocation are market services that have proven in demand through many monetary and financial system, and there is no reason to assume they will disappear in a bitcoin economy. The economics of second layers are discussed, with specific focus on the Lightning Network, and the factors shaping its growth and evolution. The risks of layered scaling are discussed. (9,514 words)

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The significance of bitcoin for the developing world lies in it offering a technical non-political solution to the problem of building a global monetary and financial system. Balance of payment problems and the pursuant financial crises and hyperinflations that have become a seemingly permanent fixture of many developing countries' modern history are not unrelated to the use of sovereign national currencies as global reserve assets, and the political incentives fostered by the indulgent sovereign lending of financial institutions that face no real accountability or strict funding constraints. (15,150 words)

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This paper examines bitcoin’s survival chances critically. It begins by examining two of the common ways in which people imagine Bitcoin could be killed, and why they are not very likely: software bugs, government bans, and the failure of fees to generate enough security. I argue that these are unlikely to kill bitcoin because they do nothing to undermine the economic incentives that people have to use bitcoin. To successfully undermine bitcoin one needs to undermine the economic incentive that people have for using it, and two such scenarios are discussed: world governments improving their monetary & financial policies; or a hyperinflationary collapse of national currencies before bitcoin has acquired significant liquidity. (11,406 words)

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How has the move to an easy and centrally-planned money in the twentieth century affected the quality of food? This paper outlines several economic mechanisms through which a monetary standard could impact the economic decisions of food producers and consumers. The central planning of interest rates leads to a higher incentive for extensive industrial agriculture that generates short-term profits but depletes the soil in the long term. Government policies have also promoted the mass production of industrial foods which help fight price rises, but compromise food nutrient content and safety. (10,017 words)

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How does bitcoin mining work, and why does it have to consume so much energy? This paper explains how bitcoin's difficulty adjustment prices out miners with high electricity costs, making mining bitcoin only reliably profitable at very low costs of electricity. Since Bitcoin can purchase electricity from anywhere in the world, this leads to bitcoin incentivizing the development of stranded & off-grid energy sources, likely leading to cheaper & more abundant energy production. (8,786 words)

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If Bitcoin were to indeed become a global money, how would that come to be? This paper argues that bitcoin is unlikely to cause hyperinflationary collapse in credit money, because its continuous growth would likely reduce the creation of credit. This paper considers the possibility that bitcoin's growth would be a more orderly technological upgrade that allows for the demonetization of debt and widescale reduction of indebtedness. The paper then discusses how bitcoin's monetary properties make it likely to behave in various types of financial crises. (15,065 words).

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This paper discusses fractional reserve banking and whether it could emerge in a bitcoin economy. Is fractional reserve banking necessary for a growing economy? Can fractional reserve banking survive in a free market? Drawing on the academic literature on the topic, this paper analyzes fractional reserve banking, whether it could emerge in a bitcoin economy, and what the implications would be. The paper also discusses why central banks are unlikely to adopt bitcoin as a reserve currency. (14,150 words)

USD $100.00

This package includes: All seven papers described on this page. Each bulletin is paper in pdf, epub, and mobi formats. Full access and material for the online course: ECO31: Hard questions on hard money  

USD $180.00

This package includes: All seven papers described on this page. Each bulletin is paper in pdf, epub, and mobi formats. Full access and material for the online course: ECO31: Hard questions on hard money Full access and material for the online course: ECO21: The Bitcoin Standard