PerfectForesightEBC.lyx

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\pdf_title "Economics of Bitcoin and Cryptocurrenies"
\pdf_author "Bastiaan Quast"
\pdf_keywords "bitcoin, cryptocurrencies, economics"
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\begin_layout Chapter
Perfect Foresight
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\begin_layout Standard
In many economic models, agents expectations are modeled as being either,
 adaptive with respect to the past, perfectly rational, or in some extreme
 cases, having perfect foresight.
 The situation where agents exhibit perfect foresight is not intended as
 realistic economic modelling, as much as it is used a benchmark for economicall
y optimal outcomes.
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\begin_layout Standard
Bitcoin and most other cryptocurrencies have the interesting feature that
 the path of monetary expansion is almost perfectly predictable.
 The rate at which new bitcoins are mined is to a very large degree predetermine
d.
 Although the price of Bitcoin, and the associated computing power in the
 network cannot be prediced, the process automatically adjusts the difficulty
 of verification process every few minutes, leading to an extremely stable
 and predictable monetary growth path.
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