Modeling and Simulation of the Economics of Mining in the Bitcoin Market

PLoS One. 2016 Oct 21;11(10):e0164603. doi: 10.1371/journal.pone.0164603. eCollection 2016.

Abstract

In January 3, 2009, Satoshi Nakamoto gave rise to the "Bitcoin Blockchain", creating the first block of the chain hashing on his computer's central processing unit (CPU). Since then, the hash calculations to mine Bitcoin have been getting more and more complex, and consequently the mining hardware evolved to adapt to this increasing difficulty. Three generations of mining hardware have followed the CPU's generation. They are GPU's, FPGA's and ASIC's generations. This work presents an agent-based artificial market model of the Bitcoin mining process and of the Bitcoin transactions. The goal of this work is to model the economy of the mining process, starting from GPU's generation, the first with economic significance. The model reproduces some "stylized facts" found in real-time price series and some core aspects of the mining business. In particular, the computational experiments performed can reproduce the unit root property, the fat tail phenomenon and the volatility clustering of Bitcoin price series. In addition, under proper assumptions, they can reproduce the generation of Bitcoins, the hashing capability, the power consumption, and the mining hardware and electrical energy expenditures of the Bitcoin network.

MeSH terms

  • Computers
  • Data Mining*
  • Models, Economic*

Grant support

This work is supported by Regione Autonoma della Sardegna (RAS), Regional Law No. 7-2007, project CRP-17938 LEAN 2.0. The funding source has no involvement in any of the phases of the research.