Image for post
Image for post

(Originally published on 20.02.2020 on Expla Platform of the National Bank of Ukraine)

What is money? A simple question with many complicated answers. The functional answer is probably the better-known one: «Money is what money does». According to this dictum, something qualifies as money when it fulfills (mainly) three functions: a medium of exchange, a unit of accounting and a store of value. Yet it is apparent that a simple 0/1 test of this dictum will lead us into a maze of conceptual and practical difficulties.

Medium of exchange for all transactions? For some transactions, one may want to use cash (central bank money) but not pay via a bank account (commercial bank money). That may be due to ease and availability — a small payment of a long-forgotten debt while hiking with a friend in a remote area, or it may be due to the need for anonymity — taking a pregnancy test under social constraints. Do these circumstances imply that cash satisfies needs but deposits do not? In a world with no transaction possibility except for commercial deposits, would barter emerge naturally? …

Machine-Learning (ML) holds great promise for real estate valuation. But relevant, high quality and timely real estate data remain an expensive input. Without the data deluge already available for other assets, a balanced mix of modeling and data remains the most likely avenue for property valuation in the next years. This article scratches the surface on this issue.

Real estate prices are observed when properties change hands. The high costs and large average volume of a typical transaction (as compared to equity markets for example), lead to infrequent observations for the same asset. …

Image for post
Image for post

Crying wolf without learning its eating and sleeping habits won’t help protect the sheep. The all-to-frequent regulatory reaction to blockchain initiatives and cryptocurrencies is to cry wolf and occasionally even shoot at them with fines or lawsuits. It is understandable given that more than a few lambs have been slaughtered on the altar of financial innovation and democratization. When it was unfortunately only personal gain being promoted at the expense of believers in revolutionary but eventually hollow promises. The already demonstrated potential should though not be ignored, let alone suffocated.

What better way to understand the threats and opportunities of a new technology than to experiment with it in a safe environment? This was the reason that motivated the Bank Of Lithuania to organize a hackathon for the launch of a digital collector coin. The mission: create a prototype for the first blockchain-powered digital collector coin along with its selling platform.

edited talk delivered at REIDA 2018

Image for post
Image for post

I have 10 minutes, which is about enough to tell you a story that’s been going on for 10 years. This story begins in 2008 when a group of institutional investors was looking for a reliable data source needed to understand the riskiness of Swiss residential property investment over the long-run. At that time, none of the published indices for Switzerland were stretching back for more than 35 years.

It is with this occasion that REIDA was founded — and through the dedicated work of Andreas Loepfe, Daniel Sager and many more, produced within one year a pool of data including historical transaction value (the earliest around 1920) and valuations along with some other variables of interest. …

Image for post
Image for post

or how ignoring the lessons of behavioral economics will invalidate many Vickrey–Clarke–Groves predictions


Biases and social norms can prevent even carefully mechanism-designed blockchains from growing. To understand why, a brief detour of game theory, behavioral economics and mechanism design is needed.

Take a deep breath… Mechanism design is about finding the optimal set of rules and parameters needed to nudge a set of potentially-competing, at times non-truthful rational agents to reveal their information and act towards reaching the common goal of the system — phew, that’s a mouthful!

The typical example that clarifies what this convoluted definition means, is an ancient problem tackled by a very clever mom. A cake needs to be split among two kids. The kids’ mother is aware of the world-ending possibility that one of them might perceive the piece of the sibling as being larger after she cut the cake. Numerous episodes of sharing things taught mom that whatever choice she makes over the size allocation, the kids might still erupt in an endless quarrel. This is because neither her, nor the kids know beforehand how each will react to the actual split. …

Mihnea Constantinescu

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store