Bitcoin’s Bold Experiment: A Goldmine for Economic Researchers

For academic economists meeting in San Francisco this week, digital currencies offer rich new research opportunities. Photo credit: www.pachd.com

As average block size approaches the 1M limit, the game theory picture changes. The accidental, artificial 1M limit becomes a Visible Hand in the market. Competition occurs not only for block space, but for developer consensus — because in this new economic system, the ability to freeze or move the 1M limit produces a system where humans — not the free market directly — wield oversize power.

In citing Andresen and Garzik, I’m not, per se, signaling support for the two computer scientists’ argument in favor of an immediate block size increase. I merely wish to point out a great piece of analysis on the economic forces at play in bitcoin’s power struggle — and note that it’s the kind of insight that professional economists could and should be making.


MIT Media Lab Digital Currency Initiative

News and ideas from the Digital Currency Initiative. Bringing together global experts in cryptography, economics, privacy, and distributed systems.

Michael Casey

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Aussie in exile. Blockchain nerd @MediaLab. Former @WSJ columnist. Author of 4 books. Latest, The Social Organism, co-authored with @revilopark

MIT Media Lab Digital Currency Initiative

News and ideas from the Digital Currency Initiative. Bringing together global experts in cryptography, economics, privacy, and distributed systems.