Economic Simulation of Cryptocurrencies and Their Control Mechanisms


  • Michael R. Mainelli Z/Yen Group
  • Matthew Leitch The Ridgeway Expertise Company Ltd
  • Dionysios Demetis University of Hull



Cryptocurrency, Economic simulation, Blockchain, Control


A cryptocurrency needs a relatively stable value if it is to fulfill the traditional functions of money and be useful as a currency. To achieve this, controls are needed within the ecosystem of the cryptocurrency. Although a simulation cannot predict future currency rates or other variables exactly, it is argued that a model that simulates a range of challenging behavior can be a useful testbed for control schemes. To illustrate and explore this idea, an agent-based economic model was used to simulate the early period of a hypothetical cryptocurrency and test two control mechanisms. The results suggest that this approach may be fruitful and that it may be important to include more than just coin minting within the control scheme. An economic simulation model is likely to be a valuable tool in developing and regulating effective cryptocurrency systems.

Author Biographies

Michael R. Mainelli, Z/Yen Group


Matthew Leitch, The Ridgeway Expertise Company Ltd


Dionysios Demetis, University of Hull

Lecturer in Management Systems


Baek, C., Elbeck, M. “Bitcoins as an Investment or Speculative Vehicle? A First Look.” Applied Economics Letters 22.1 30-34 (2014)

Bolt, W., van Oordt, M. R. “On the Value of Virtual Currencies.” Bank of Canada. Staff Working Paper (2016)

Bouoiyour, J., Selmi, R., Tiwari, A. “Is Bitcoin Business Income or Speculative Bubble? Unconditional vs. Conditional Frequency Domain Analysis.” MPRA (2014)

Chatagny, R., Chopard, B. "A Parallel Model for the Foreign Exchange Market," Parallel Computing 26.5 587-600 (2000).

Cheah, E., Fry, J. “Speculative Bubbles in Bitcoin Markets? An Empirical Investigation into the Fundamental Value of Bitcoin.” Economics Letters 130 32-36 (2015)

Cheung, A., Roca, E., Su, J. “Crypto-Currency Bubbles: An Application of the Phillips–Shi–Yu (2013) Methodology on Mt. Gox Bitcoin Prices.” Applied Economics 47.23 2348-2358 (2015)

Ciaian, P., Rajcaniova, M., Kancs, d’A. “The Economics of BitCoin Price Formation,” Applied Economics 48.19 1799-1815 (2016)

Cocco, L., Concas, G., Marchesi, M. “Using an Artificial Financial Market for Studying a Cryptocurrency Market.” Journal of Economic Interaction and Coordination 12.2 345-365 (2017)

De Grauwe, P., Vansenten, K. “Deterministic Chaos in the Foreign Exchange Market,” Center for Economic Policy Research Discussion Paper 370 (1990)

Delage, V., Brandlhuber, C., Tuyls, K., Weiss, G. “Multi-Agent Based Simulation of FOREX Exchange Market,” in P. De Causmaecker, J. Maervoet, T. Messelis, K. Verbeeck, T. Vermeulen (Eds.), Proceedings of the 23rd Benelux Conference on Artificial Intelligence (BNAIC) (2011)

ElBahrawy, A., Alessandretti, L., Kandler, A., Pastor-Satorras, R., Baronchelli, A. “Evolutionary Dynamics of the Cryptocurrency Market.” Royal Society Open Science 4.11 170623 (2017)

Harris, I., Mainelli, M. R. The Price of Fish. London: Nicholas Brealey Publishing 156-182 (2011).

Higuchi, T. “Approach to an Irregular Time Series on the Basis of the Fractal Theory.” Physica D: Nonlinear Phenomena 31.2 277-283 (1988).

Hileman, D. G., Rauchs, M. “2017 Global Cryptocurrency Benchmarking Study.” Cambridge Centre for Alternative Finance, University of Cambridge Judge Business School (2017)

Izumi, K. “An Artificial Market Model of a Foreign Exchange Market,” CiteseerX (accessed 11 May 2019)

Jevons, W. S. Money and the Mechanism of Exchange. New York: D. Appleton and Co. (1875). Text is available online at:

Kelly, J. L., "A New Interpretation of Information Rate." Bell System Technical Journal 35.4 917-926 (1956).

Luther, W.J., White, L.H. (2014) “Can Bitcoin Become a Major Currency?” GMU Working Paper in Economics 14-17 (5 June 2014).

Matta, M., Lunesu, I., Marchesi, M. “Bitcoin Spread Prediction Using Social and Web Search Media,” UMAP Workshops (2015)

Setzu, A. “A Framework for Financial Markets Modeling and Simulation,” Exchange Organizational Behavior Teaching Journal (2007)

Usami, A., Tsuya, R., Iba, T., Takayasu, H. “Building a Simulation Model of Foreign Exchange Market: Reproduction of Yen Dollar Market.” 9th Joint International Conference on Information Sciences (JCIS-06) (2006)

Additional Files



How to Cite

Mainelli, M. R., Leitch, M., & Demetis, D. (2019). Economic Simulation of Cryptocurrencies and Their Control Mechanisms. Ledger, 4.



Research Articles