This is a respository linked to the paper "Cryptocurrencies and the velocity of money" by Ingolf G.A. Pernice, Georg Gentzen and Hermann Elendner to be presented at the CES'20.

We are happy if you use and/or fork our code! However - we put many hours of work (and free time) into the project and would be greatful if you would reference us in your publication. You can use the following bib-entry:

@article{pernice2019cryptocurrencies, title={Cryptocurrencies and the Velocity of Money}, author={Pernice, Ingolf Gunnar Anton and Gentzen, Georg and Elendner, Hermann}, journal={Available at SSRN 3499500}, year={2019} }

or, for example, APA-style citations as:

Pernice, I. G. A., Gentzen, G., & Elendner, H. (2019). Cryptocurrencies and the Velocity of Money. Available at SSRN 3499500.

Algortihms and code presented in this repo are the basis of an academic paper to be published in the Cryptoeconomic Systems Journal. You find our latex files, tables and figures and the corresponding code in this repository as well.

Velocity of money is central to the quantity theory of money, which relates it to the general price level. While the theory motivated countless empirical studies to include velocity as price determinant, few find a significant relationship in the short or medium run. Since the velocity of money is generally unobservable, these studies were limited to use proxy variables, leaving it unclear whether the lacking relationship refutes the theory or the proxies. Cryptocurrencies on public blockchains, however, visibly record all transactions, and thus allow to measure - rather than approximate - velocity. This paper evaluates most suggested proxies for velocity and also proposes a novel measurement approach. We introduce velocity measures for UTXO-based cryptocurrencies focused on the subset of the money supply effectively in use for the processing of transactions. Our approach thus explicitly addresses the hybrid use of cryptocurrencies as media of exchange and as stores of value, a major distinction in recently proposed theoretical pricing models. We show that each of the velocity estimators is approximated best by the simple ratio of on-chain transaction volume to total coin supply. Moreover, "coin days destroyed", if used as an approximation for velocity, shows considerable discrepancy from the other approaches.

The paper "Cryptocurrencies and the velocity of money" will be published in the first edition of the Cryptoeconomic Systems Journal by MIT Press. You can download it here.

The paper was presented at the Cryptoeconomic Systems Conference 2020 in Boston. We tried to introduce the audience to the main ideas and basic concepts in an entertaining fashion. Thanks to the CES Team, a video recording is available at YouTube.

To be done. =)