Modelling the Effects of a Predictable Money Supply of Bitcoin

Abstract

The paper examines effects of a predefined and immutable money supply using a simulation performed in Minsky. It uses the cryptocurrency Bitcoin as an example and compares its settings and outcomes with Euro as a credit based fiat currency. Minsky is a specialized software for creating SFC economic models. It operates in continuous time. Unlike Euro, Bitcoin is a non-liability currency. It is not being issued against debt and it does not allow a fiduciary issue. The study examines the economy of the EU complexly, focusing on its monetary system, using Eurostat data. Then it changes the rules of the system so that they comply with the rules of Bitcoin’s protocol. The performed simulations show different effects of these monetary settings on wealth distribution among particular groups of economic subjects as well as on the stability of the economy as a whole after some time has passed.