What is the Market? The Essential Teachings from an AI Market Experiment

Abstract

So far traditional economics chose to argue “market in general”, as symbolized by general equilibrium theory, which was originally established in 1870’s. In reality, unfortunately, there is no longer a held “generality” by any means, as Leon Walras firstly expected. To depict the modern market, it may be not only inappropriate but also boldly far-reaching for us to discuss the market in general. Fortunately, we recently acquired two major technological advancements. One is AI in general, the other is Bitcoin or cryptocurrency in particular. The latter is a byproduct in association with blockchain technology. But the impact of Bitcoin is enormous in theory and in practice. This has the potential power to innovate the economic system, quite possibly, the social system. This article focuses on the settlement mechanism of the Bitcoin Exchange to discuss its uniqueness and commonality as compared with the stock exchange. We then introduce our new idea of digit length frequency distribution when we are interested in fully random iterated cellular automata (FRICA). Finally, we apply the length distribution to the price time series generated by the U-Mart acceleration experiment tool and examine the neutralizing effects by the change of the market transaction strategy composition, which may suggest some possible criteria whether the market may be rigged or not.