Applying system dynamics to model the world of cryptocurrency

Abstract

The world of cryptocurrency has been seriously criticized, encouraged, and disallowed. Regardless, its value and popularity has lately grown at the high rate. Among reasons for this are buzz and hype created by the mass media; easy access to cryptocurrency mining and exchange; and visible participation of retail and institutional investors. A lot of tech-enabled individuals grabbed the opportunity to access this rising market and gain some extra profit at low risk by cryptocurrency mining. Namely, cryptocurrency mining implies adding transaction records to cryptocurrency's public ledger of past transactions. This paper presents a model of cryptocurrency space and factors influencing its popularity and value. The model includes a wide range of variables and connections among them. Based on that, the system dynamics approach is identified as most appropriate for better understanding the phenomenon.