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Impacts of Economic Policies on Wealth Distribution in Token Economies

Rem Sadykhov, Geoff Goodell, Philip Treleaven

TL;DR

This study investigates how exogenous and endogenous policies shape wealth distribution in a token economy, using Bitcoin and BIPs as a case study. It deploys a two-stage approach: first removing exogenous noise via stationary transformations and multivariate regression to obtain a cleaned wealth-distribution signal, then testing Granger-causality between BIP signals and the cleaned distribution. The results show exogenous factors like the Federal Funds Rate and M2 (US) influence wealth buckets, and that endogenous BIPs do Granger-cause shifts in wealth distribution with distinct effects on wealthy versus poorer addresses and a best-supported 6-month impact window. The work also proposes a taxonomy of token-economy policies aligned with standard economic policy concepts, highlighting both alignments and divergences, and outlining directions for extending the framework to other token ecosystems and deeper causal analyses.

Abstract

In this paper, we analyse the impacts of exogenous and endogenous factors on wealth distribution in the Bitcoin token economy, where wealth distribution refers to the distribution of BTC between economic participants or groups of economic participants. The objective of the paper is to analyse the impact of economic policies on wealth distribution in the Bitcoin ecosystem. Different macroeconomic and microeconomic time series are used to eliminate noise in the wealth distribution time series, and the causality analysis is performed between Bitcoin Improvement Proposals (i.e., BIPs) and the cleaned wealth distribution data to reveal possible patterns in the impacts that the endogenous policies have on wealth distribution in token economies. Lastly, a structure for economic policy taxonomy in token economies is proposed where different the policy implementations are illustrated by existing BIPs. This approach highlights the actions available to the policy makers, as well as providing a technique for analysis of policy impacts in token economies and their categorization.

Impacts of Economic Policies on Wealth Distribution in Token Economies

TL;DR

This study investigates how exogenous and endogenous policies shape wealth distribution in a token economy, using Bitcoin and BIPs as a case study. It deploys a two-stage approach: first removing exogenous noise via stationary transformations and multivariate regression to obtain a cleaned wealth-distribution signal, then testing Granger-causality between BIP signals and the cleaned distribution. The results show exogenous factors like the Federal Funds Rate and M2 (US) influence wealth buckets, and that endogenous BIPs do Granger-cause shifts in wealth distribution with distinct effects on wealthy versus poorer addresses and a best-supported 6-month impact window. The work also proposes a taxonomy of token-economy policies aligned with standard economic policy concepts, highlighting both alignments and divergences, and outlining directions for extending the framework to other token ecosystems and deeper causal analyses.

Abstract

In this paper, we analyse the impacts of exogenous and endogenous factors on wealth distribution in the Bitcoin token economy, where wealth distribution refers to the distribution of BTC between economic participants or groups of economic participants. The objective of the paper is to analyse the impact of economic policies on wealth distribution in the Bitcoin ecosystem. Different macroeconomic and microeconomic time series are used to eliminate noise in the wealth distribution time series, and the causality analysis is performed between Bitcoin Improvement Proposals (i.e., BIPs) and the cleaned wealth distribution data to reveal possible patterns in the impacts that the endogenous policies have on wealth distribution in token economies. Lastly, a structure for economic policy taxonomy in token economies is proposed where different the policy implementations are illustrated by existing BIPs. This approach highlights the actions available to the policy makers, as well as providing a technique for analysis of policy impacts in token economies and their categorization.
Paper Structure (32 sections, 5 equations, 5 figures, 1 table)

This paper contains 32 sections, 5 equations, 5 figures, 1 table.

Table of Contents

  1. Introduction
  2. Scope
  3. Exogenous Policies Data
  4. Macroeconomic Data
  5. Microeconomic Data
  6. Impact of Exogenous Factors on Wealth Distribution
  7. Data Pre-Processing
  8. Linear Regression Analysis of Wealth Distribution
  9. Cleaning of Wealth Distribution Data
  10. Summary
  11. Impact of Endogenous Policies on Wealth Distribution
  12. Filtering of BIPs Data
  13. All BIPs
  14. All Economy-Related BIPs
  15. Major Economy-Related BIPs
  16. ...and 17 more sections

Figures (5)

  • Figure 1: Log change in wealth distribution of bucket From 0 to 0.001
  • Figure 3: Log change in wealth distribution of bucket From 0.01 to 0.1
  • Figure 5: Log change in wealth distribution of bucket From 1 to 10
  • Figure 7: Log change in wealth distribution of bucket From 100 to 1000
  • Figure 9: Log change in wealth distribution of bucket From 10000 to 100000

Theorems & Definitions (2)

  • Definition 1
  • Definition 2