Decentralization of Cryptocurrency and Its Theoretical Significance for Economic Efficiency

DOI: https://doi.org/10.62517/jse.202411314

Author(s)

Hou Zeyu

Affiliation(s)

School of Economics and Management, Yan’an University, Yan’an, Shaanxi, China

Abstract

This paper aims to explore the theoretical significance of the decentralization of cryptocurrency for economic efficiency. The core of the research is to analyze how the decentralization of cryptocurrency affects economic efficiency, especially in terms of changes in transaction costs, resource allocation, and market competition. This paper employs a literature review and theoretical analysis to systematically organize the existing main research findings on cryptocurrencies and their economic effects. During the research process, the basic characteristics and decentralization mechanisms of cryptocurrency were first elaborated in detail, with a focus on the differences from the traditional centralized monetary system. Through theoretical models, this paper discusses how cryptocurrency can enhance economic efficiency by reducing transaction costs, increasing transaction transparency, and reducing intermediary fees. The paper analyzes the potential impact of cryptocurrency on resource allocation, particularly how its decentralization characteristics can drive more effective utilization and distribution of resources. Furthermore, the paper explores the competitive nature of the cryptocurrency market, analyzing the competitive pressure and potential impact on traditional financial markets and institutions. The paper concludes that the decentralization of cryptocurrency has significant theoretical implications for economic efficiency in various aspects, including reducing transaction costs, optimizing resource allocation, and promoting market competition. However, these effects also come with certain risks and challenges, such as market volatility and regulatory complexity. The research in this paper provides a theoretical foundation for understanding the impact of cryptocurrency on economic efficiency and offers references for policymakers in formulating related policies.

Keywords

Cryptocurrency; Economic Efficiency; Decentralization; Transaction Costs; Market Competition

References

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