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This paper develops a model of user adoption and use of virtual currency (such as Bitcoin), and specifically incorporates the frictions created by Bitcoin. The theoretical model can be used to analyze how market fundamentals determine the exchange rate of fiat currency to virtual currency. Empirical evidence from Bitcoin prices and utilization provides mixed evidence about the ability of the model to explain prices. Further analysis of the history of all individual transactions on Bitcoin's public ledger establishes patterns of adoption and utilization across user types, transaction type, and geography.
Susan Athey is the Economics of Technology Professor at Stanford Graduate School of Business. Born in 1970, she received her bachelor’s degree from Duke University and her PhD from Stanford, and she holds an honorary doctorate from Duke University. She previously taught at the economics departments at MIT, Stanford and Harvard.
Her current research focuses on the economics of the internet, marketplace design, auction theory, the statistical analysis of auction data, and the intersection of econometrics and machine learning. She has focused on several applications, including timber auctions, internet search, online advertising, the news media, and virtual currency. She advises governments and businesses on the design of auction-based marketplaces. She has served as a long-term consultant for Microsoft Corporation since 2007, including a period as chief economist. She also serves as a long-term advisor to the British Columbia Ministry of Forests, helping to architect and implement their auction-based pricing system.