Blockchain mechanism and distributional characteristics of cryptos
This research provides crypto creators and users with a better understanding of how blockchain protocol design influences the distributional characteristics of cryptocurrencies, which is an incremental step in understanding crypto market dynamics.
This paper investigates the relationship between the underlying blockchain mechanism of cryptocurrencies and their distributional characteristics, using price, block size, and block time as operational features. By applying characteristic-based spectral clustering to various distributional measures, the authors grouped cryptocurrencies into five clusters, finding that cryptos within each cluster share similar mechanisms like fork origin, difficulty adjustment frequency, and block size nature.
We investigate the relationship between underlying blockchain mechanism of cryptocurrencies and its distributional characteristics. In addition to price, we emphasise on using actual block size and block time as the operational features of cryptos. We use distributional characteristics such as fourier power spectrum, moments, quantiles, global we optimums, as well as the measures for long term dependencies, risk and noise to summarise the information from crypto time series. With the hypothesis that the blockchain structure explains the distributional characteristics of cryptos, we use characteristic based spectral clustering to cluster the selected cryptos into five groups. We scrutinise these clusters and find that indeed, the clusters of cryptos share similar mechanism such as origin of fork, difficulty adjustment frequency, and the nature of block size. This paper provides crypto creators and users with a better understanding toward the connection between the blockchain protocol design and distributional characteristics of cryptos.