Paper 2020/344

Anchoring the Value of Cryptocurrency

Yibin Xu, Yangyu Huang, and Jianhua Shao

Abstract

A decade long thrive of cryptocurrency has shown its potential as a source of alternative-finance and the security and the robustness of the underpinning blockchain technology. However, most cryptocurrencies fail to show inimitability and their meanings in the real world. As a result, they usually start off as favourites but quickly become the outcasts of the digital asset market. The blockchain society attempts to anchor the value of cryptocurrency with real values by employing smart contracts and link it with computation resources and the digital-productivity that have value and demands in the real world. But their attempts have some undesirable effects due to a limited number of practical applications. This limitation is caused by the dilemma between high performance and decentralisation (universal joinability). The emerging of blockchain sharding models, however, has offered a possible solution to address this dilemma. In this paper, we explore a financial model for blockchain sharding that will build an active link between the value of cryptocurrency and computation resources as well as the market and labour behaviours. Our model can adjust the price of resources and the compensation for maintaining a system based on those behaviours. We anchor the value of cryptocurrency by the amount of computation resources participated in and give the cryptocurrency a meaning as the exchange between computation resources globally. Finally, we present a working example which, through financial regularities, regulates the behaviour of anonymous participants, also incents/discourages participation dynamically.