This is an interesting theoretical implication of cryptocurrencies' decrentralised mining process. The welfare of monopoly vs. competitive markets are the oppos

This is an interesting theoretical implication of cryptocurrencies' decrentralised mining process. The welfare of monopoly vs. competitive markets are the opposite to traditional micoroeconomics, because a currency's social value does not increase with mining effort. Any central bank can use their monopoly over the creation of currency to increase reserves whilst incurring a cost less than those reserves. For example, suppose the US economy grows by 50% over 30 years, but that the country's payment infrastructure doesn't change otherwise, and so the typical American wishes to have a higher real value of cash in their wallet, to buy more luxurious office lunches, or spend the cash in other circumstances. In a situation where everyone uses a traditional fiat currency, minted by a central bank, the central banks monopoly over the production of these additional currency reserves will allow them to spend significantly less than the value of the currency in making it. Today, a $100 bill costs 12.5 cents to make, plus some additional transport and monitoring costs [1]. However, with the decentralised nature of a crypo-currency, a competitive market dictates that in order for it to be created, miners must spend the entire value of the cryptocurrency in energy costs, otherwise they would be forgoing risk-free profits. Suppose the economy uses cryptocurrency. If the market allows for miners to spend only $90 of energy, hardware and labour to mine $100 of currency, then a less efficient entrant can come in with costs between $90-$100 and make a positive expected profit. This means that even if there are not technical difficulties preventing a crypocurrency from replacing a traditional fiat currency, it's adoption reduces the social surplus generated from the minting of new currency. [1] https://www.marketwatch.com/story/new-100-bill-costs-60-more-to-produce-2013-10-08 https://www.marketwatch.com/story/new-100-bill-costs-60-more...