Dynamics of Crypto-Prices : Equilibrium Implications for Professional and Casual Miners

We design an equilibrium model for the mining market in the presence of professional and casual miners. We apply our setup to the Bitcoin and Ethereum market and find that the (recent) dynamics of crypto prices are well approximated by those of their mining technological enhancements. Technological enhancements have a negative impact on the activities of casual miners and result in professional miners' monopolies. Fixed mining costs paid by professional miners are inversely related to technological enhancements, decrease at an exponential rate (which is twice as big for Bitcoin), and are the smallest during periods of professional miners' monopolies