Economics' Alumnus Zichao Yang Mines the Mysterious World of Bitcoin
Department of Economics doctoral alumnus Zichao Yang (economics M.S. 2017, Ph.D. 2021) is emerging as a leading guide in cryptocurrencies with published research in the Journal of International Financial Markets, Institutions & Money. The paper was co-authored with Associate Professor Kwok “Byron” Ping Tsang.
In basic terms, bitcoin is a digital currency that can be exchanged by anyone anywhere in the world via the Internet. It is not backed by a government credit, but instead by crypto-technology. Transactions are tracked on a blockchain — a seemingly hack-proof computer code recorded by programmers or “miners." Only 21 million bitcoin will ever be created.
Bitcoin’s creators “wanted to make a global currency, a digital currency to replace the current system backed by government credit,” said Yang, who graduated in May. “They wanted to replace it with currency backed up by technology to take back power from governments and give power to the public.”
Yang’s research focuses on the transaction fees that miners receive (in bitcoin, of course) for recording or confirming an exchange in the blockchain. These fees are similar to when a store pays a fixed percentage of a sale to VISA or MasterCard.
However, "in bitcoin, it's different," Yang said. The purchaser pays the transaction fee depending on “how many miners are on the network at that moment and how many transactions need to be processed.” The higher the demand, the higher the fee. Speed can be at a premium given the wild swings in the bitcoin market.
What began as an experiment within a subset of the computer science community has emerged as a major investment opportunity, with more companies increasingly trying to figure out how to accept bitcoin as payment for goods, Yang said. Economists are equally fascinated. “Working on cryptocurrencies is so different from working on other research topics. There is just so much data to play with,” Tsang said.