The velocity of money, measuring the average frequency with which money is used to purchase goods and services, is a key metric to understand the functioning of an economy. In this project we investigate new methods to measure velocity from microeconomic transaction data: we show that it is possible to factor the average velocity into individual agents' contributions, defining their MicroVelocity. This innovation allows the analysis of distributional aspects of the velocity of money, which offer insights to regulators and policymakers and could become crucial in the development of digital currency systems.
We are applying our methodology to several cryptocurrencies, which offer ideal working conditions thanks to the complete publicly available transactions data stored in blockchains. Our first work [link], analyzing four UTXO alt-coins, shows that the MicroVelocity is very heterogeneously distributed in these systems, that it correlates strongly with agents' wealths, and that agents with high MicroVelocity tend to act as intermediaries for those with lower MicroVelocity. Our early findings are in line with the growing literature on the emergent centralization of decentralized platforms, with pseudo-banking services having a significant role in these economies.
We are currently expanding our research to other cryptocurrency platforms, Ethereum-based tokens, as well as traditional payment systems like bank transfers and credit cards.
