Useful link to a non-technical summary of the paper:
https://imperialcollegelondon.app.box.com/s/u1qark0r6cvdvzj4vp5s3xyfo9tkpjt8Interesting comment relevant to ASICs in Monero:
[Emiliano Pagnotta] To add to AB’s comment, let me elaborate on your conjecture. If a particular entrepreneur created a superior ASIC machine, the effect on the bitcoin valuation could be ambiguous.
... (read more at link above)
Thanks smooth, I like the fact they put out a layman's copy.
That paper got way out my league to comprehend pretty fast and what I did digest didn't seem to come to any conclusion that is not already obvious.
So what point is it trying to make that we don't already know?
There are some interesting perhaps non-intuitive conclusions. They mention some of them in the non-technical summary or AMA:
1. An increase in the cost of mining implies a reduction in the coin value. Some have claimed that mining cost or energy cost backs the value of a coin given its cost of creation (or similarly, the claim that botnets reduce the coin value since their cost of mining is lower), but this appears not only wrong, but backwards.
2. ASICs increase hash rate security (and therefore coin value) but may reduce it due to reduced miner decentralization, so the effect is ambiguous (and depends on the relevant, and generally unknown, constant factors). Of course, the Monero community is aware of the second consideration, given the recent decision to fork out ASICs, but the ambiguity may be under appreciated. Personally I find it quite troubling and would prefer a way to win on both sides rather than grapple with a potentially intractable tradeoff.
3. There are multiple equilibria in any coin, one being the coin price at zero (so no mining rewards, no security, no value., etc.) This may be obvious but we don't see it much. However, it appears to reinforce the notion that a coin can completely fail.
4. Non-linearity can produce price and hash rate spirals. If someone spikes the price (say Roger Ver buying into Monero in 2016) and the hash rate follows, this can improve perceived security and perceived value to the point where the new value is self-sustaining. Perhaps this can occur by hash rate increases as well (even potentially due to ASICs or botnets joining the network). I guess this can happen in the other direction too (possibly leading to complete failure, i.e. #3?)
5. There is an optimal inflation rate that is not zero. Some amount of inflation subsidizes mining which increases the hash rate and then coin value so it is therefore self-supporting. This has been alternately stated many times in the past as avoiding the free rider problem where holders who do not transaction still benefit from mining security. It is actually quite obvious to most people who understand economics but remains highly controversial among Bitcoiners.
Reminder: As with most if not all of economics, this is only an idealized model, and doesn't necessarily accurately represent reality. Lessons may be learned from it, and they may be valuable, but they risk being wrong if the model is wrong.