# A Model of the Optimal Selection of Crypto Assets

## TL;DR

This paper introduces a modeling framework for optimal crypto asset selection based on security and stability, simulating investor choices and emergent investment outcomes in the crypto ecosystem.

## Contribution

It presents a novel simulation model for optimal crypto asset selection considering investor preferences and asset features, providing insights into potential investment outcomes.

## Key findings

- Diverse emergent investment outcomes are possible.
- Investor behavior influences crypto ecosystem development.
- Optimal selection strategies vary with investor attitudes.

## Abstract

We propose a modelling framework for the optimal selection of crypto assets. Crypto assets differ by two essential features: security (technological) and stability (governance). Investors make choices over crypto assets similarly to how they make choices by using a recommender app: the app presents each investor with a pair of crypto assets with certain security-stability characteristics to be compared. Each investor submits its preference for adopting one of the two assets to the app. The app, in turn, provides a recommendation on whether the proposed adoption is sensible given the assets' essential features, information about the adoption choices of all other investors, and expected future economic benefits of adoption. Investors continue making their adoption choices over all pairs of crypto assets until their expected future economic benefits can no longer be improved upon. This constitutes an optimal selection decision. We simulate optimal selection decisions considering the behaviour of different types of investors, driven by their attitudes towards assets' features. We find a variety of possible emergent outcomes for the investments in the crypto-ecosystem and the future adoption of the crypto assets.