Zero-Knowledge Optimal Monetary Policy under Stochastic Dominance

TL;DR

This paper derives optimal monetary policy rules for the first stochastically dominant cryptocurrency using a DSGE model, demonstrating superior performance and implementing zero-knowledge proofs on the blockchain.

Contribution

It introduces a novel DSGE-based framework for optimal monetary policy in crypto markets and provides a zero-knowledge proof implementation for policy commitments.

Findings

Optimal policies outperform previous cryptocurrencies in stochastic dominance.

Long position in the dominant crypto yields higher returns and Omega ratio.

Zero-knowledge proofs enable secure, transparent policy commitments.

Abstract

Optimal simple rules for the monetary policy of the first stochastically dominant crypto-currency are derived in a Dynamic Stochastic General Equilibrium (DSGE) model, in order to provide optimal responses to changes in inflation, output, and other sources of uncertainty. The optimal monetary policy stochastically dominates all the previous crypto-currencies, thus the efficient portfolio is to go long on the stochastically dominant crypto-currency: a strategy-proof arbitrage featuring a higher Omega ratio with higher expected returns, inducing an investment-efficient Nash equilibrium over the crypto-market. Zero-knowledge proofs of the monetary policy are committed on the blockchain: an implementation is provided.