Definition ∞ This involves the creation of simplified representations of economic systems or phenomena. It uses mathematical equations, statistical methods, and computational tools to simulate the behavior of economic agents and markets. The goal is to analyze relationships, forecast outcomes, and test hypotheses under various conditions.
Context ∞ In the cryptocurrency domain, economic modeling is applied to analyze market dynamics, predict asset price movements, and assess the incentive structures of blockchain protocols. Discussions often focus on the efficacy of different models in capturing the unique characteristics of digital assets and decentralized systems. Key considerations include the assumptions underlying these models and their ability to account for behavioral economics and network effects.
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