Cryptocurrency Market Efficiency: Does Distributed Ledger Technology Matter?

Abstract

In recent years, due to its use in transactions with encrypted assets, distributed ledger technology has attracted the attention of the financial sector on the one hand. On the other hand, the expansion of the projects has the potential to increase the efficiency, transparency, speed, and flexibility of financial transactions underlying infrastructure processes. The present article aims to calculate the efficiency of various modes of this technology. Calculating and examining the efficiency of financial markets are remarkably effective in choosing the investors' strategy. There are several methods to calculate efficiency. In the present study, the method of analyzing Multi Fractal Detrended Fluctuation Analysis (MFDFA) has been implemented to calculate such an efficiency. Hence, different forms of distributed ledger technology have been investigated including: “Blockchain" and “Directed Acyclic Graph (DAG)". The DAG technology itself is classified into two modes: 1. Tangle and 2. Hashgraph. To calculate Blockchain efficiency, the hourly data from September 2019 to November 2022 were utilized for Bitcoin (BTC) and Ethereum (ETH) cryptocurrencies. For Tangle technology, Iota cryptocurrencies were used, and for Hashgraph technology, Fantom (FTM) and Hederahashgraph (HBAR) cryptocurrencies were implemented. The results reveal that the distributed ledger technology of cryptocurrencies influences their efficiency. Hashgraph technology (the cutting-edge type of distributed ledger) proves the highest efficiency compared to other technologies.