The process of determining the price of mining government bonds
Summary
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―A new fiscal finance model that integrates market principles and central bank policies―
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- Introduction
The price of traditional government bonds has been determined through a bidding system based on government credit. However, this mechanism depends on the government’s creditworthiness and interest rate trends, and is a factor that restricts fiscal sustainability.
This white paper proposes “mining government bonds” as a financial financing model for the next generation. This is issued on the basis of technical assets generated through computational resources and security programs, and the price is determined by the market mechanism and the central bank’s policy buyback. In this paper, the price determination process will be systematically explained.
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- Three-stage pricing process
The price of mining government bonds is determined by the following three stages.
2.1 Phase 1: Primary sales in the market
• Selling government-generated mining government bonds to investors
• Initial prices are formed by supply and demand relations in a perfectly competitive market
• Investor evaluation criteria: technical value, long-term growth potential, international credibility
2.2 Phase 2: Confirmation of market prices
• By buying and selling in the secondary market, the “true market price” of mining government bonds is established
• Arbitrary price manipulation by the government is impossible
• The soundness of the technical foundation and investor demand are directly reflected in the price
2.3 Stage 3: Buyback by the Bank of Japan
• Bank of Japan buys back mining government bonds from the market at market prices
• Adjust until the buyback amount reaches the procurement target of the government budget
• Realize funding and financial stability at the same time
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- Mathematical model
3.1 Basic formula
Finance amount F = Σ (Pi × Qi)
• Pi = Price in the market (the price of the inth government bond)
• Qi = Purchase amount of the Bank of Japan
• F = Targeted financial financing amount
3.2 Automatic adjustment mechanism
• Soaring market prices → Reducing purchases
• Market price decreases → Increase purchase volume
• Automatic stabilization to F → target amount by convergence algorithm (e.g. proportional control method)
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- Mechanism of price stabilization
4.1 Short-term stabilization
• Adoption of the moving average price
• Automatic exclusion of abnormal values
• Suppression of rapid price fluctuations due to gradual trading
4.2 Long-term stabilization
• Reflecting the increase in basic value associated with technological progress
• Relative evaluation based on international comparison
• Decrease in volatility according to market maturity
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- Expected market participants and evaluation axis
5.1 Primary market participants
• Institutional investors (pension funds, insurance companies)
• Crypto Asset Fund
• International hedge fund
• Individual investors (phased entry)
5.2 Criteria for value evaluation
• Innovation in security technology
• Reliability and efficiency of computing resources
• The possibility of sustainable development of technology
• International recognition and trust
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- Comparison with conventional government bonds
An item Traditional government bonds Mining government bonds
Price basis Government credit Technical assets + market evaluation
Price determination method Bidding system Market trading + central bank buyback
Value fluctuation factors Interest rate and credit risk Technological progress and market supply and demand
Transparency Limited Disclosure of all transaction history
Internationality Currency dependence International evaluation based on technical standards
Procurement cost Interest payment cost incurred No need to pay interest (market evaluation only)
Sustainability Concerns about cumulative debt expansion A sustainable model linked to technological development
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- Conclusion
The pricing process of mining government bonds realizes a new fiscal finance model that combines transparency, flexibility, and sustainability by integrating fair price discovery based on market principles and policy buybacks by central banks.
The transition from the previous “credit-dependent government bonds” to “technology asset-linked government bonds” opens up a new paradigm in fiscal management.