The Evolution of the Bitcoin Economy: Extracting and Analyzing the Network of Payment Relationships

46 Pages Posted: 13 Jul 2016 Last revised: 29 Aug 2016

Paolo Tasca

UCL Centre for Blockchain Technologies

Shaowen Liu

Deutsche Bundesbank

Adam Hayes

University of Wisconsin - Madison - Department of Sociology; The New School - Department of Economics

Date Written: July 1, 2016

Abstract

In this paper, we gather together the minimum units of Bitcoin identity (the individual addresses), and group them into approximations of business entities, what we call “super clusters”. While these clusters can remain largely anonymous, we are able to ascribe many of them to particular business categories by analyzing some of their specific transaction patterns, as observed during the period from 2009-2015. We are then able to extract and create a map of the network of payment relationships among them, and analyze transaction behavior found in each business category. We conclude by identifying three marked regimes that have evolved as the Bitcoin economy has grown and matured: from an early prototype stage; to a second growth stage populated in large part with “sin” enterprise (i.e., gambling, black markets); to a third stage marked by a sharp progression away from “sin” and toward legitimate enterprises.

Keywords: Blockchain, Bitcoin, Digital Currencies, Business Analysis, Network Theory

JEL Classification: E42, L14, O12, O35, P40

Suggested Citation

Tasca, Paolo and Liu, Shaowen and Hayes, Adam, The Evolution of the Bitcoin Economy: Extracting and Analyzing the Network of Payment Relationships (July 1, 2016). Available at SSRN: https://ssrn.com/abstract=2808762 or http://dx.doi.org/10.2139/ssrn.2808762

Paolo Tasca (Contact Author)

UCL Centre for Blockchain Technologies ( email )

Gower Street
London, WC1E 6BT
United Kingdom

HOME PAGE: http://paolotasca.com

Shaowen Liu

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
D-60431 Frankfurt/Main
Germany

Adam Hayes

University of Wisconsin - Madison - Department of Sociology ( email )

8128 William H. Sewell Social Sciences Building
1180 Observatory Drive
Madison, WI 53706
United States

The New School - Department of Economics ( email )

Room 1116
6 East 16th Street
New York, NY 10003
United States

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