On the Nature of Bitcoin as a Social Network

Bitcoin is a currency and a decentralized semi-anonymous peer-to-peer payment system in which the transactions are verified by network nodes and recorded in a public massively-replicated ledger called the blockchain. Bitcoin represents a paradox of opposing forces. On one hand, it is fundamentally social, allowing people to transact in a peer-to-peer manner to create and exchange value. On the other hand, Bitcoin's core design philosophy and user base contain strong anti-social elements and constraints, emphasizing anonymity, privacy and subversion of traditional centralized financial systems. We believe that the success of Bitcoin, and the financial ecosystem built around it, will likely rely on achieving an optimal balance between these social and anti-social forces. To elucidate the role of these forces, we analyze the evolution of the entire Bitcoin transaction graph from its inception, and quantify the evolution of its key structural properties. We observe that despite its different nature, the Bitcoin transaction graph exhibits many universal dynamics typical of social networks. However, we also find that Bitcoin deviates in important ways due to anonymity-seeking behavioral patterns of its users. As a result, the network exhibits a two-orders-of-magnitude larger diameter, sparse tree-like communities, and an overwhelming majority of transitional or intermediate accounts with incoming and outgoing edges but zero cumulative balances. These results illuminate the evolutionary dynamics of the most popular cryptocurrency, and provide us with initial understanding of social networks rooted in and driven by anti-social constraints. (This work is currently under review for a journal publication.)

Masdar Institute of Science and Technology is a graduate level, research-oriented university which is focused on alternative energy, sustainability, and the environment. It is located in Masdar City in Abu Dhabi, United Arab Emirates. Masdar Institute offers nine accredited MSc programs and a PhD program in Interdisciplinary Engineering based on the US graduate education model, developed in collaboration with MIT.

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