A new papaer, called “The Evolution of the Bitcoin Economy: Extracting and Analyzing the Network of Payment Relationships,” has been published, describing how the Bitcoin protocol is maturing.
UCLIn partnership with Deutsche Bundesbank, the University of Wisconsin, and the UCL Centre for Blockchain Technologies, researchers stated that Bitcoin is maturing towards critical mass and enterprise usage. Data showed that transactions in cryptocurrency have risen “exponentially,” and are expected to continue. This makes Bitcoin an appropriate study, researchers say, that explores how this cryptocurrency will evolve over time.
According to the paper:
“It becomes appropriate to explore how the Bitcoin economy is populated and extract the map of payment relationships, as well as to trace the evolution of those relationships over time. This paper takes that direction by identifying the interconnection between the economic agents that use the Bitcoin payment network to transfer the digital currency among each other.”
The cryptocurrency has advanced in number of sectors like gambling and black markets, detailing how exchanges have matured over time before and after the Mt Gox fiasco. The study also focuses on transaction relationships through clusters allowed the researchers to allocate how Bitcoin was being used by certain businesses.
The study says:
“In particular, we start by clustering the minimum units of Bitcoin identity, which are the individual ‘addresses,’ into what we call ‘super clusters,’ and then we tag those clusters using de-anonymized addresses. A supercluster can be thought of as an approximation of a business entity in that it describes a group of addresses that are owned or controlled collectively for some particular economic purpose by the same entity.”
Moreover, the research sees three “distinguishable regimes” that have occurred within the Bitcoin economy since Satoshi introduced the protocol. The first one, from 2009 to March 2012, is called the “proof-of-concept” period. This means the network has a subtle number of users, early adopters, and “very little meaningful commercial activity.”
The second period was mostly well-know due to black market usage and gambling. Researchers also note there was a concurrent drop in gambling as well in October of 2013 when the Silk Road operations had ceased. The decline was relatively small only dropping by 3% in total transactions.
The third period is the actual period, marked by significant maturation. The paper states that the Bitcoin economy has turned “away from ‘sin’ enterprise and moving towards legitimate payments, commerce, and services.” From January 2014 to May 2015 researchers noticed an increase in legal services, with cryptocurrency exchanges at the center of this movement.
The paper concludes by saying Bitcoin has indeed matured rather than continuing to be volatile, if not unreliable, as many economists have suggested in the past.
For any questions or recommendations, feel free to write us on hello@goforex.eu
