On the Nature of Bitcoin as a Social Network

  • Isra'a A. Al-Qassem

Student thesis: Master's Thesis

Abstract

Adopting a network mindset is an efficient way to understand the underlying structure and evolution dynamics of complex systems in various domains. Bitcoin can be viewed a global peer-to-peer financial network where Bitcoin accounts represent the nodes and the transactions occurring between these accounts correspond to the edges. This research examines the structural properties and evolution dynamics of the Bitcoin transaction network putting this in the context of some Bitcoin historical events and the possible motivation of Bitcoin users. We also compare this transaction network to other social networks. Here we show that, despite the distinction in the nature of Bitcoin transaction network when compared to other social networks, the transaction network follows the same growth patterns, i.e., densification law and shrinking diameter after the network becomes mature, it also has heavy-tailed degree distribution. On the other hand, Bitcoin users’ behavior deviate in some aspects from the behavior of users in other social networks, i.e., Bitcoin users try to maintain their anonymity to avoid potential financial tracking given the transparency of Bitcoin’s public ledger. As a result of that, the transaction network has two-order-of-magnitude larger diameter, sparse tree-like communities, additionally the majority of Bitcoin accounts represents transitional or intermediate accounts with incoming and outgoing edges but zero cumulative balances. Our results clarify the evolutionary dynamics of the most popular cryptocurrency, which can be considered as a helpful step towards developing a dynamic model characterizing the Bitcoin transaction network since the real graph is too large to work with.
Date of AwardMay 2015
Original languageAmerican English
SupervisorDavor Svetinovic (Supervisor)

Keywords

  • Bitcoin
  • Peer-to-Peer Financial Network
  • Social Networks
  • Anonymity
  • Cryptocurrency.

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