Abstract
As the first decentralized digital currency introduced in 2009 together with the blockchain, Bitcoin offers new opportunities both for developed and developing countries. Bitcoin peer-to-peer transactions are independent of the banking system, facilitating foreign exchanges with low transaction fees, such as remittances, and offering a high degree of anonymity. These opportunities together with other key factors led the Bitcoin to become extremely popular and caused its price to skyrocket during 2017 (Henry et al. in J Digit Bank 2(4):311–337, 2018).However, while the Bitcoin blockchain attracts a lot of attention, it remains difficult to investigate where this attention comes from, due to the pseudo-anonymity of the system, and consequently to appreciate its social impact. Here we make an attempt to characterize the adoption of the Bitcoin blockchain by country. In the first part of the work we show that information about the number of Bitcoin software client downloads, the IP addresses that act as relays for the transactions, and the Internet searches about Bitcoin provide together a coherent picture of the system evolution in different countries. Using these quantities as a proxy for user adoption, we identify several socio-economic indexes such as the GDP per capita, freedom of trade and the Internet penetration as key variables correlated with the degree of user adoption.In the second part of the work, we build a network of Bitcoin transactions between countries using the IP addresses of nodes relaying transactions and we develop an augmented version of the gravity model of trade in order to identify socio-economic factors linked to the flow of Bitcoin between countries. In a nutshell our study provides a new insight on Bitcoin adoption by country and on the potential socio-economic drivers of the international Bitcoin flow.
Highlights
Bitcoin is a digital currency created in 2009 as an alternative to the banking system
Due to the partial anonymity offered by the blockchain, discovering the location of Bitcoin users is a challenging task; we tackled this problem by combining a series of proxies with the transactional data coming from the Bitcoin public ledger
In the first part of the work we showed that the number of IP addresses associated to the relay nodes of the transactions, the number of Bitcoin client downloads, and the interest measured by Google Trends, all give a coherent picture about user adoption by country, even though each of them provides only a partial view of the Bitcoin system
Summary
Bitcoin is a digital currency created in 2009 as an alternative to the banking system. In order to check if they give a consistent picture of Bitcoin adoption, we study the correlation between the two time series and after removing small fluctuations by applying a moving window average (window length: 1 month, offset: 1 day), we measure a high correlation (Table 4) The fact that they correlate positively even though they potentially concern different users encourages the use of these data sources as proxy for the distribution of users among countries. Focusing on a time interval of one year, we compute the Spearman correlation coefficient between the rank of countries according to the number of client downloads or number of unique IP addresses (normalized by population) and the ranking according to different socio-economic indexes. The general picture that emerges is that socio-economic welfare—as present in most developed countries— appears to have
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