Abstract
Cryptocurrencies are distributed systems that allow exchanges of native (and non-) tokens between participants. The availability of the complete historical bookkeeping opens up an unprecedented possibility: that of understanding the evolution of a cryptocurrency's network structure while gaining useful insights into the relationships between users' behavior and cryptocurrency pricing in exchange markets. In this article we review some recent results concerning the structural properties of the Bitcoin Transaction Networks, a generic name referring to a set of three different constructs: the Bitcoin Address Network, the Bitcoin User Network, and the Bitcoin Lightning Network. The picture that emerges is of a system growing over time, which becomes increasingly sparse and whose mesoscopic structural organization is characterized by the presence of an increasingly significant core-periphery structure. Such a peculiar topology is accompanied by a highly uneven distribution of bitcoins, a result suggesting that Bitcoin is becoming an increasingly centralized system at different levels.
Highlights
A cryptocurrency is an online payment system for which the storage and verification of transactions—and the safeguarding of the system’s consistency itself—are decentralized, i.e., do not require the presence of a trusted third party
In this article we review some recent results concerning the structural properties of the Bitcoin Transaction Networks, a generic name referring to a set of three different constructs: the Bitcoin Address Network, the Bitcoin User Network, and the Bitcoin Lightning Network
The cryptography protocols that Bitcoin rests upon aim to prevent the so-called double-spending problem, i.e., the possibility of the same digital token being spent more than once in the absence of a central party that guarantees the validity of the transactions [1, 2]; remarkably, the transaction-verification mechanism Bitcoin relies on allows its entire transaction history to be openly accessible, a feature that, in turn, allows researchers to analyze Bitcoin transactions in different network representations
Summary
A cryptocurrency is an online payment system for which the storage and verification of transactions—and the safeguarding of the system’s consistency itself—are decentralized, i.e., do not require the presence of a trusted third party. The first and most popular cryptocurrency, was introduced in 2008 by Satoshi Nakamoto [2] It consists of a decentralized peer-to-peer network to which users connect to exchange property in the account units of the system, i.e., to perform transactions of bitcoins. Proposed in 2015 [6], the Bitcoin Lightning Network (BLN) is a “Layer 2” protocol that can operate on top of blockchain-based (Bitcoin-like) cryptocurrencies by creating bilateral channels for off-chain payments which are settled concurrently on the blockchain, once the channels are closed As both the transaction fees and the blockchain confirmation are no longer required, the network is spared from avoidable burdens; the key features of Bitcoin, i.e., its decentralized architecture, its political organization, and its wealth distribution, are no longer sacrificed, while the circulation of the native assets is enhanced. The BLN was considered over a period of 18 months, from 14th January 2018 to 13th July 2019, at the end of which the network consisted of 8,216 users, 122,517 active channels, and 2732.5 transacted bitcoins
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