Abstract
Cryptocurrency is a well-developed blockchain technology application that is currently a heated topic throughout the world. The public availability of transaction histories offers an opportunity to analyze and compare different cryptocurrencies. In this paper, we present a dynamic network analysis of three representative blockchain-based cryptocurrencies: Bitcoin, Ethereum, and Namecoin. By analyzing the accumulated network growth, we find that, unlike most other networks, these cryptocurrency networks do not always densify over time, and they are changing all the time with relatively low node and edge repetition ratios. Therefore, we then construct separate networks on a monthly basis, trace the changes of typical network characteristics (including degree distribution, degree assortativity, clustering coefficient, and the largest connected component) over time, and compare the three. We find that the degree distribution of these monthly transaction networks cannot be well fitted by the famous power-law distribution, at the same time, different currency still has different network properties, e.g., both Bitcoin and Ethereum networks are heavy-tailed with disassortative mixing, however, only the former can be treated as a small world. These network properties reflect the evolutionary characteristics and competitive power of these three cryptocurrencies and provide a foundation for future research.
Highlights
Network analysis, such as those reported in [1,2,3,4], has attracted increasing attention in economics and finance since it provides further insights than traditional methods
The main contributions of our research are: 1) We find that the growth pattern of cryptocurrency transaction networks is different from that of most other networks reported in the literature in the way that they do not always follow neither the densification law nor the constant average degree assumption over time; 2) Monthly network, instead of accumulated network, is proposed as an appropriate object to understand the dynamics of the network; 3) we conduct the first empirical comparison among three representative cryptocurrency networks and point out the similarities and differences to help understand the peer-to-peer technology on a network level
This paper analyzed the dynamic characteristics of the transaction networks of three representative cryptocurrencies: Bitcoin, Ethereum, and Namecoin
Summary
Network analysis, such as those reported in [1,2,3,4], has attracted increasing attention in economics and finance since it provides further insights than traditional methods. A large volume of financial data, e.g., stock price, is available for network related research and analysis, information about transaction details is usually considered sensitive and not available for research. Cryptocurrency, where a continuously growing list of records stored in a chain is accessible, provides opportunities to analyze transaction networks in detail. A cryptocurrency is a digital currency in which blockchain techniques are used to secure the transactions and control the generation of new units of currency (the so-called coins), operating independently without a central authority.
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