Working Paper: NBER ID: w29396
Authors: Igor Makarov; Antoinette Schoar
Abstract: In this paper, we provide detailed analyses of the Bitcoin network and its main participants. We build a novel database using a large number of public and proprietary sources to link Bitcoin addresses to real entities and develop an extensive suite of algorithms to extract information about the behavior of the main market participants. We conduct three major pieces of analysis of the Bitcoin eco-system. First, we analyze the transaction volume and network structure of the main participants on the blockchain. Second, we document the concentration and regional composition of the miners which are the backbone of the verification protocol and ensure the integrity of the blockchain ledger. Finally, we analyze the ownership concentration of the largest holders of Bitcoin.
Keywords: No keywords provided
JEL Codes: F38; G12; G15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| bitcoin protocol and user preferences for anonymity (E42) | 90% of transaction volume is not linked to economically meaningful activities (F69) |
| exchanges (F33) | 75% of real bitcoin volume is associated with exchanges (F31) |
| exchanges are the most connected nodes in the network (D85) | exchanges significantly influence transaction volume (F31) |
| top 10% of miners controlling 90% of mining power (L72) | concerns about systemic risks such as potential for a 51% attack (E42) |
| geographic concentration of miners (L72) | significant impact on mining capacity (L72) |
| individual investors control 85 million bitcoins (G50) | highly concentrated ownership structure (G34) |
| top 1000 investors holding approximately 3 million bitcoins (G13) | highly concentrated ownership structure (G34) |