The Unreasonable Effectiveness of Address Clustering

TL;DR

This paper investigates why address clustering techniques are highly effective in Bitcoin, analyzing factors like address reuse and cluster growth over seven years.

Contribution

It identifies and quantifies key reasons behind address clustering effectiveness, providing insights into Bitcoin's address structure.

Findings

Address reuse significantly aids clustering accuracy

Super-clusters exhibit high centrality, facilitating entity identification

Incremental cluster growth reflects Bitcoin's evolving address network

Abstract

Address clustering tries to construct the one-to-many mapping from entities to addresses in the Bitcoin system. Simple heuristics based on the micro-structure of transactions have proved very effective in practice. In this paper we describe the primary reasons behind this effectiveness: address reuse, avoidable merging, super-clusters with high centrality, and the incremental growth of address clusters. We quantify their impact during Bitcoin's first seven years of existence.