Mapping network structures and dynamics of decentralised cryptocurrencies: The evolution of Bitcoin (2009-2023)

TL;DR

This study reconstructs Bitcoin's network evolution from 2009 to 2023, revealing increasing centralization and wealth inequality, and identifies three key evolutionary phases that impact its sustainability.

Contribution

It provides a comprehensive analysis of Bitcoin's network structure and dynamics over time, highlighting the endogenous growth of centralization and wealth concentration.

Findings

Network centralization increased over time.

Wealth inequality grew following a rich-get-richer pattern.

Bitcoin's evolution includes three distinct phases: Exploration, Adaptation, Maturity.

Abstract

Cryptocurrencies have recently been in the spotlight of public debate due to their embrace by the new US President, with crypto fans expecting a 'bull run'. The global cryptocurrency market capitalisation is more than \$3.50 trillion, with 1 Bitcoin exchanging for more than \$97,000 at the end of November 2024. Monitoring the evolution of these systems is key to understanding whether the popular perception of cryptocurrencies as a new, sustainable economic infrastructure is well-founded. In this paper, we have reconstructed the network structures and dynamics of Bitcoin from its launch in January 2009 to December 2023 and identified its key evolutionary phases. Our results show that network centralisation and wealth concentration increased from the very early years, following a richer-get-richer mechanism. This trend was endogenous to the system, beyond any subsequent institutional or exogenous influence. The evolution of Bitcoin is characterised by three periods, Exploration, Adaptation and Maturity, with substantial coherent network patterns. Our findings suggest that Bitcoin is a highly centralised structure, with high levels of wealth inequality and internally crystallised power dynamics, which may have negative implications for its long-term sustainability.