Concentration Within Distribution: Unmasking Bitcoin's Structural Centralization Through Network Science

TL;DR

This study constructs and analyzes the Bitcoin User Network from blockchain data to reveal persistent structural centralization and core-periphery patterns, despite Bitcoin's decentralized protocol.

Contribution

We introduce direction-sensitive centrality measures and mesoscopic network analysis to uncover structural centralization in Bitcoin's user network.

Findings

Bitcoin network shows increasing core-periphery structure.

A few large components form the critical backbone of the system.

The network's structure indicates persistent centralization despite decentralization goals.

Abstract

We construct the Bitcoin User Network (BUN) directly from raw blockchain data up to late 2025, which allows us to explore its mesoscopic properties and trace its temporal evolution. In particular, we analyze the structure of connected components and directed assortativity through the four variants of Newman's coefficient, implemented via custom algorithms and a dedicated database. Building on this, to characterize the distribution of structural influence, we introduce direction-sensitive centrality measures based on PageRank and HITS, which provide a complementary global analysis of the BUN and reveal a persistently unequal and increasingly core-periphery structure. In addition, we complement the structural analysis with a study of Bitcoin's price volatility using high-frequency market data. Overall, our results reveal a clear pattern of concentration within distribution: although the protocol is decentralized by design, the emergent user network evolves toward an asymmetric mesoscopic structure that indicates the existence of a few large-scale connected components that function as the critical backbone of the system.