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

TL;DR

The paper investigates whether decentralized Bitcoin evolves toward centralisation by constructing a long-run longitudinal network of on-chain transactions from 2009–2023 using 15 yearly snapshots and dual edge weights $w_1$ (value) and $w_2$ (activity). It finds persistent centralisation and wealth concentration, with high Gini coefficients ($G$ typically $>0.75$) and a strengthening rich-get-richer dynamic over time, even as institutional participation grows. The authors identify three evolutionary phases—Exploration, Adaptation, and Maturity—across which a giant connected component remains dominant and network metrics stabilize after 2015. Together, these findings challenge the notion of Bitcoin as a fully egalitarian, decentralized infrastructure and highlight the value of fine-grained, longitudinal network analyses for assessing crypto ecosystems' resilience and sustainability.

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.

Figures (8)

• Figure 1: The four degree distributions in 2011: (a)in-degree weighted by activity, (b) in-degree weighted by value,(c) out-degree weighted by activity, (d) and out-degree weighted by value.
• Figure 2: The four degree distributions in 2023: (a) in-degree weighted by activity, (b) in-degree weighted by value, (c) out-degree weighted by activity, and (d) out-degree weighted by value.
• Figure 3: (3a) Average degree weighted by activity and value. In this case, in- and out-degree averages are equal. (3b) Gini coefficients of the four degree distributions.
• Figure 4: Effect of the filter on Degree Assortativity and Transitivity Coefficients, per year.
• Figure 5: (a) Gini Indices of the size distribution of the Weakly and Strongly Connected Components. (b) Shares of the in- and out-egdes controlled by the richest 1% nodes in terms of in- and out-degree. (c) Percentages of the richest 1% in terms of in and out-degree that are present in the Largest Strongly Connected Component.