Cryptocurrency functioning in the global economy

The article reveals a conceptual basis of the cryptocurrency functioning. The main types of cryptocurrencies are featured and analyzed as well as their general strengths and weaknesses. Based on the price dynamics correlation analysis of some cryptocurrency types, a general low level of dependence between digital assets is established. The main functions of the cryptocurrency are formulated in the form of transformed money functions. Also, additional functions of cryptocurrencies are defined on the basis of their innovative nature, as well as the role in the modern financial system and world economic relations

The Economics of Bitcoins : News, Supply vs Demand and Slumps

Publisher PD

“Bit Standard”- Bitcoin between reality and risks of a “halfway-money”

This work provides an explanation of the market underlying the evolution due to modern technologies and technical advances, especially in transactions. In this regard, the authors specify the aspect related to the creation of virtual currencies like bitcoin that can circulate thanks to the Blockchain system through miners\u2019 work. The authors consider areas related to the warnings on the use and exchange of virtual currencies. The aim is to conceptualize in a graphical way the current operational transaction in bitcoin through the existing exchange platforms. The authors try to attest the fickleness of the disintermediation ideal founding Bitcoin. The analysis purposed could be interesting and useful to provide a kind of interpretation of the phenomenon and a general overview about Bitcoin system

Do the rich get richer? An empirical analysis of the BitCoin transaction network

The possibility to analyze everyday monetary transactions is limited by the scarcity of available data, as this kind of information is usually considered highly sensitive. Present econophysics models are usually employed on presumed random networks of interacting agents, and only macroscopic properties (e.g. the resulting wealth distribution) are compared to real-world data. In this paper, we analyze BitCoin, which is a novel digital currency system, where the complete list of transactions is publicly available. Using this dataset, we reconstruct the network of transactions, and extract the time and amount of each payment. We analyze the structure of the transaction network by measuring network characteristics over time, such as the degree distribution, degree correlations and clustering. We find that linear preferential attachment drives the growth of the network. We also study the dynamics taking place on the transaction network, i.e. the flow of money. We measure temporal patterns and the wealth accumulation. Investigating the microscopic statistics of money movement, we find that sublinear preferential attachment governs the evolution of the wealth distribution. We report a scaling relation between the degree and wealth associated to individual nodes.Comment: Project website: http://www.vo.elte.hu/bitcoin/; updated after publicatio

The rich still get richer: Empirical comparison of preferential attachment via linking statistics in Bitcoin and Ethereum

Bitcoin and Ethereum transactions present one of the largest real-world complex networks that are publicly available for study, including a detailed picture of their time evolution. As such, they have received a considerable amount of attention from the network science community, beside analysis from an economic or cryptography perspective. Among these studies, in an analysis on the early instance of the Bitcoin network, we have shown the clear presence of the preferential attachment, or "rich-get-richer" phenomenon. Now, we revisit this question, using a recent version of the Bitcoin network that has grown almost 100-fold since our original analysis. Furthermore, we additionally carry out a comparison with Ethereum, the second most important cryptocurrency. Our results show that preferential attachment continues to be a key factor in the evolution of both the Bitcoin and Ethereum transactoin networks. To facilitate further analysis, we publish a recent version of both transaction networks, and an efficient software implementation that is able to evaluate linking statistics necessary for learn about preferential attachment on networks with several hundred million edges

Architectural Adequacy and Evolutionary Adequacy as Characteristics of a Candidate Informational Money

For money-like informational commodities the notions of architectural adequacy and evolutionary adequacy are proposed as the first two stages of a moneyness maturity hierarchy. Then three classes of informational commodities are distinguished: exclusively informational commodities, strictly informational commodities, and ownable informational commodities. For each class money-like instances of that commodity class, as well as monies of that class may exist. With the help of these classifications and making use of previous assessments of Bitcoin, it is argued that at this stage Bitcoin is unlikely ever to evolve into a money. Assessing the evolutionary adequacy of Bitcoin is perceived in terms of a search through its design hull for superior design alternatives. An extensive comparison is made between the search for superior design alternatives to Bitcoin and the search for design alternatives to a specific and unconventional view on the definition of fractions.Comment: 25 page

Collective Dynamics of Dark Web Marketplaces

Dark markets are commercial websites that use Bitcoin to sell or broker transactions involving drugs, weapons, and other illicit goods. Being illegal, they do not offer any user protection, and several police raids and scams have caused large losses to both customers and vendors over the past years. However, this uncertainty has not prevented a steady growth of the dark market phenomenon and a proliferation of new markets. The origin of this resilience have remained unclear so far, also due to the difficulty of identifying relevant Bitcoin transaction data. Here, we investigate how the dark market ecosystem re-organises following the disappearance of a market, due to factors including raids and scams. To do so, we analyse 24 episodes of unexpected market closure through a novel datasets of 133 million Bitcoin transactions involving 31 dark markets and their users, totalling 4 billion USD. We show that coordinated user migration from the closed market to coexisting markets guarantees overall systemic resilience beyond the intrinsic fragility of individual markets. The migration is swift, efficient and common to all market closures. We find that migrants are on average more active users in comparison to non-migrants and move preferentially towards the coexisting market with the highest trading volume. Our findings shed light on the resilience of the dark market ecosystem and we anticipate that they may inform future research on the self-organisation of emerging online markets

(WP 2014-01) Is Bitcoin the \u27Paris Hilton\u27 of the Currency World? Or Are the Early Investors onto Something That Will Make Them Rich? [updated version]

The bitcoin phenomenon, and the technological innovation that made it possible, is interesting - but for investors large and small, the more pertinent question is whether they should buy the digital currency or avoid it. We analyze a bitcoin investment from the standpoint of an investor with a diversified portfolio using both in-sample and out-of-sample settings. Within the in-sample setting, bitcoin does not yield added value to investors with utility function consistent with the mean-variance setting. On the other hand, they do offer diversification benefits to investors with negative exponential and power utility functions. However, these benefits are not preserved in the out-of-sample framework. In most cases, the optimal portfolios that include only the traditional asset classes appear to have superior performance

Pump and Dumps in the Bitcoin Era: Real Time Detection of Cryptocurrency Market Manipulations

In the last years, cryptocurrencies are increasingly popular. Even people who are not experts have started to invest in these securities and nowadays cryptocurrency exchanges process transactions for over 100 billion US dollars per month. However, many cryptocurrencies have low liquidity and therefore they are highly prone to market manipulation schemes. In this paper, we perform an in-depth analysis of pump and dump schemes organized by communities over the Internet. We observe how these communities are organized and how they carry out the fraud. Then, we report on two case studies related to pump and dump groups. Lastly, we introduce an approach to detect the fraud in real time that outperforms the current state of the art, so to help investors stay out of the market when a pump and dump scheme is in action.Comment: Accepted for publication at The 29th International Conference on Computer Communications and Networks (ICCCN 2020