Analysis of the Bitcoin blockchain: Socio-economic factors behind the\n adoption

Abstract

As the first decentralized digital currency introduced in 2009 together with\nthe blockchain, Bitcoin offers new opportunities both for developed and\ndeveloping countries. Bitcoin peer-to-peer transactions are independent of the\nbanking system, thus facilitating foreign exchanges with low transaction fees\nsuch as remittances, with a high degree of anonymity. These opportunities\ntogether with other key factors led the Bitcoin to become extremely popular and\nmade its price skyrocket during 2017. However, while the Bitcoin blockchain\nattracts a lot of attention, it remains difficult to investigate where this\nattention comes from, due to the pseudo-anonymity of the system, and\nconsequently to appreciate its social impact. Here we make an attempt to\ncharacterize the adoption of the bitcoin blockchain by country. In the first\npart of the work we show that information about the number of Bitcoin software\nclient downloads, the IP addresses that act as relays for the transactions, and\nthe Internet searches about Bitcoin provide together a coherent picture of the\nsystem evolution in different countries. Using these quantities as a proxy for\nuser adoption, we identified several socio-economic indexes such as the GDP per\ncapita, freedom of trade and the Internet penetration as key variables\ncorrelated with the degree of user adoption. In the second part of the work, we\nbuild a network of Bitcoin transactions between countries using the IP\naddresses of nodes relaying transactions and we develop an augmented version of\nthe gravity model of trade in order to identify socio-economic factors linked\nto the flow of bitcoins between countries. In a nutshell our study provides a\nnew insight on the bitcoin adoption by country and on the potential\nsocio-economic drivers of the international bitcoin flow.\n