‘Sin’ Activities No Longer Drive Bitcoin Economy, Researchers Find

By July 11, 2016Bitcoin Business

A soon-to-be-released study centers on evidence that bitcoin’s market has matured to a point where commerce is no longer driven by illicit activities.

Drafted by researchers from the central bank of Germany, University College London and the University of Wisconsin-Madison, the paper argues that bitcoin has passed through three distinct phases of growth as a distributed payment system, the most recent and current of which they assert is driven by "legitimate payments, commerce and services".

As such, the study sheds light on a key question that the bitcoin network continues to face: whether it should face more scrutiny than other, more established payment networks.

The paper reads: "Our results suggest that some recent concerns regarding the use of bitcoin for illegal transactions at the present time might be overstated, and that whatever such transactions may exist could further diminish as the bitcoin economy continues to mature." For the study, researchers Paolo Tasca, Shaowen Liu and Adam Hayes sought to de-anonymize a database composed of "millions" of pseudonymous bitcoin addresses , which they worked to distill into "super clusters" they assert are owned by one entity or managed collectively.

From there, the researchers sought to sort these clusters of addresses into four categories – bitcoin exchanges, gambling services, mining pools and black markets. The report then traces the transaction history between these entities over time, finding that the first two phases of the network were dominated by mining activities and "sin enterprises" respectively.

The third and current phase, the report said, is now dominated by legitimate merchants and exchanges.

"We can thus refer to the first regime as the ‘proof of concept’ or ‘mining-dominated’ phase, the second as the ‘sin’ or ‘gambling/black market-dominated’ phase, and the third as the ‘maturation’ or ‘exchange-dominated’ phase," the paper reads.

Notably, the report asserts this has happened even as the number […]

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