Rich Get Richer Phenomenon In Bitcoin Market
Rich Get Richer Phenomenon In Bitcoin Market
https://www.technologyreview.com/s/518541/rich-get-richer-effect-observed-in-bitcoin-digital-currency-network/
Bitcoin is a digital currency without a bank or administrator. Transactions of Bitcoin are verified by cryptography and recorded in a blockchain, a public distributed ledger. Bitcoin is created in 2008 by Satoshi Nakamoto. In 2009, its source code was released as open-source software. Since 2011, the Bitcoin market grew rapidly. More than 1 billion dollar Bitcoins were in circulation. Bitcoin marketplace hosted more than 17 million transactions. A list of every transaction is open to the public.
Daniel Kondor and his coworkers at Eotvos Lorand University obtained the list of transactions and studied the complete financial history of accounts in the market. They analyzed the flow of money through the network and the patterns of wealth accumulation. They used nodes to represent Bitcoin address and edges to represent transactions between the 2 Bitcoin addresses. They discovered that before 2011, Bitcoin had little real-world value because it was used by a small number of people. In 2011, the media focused on Bitcoin. In addition, Bitcoins were allowed to be traded for dollars.The real-world value of Bitcoin increased.
Wealth accumulation through Bitcoin shows rich get richer phenomenon. BitCoin addresses with a greater number of transactions attract more transactions than addresses with few transactions. In other words, a node with a greater number of links attracts more links than a node with few links. The wealth of a node with a greater number of links increase more rapidly than a node with few links. Daniel Kondor explained that this phenomenon occurs because nodes with more links are more likely to attract new connections which leads to more transactions and wealth accumulation.