Empirical Analysis of Digital Currencies Manoj kumar popuri Cs 765

Questions & Suggestions OUTLINE: Digital currencies Non crypto-currencies Crypto-currencies Bit coin Litecoin Namecoin Darkcoin Maidsafecoin Bitcoin Related work Questions & Suggestions

Digital currency : virtual currency : Digital currency is a form of currency or medium of exchange that is electronically created and stored (i.e., distinct from physical, such as banknotes and coins).  Like traditional money these currencies may be used to buy physical goods and services but could also be restricted to certain communities such as for example for use inside an on-line game or social network. virtual currency : A virtual currency has been defined in 2012 by the European Central Bank as "a type of unregulated, digital money, which is issued and usually controlled by its developers, and used and accepted among the members of a specific virtual community". The US Department of Treasury in 2013 defined it more tersely as "a medium of exchange that operates like a currency in some environments, but does not have all the attributes of real currency". The key attribute a virtual currency does not have according to these definitions, is the status as legal tender.

NON CRYPTO-CURRENCY: The non-cryptocurrencies are all centralized. As such, they may be shut down or seized by a government at any time

CRYPTO-CURRENCIES: Release Currency Symbol Founder Hash Algorithm Market Cap (USD) Market Value 2009 Bitcoin BTC Satoshi Nakamoto SHA-256d 5,111,285,459 382.95 2011 Namecoin NMC Vincent Durham SHA-256 10,231,882 1.01 Litecoin LTC Charles Lee Scrypt 129,649,518 3.92 2012 Peercoin PPC Sunny King 21,217,963 0.972342 2013 Ripple XRP Chris Larsen ECDSA 148,208,132 0.005113 2014 Darkcoin DRK Kyle Hagan X11 10,099,155 2.12 A cryptocurrency (or crypto currency) is a medium of exchange using cryptography to secure the transactions and to control the creation of new units. Cryptocurrencies are a subset of alternative-currencies or specifically of Digital-currencies. The first cryptocurrency to be created was Bitcoin in 2009. Since then, numerous cryptocurrencies have been created. A feature that is typical in cryptocurrency is decentralized control, distinct from a centralized electronic money system such as PayPal. A cryptocurrency (or crypto currency) is a medium of exchange using cryptography to secure the transactions and to control the creation of new units. Cryptocurrencies are a subset of alternative-currencies or specifically of Digital-currencies. The first cryptocurrency to be created was Bitcoin in 2009. Since then, numerous cryptocurrencies have been created. A feature that is typical in cryptocurrency is decentralized control, distinct from a centralized electronic money system such as PayPal. Source: http://coinmarketcap.com/

Market Cap in Millions Market Cap in Millions Cryptocurrency is produced by the entire cryptocurrency system collectively, at a rate which is prior defined and publicly known. In centralized banking and economic systems such as the Federal Reserve System, governments control the supply of currency by printing units of fiat money or demanding additions to digital banking ledgers. However, governments cannot produce units of cryptocurrency and as such, governments cannot provide backing for firms, banks or corporate entities which hold asset value measured in a decentralized cryptocurrency. The underlying technical system upon which all cryptocurrencies are now based was created by the group or individual known as Satoshi Nakamoto. Market Cap in Millions

BITCOIN: Bitcoin is a software-based online payment system described by Satoshi Nakamoto in 2008 and introduced as open-source software in 2009.Payments are recorded in a public ledger using its own unit of account, which is also called bitcoin. Payments work peer-to-peer without a central repository or single administrator, which has led the US Treasury to call bitcoin a decentralized virtual currency. Although its status as a currency is disputed, media reports often refer to bitcoin as acryptocurrency or digital currency. Bitcoin is the first fully implemented decentralized cryptocurrency; most other cryptocurrencies are similar and derived from it. It is also the largest cryptocurrency by market capitalization.

MINING BITCOIN: Bitcoins are created as a reward for processing work in which users offer their computing power to verify and record payments into the public ledger. This activity is called mining, which individuals or companies engage in, in exchange for transaction fees and newly created bitcoins. Bitcoins are created as a reward for processing work in which users offer their computing power to verify and record payments into the public ledger. This activity is called mining, which individuals or companies engage in, in exchange for transaction fees and newly created bitcoins.

DIFICULTY: Bitcoin Dificulty Litecoin Dificulty

Do Rich get Richer? An Empirical Analysis of Bitcoin Network Data: Trsansactions until May 17th 2013 Nodes ( Bitcoin Addresses) : 13,086,528 Edges ( Transactions ) : 17,354,797 They studied the dynamics taking place on the transaction network, i.e. the flow of money. Measured temporal patterns and the wealth accumulation. Reported a scaling law between the degree and wealth associated to individual nodes.

Growth of Bitcoin Network : Number of addresses with nonzero balance (green), addresses in partic- ipating in at least one transaction in one week intervals (red) and the exchange price of bitcoins in US dollars according to MtGox, the largest Bitcoin exchange site (blue). The black lines are exponential functions bounding the growth of the network size; the characteristic times are 188 and 386 days.

Indegree Distribution : Since the beginning of 2011, the shape of the distribution does not change significantly. The black line shows a fitted power-law for the final network; the exponent is 2.18. The data is log- binned for ease of visual inspection, the power-law is fitted on the original data [19].

Outdegree Distribution : The black line shows a fitted power-law for the final network; the exponent is 2.06. The data is log-binned for ease of visual inspection, the power-law is fitted on the original data [19].

Change of balances in one month windows: Increase (top) and decrease (bottom, vertical axis is inverted) of node balances in one month windows as a function of their balance at the beginning of each month. We show the raw data (red), the average (green), median (blue) and logarith- mic average (magenta). The later three are calculated for log- arithmically sized bins. We find a clear positive correlation: addresses with high balance typically increase their wealth more than addresses with low balance. The median and the logarithmic average values almost coincide, which suggests multiplicative fluctuations. The median and the logarithmic average increase approximately as power-laws for several or- ders of magnitude. The black line is a power-law fit for the double logarithmic data; the exponent is 0.857.

Average node balances as a function of the indegrees : We calculate the averages for logarithmically sized bins. We find strong correlation between the balance and the indegree of individual nodes. The main plot shows in- degree values up to kin ≈ 3000, only 75 nodes (0.0063%) have higher indegree, the averages calculated for such small sample result in high fluctuations (see inset). We also measure both the Pearson and Spearman correlation coefficient: The Pear- son correlation coefficient of the full dataset is 0.00185041, while the Spearman rank correlation coefficient is 0.275881. (Note that the Pearson correlation coefficient measures the linear dependence between two variables, while the Spearman coefficient evaluates monotonicity). We test the statistical sig- nificance of the correlation by randomizing the dataset 1000 times and calculating the Spearman coefficient for each ran- domization. We find that the average Spearman coefficient is 10−4 with a standard deviation of 9.5 · 10−4, indicating that the correlation is indeed significant.

Current Data: Trsansactions until October 22nd 2014 Nodes ( Bitcoin Addresses) : 80,425,692 13,086,528 Edges ( Transactions ) : 49,517,103 17,354,797

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Manoj K Popuri 11/11/2018