A combined research paper from University College London Centre for Blockchain Technologies, Deutsche Bundesbank and University of Wisconsin-Madison has identified three distinct regimes that have existed in the bitcoin economy’s growth and development.

The researchers gathered together the minimum units of bitcoin identity (the individual addresses), and grouped them into approximations of business entities, called “super clusters”. While anonymity is maintained, the researchers ascribe many of these clusters to particular business categories by analyzing some of their specific transaction patterns during 2009-2015.

“The data reveal that the number of transactions on the Bitcoin blockchain rose exponentially from around 1,000 per day in 2011 to around 300,000 per day at the moment of writing. At the current exchange rate the notional value of daily transaction volume ranges between $200 and $300 million”, it said. “Thus, it becomes appropriate to explore how the Bitcoin economy is populated and extract the map of payment relationships, as well as to trace the evolution of those relationships over time.”

Using this data, the researchers unveil and study the Bitcoin network of payment relationships both among super clusters and between them with other clusters in broader business categories (traders, gamblers, black market user-dealers, others, individuals or unknown). Subsequently, they identify three regimes, namely:

• “Proof of concept” or “mining-dominated” phase (from approximately January 2009 through March 2012): The regime is characterized by test transactions among a small number of users, and with very little meaningful commercial activity. The paper said that this initial period was dominated almost entirely by mining.
   
• “Sin” or “gambling/black market-dominated” phase (from approximately April 2012 through October 2013): This period consisted of “early adopters” and is characterized by a sudden influx of gambling services and “darknet” black markets. Users of “sin” sites would mask their internet traffic via services such as a virtual private network (VPN) or via the TOR network, boosting usage growth where the probability of being caught would be minimal.
   
• “Maturation” or “exchange-dominated” phase (starting November 2013): The researchers found that by November 2013, the amount of inflows attributable to “sin” entities had shrunk significantly to just 3% or less of total transactions.

“This third period, which we are still currently experiencing, is characterized by a maturation of the Bitcoin economy away from “sin” enterprise and diversifying into legitimate payments, commerce and services”, it said.

In concluding remarks, the paper says that rather than being a fleeting and frivolous pursuit, the bitcoin economy has grown and matured over the few years that it has been operational. It further suggested that some recent concerns regarding the illegal use of bitcoin currently might be overstated, and that whatever such transactions may exist could further diminish as the bitcoin economy continues to mature.