The researchers found strong correlations between price development, the number of new bitcoin users, Internet searches and tweets related to bitcoin. They also identified two positive feedback loops. In the first, the increased popularity led to growing demand, which in turn stimulated activity on social media. The second loop relates to the user base: the more users join the network, the higher the price.
However, there is also negative feedback: before a significant drop in prices, the level of activity on the Internet skyrockets. The researchers concluded that big changes in online and social media activities lead to major price fluctuations.
The power of the network
Garcia’s colleague and co-author Nicolas Perony sees great potential in the quantitative analysis of social phenomena.
“With digital currencies we can examine certain aspects of the economy which cannot be observed with cash,” said Perony. “That way we can better understand how the market really works.”
Perony argues that the same methodology can be applied to other areas of society, thanks to block-chain technology. He points out that the bitcoin network is 300 times more powerful than the 500 most powerful supercomputers combined.
“The big question is how one could use such a powerful system for collaborative activities that go beyond the production of money,” said Perony.
Perony believes it would be possible to use the system to manage ownership of certain goods or to help collaborative research efforts, as the network could be used to conduct research on various collaborative concepts.
Social media image via Twin Design / Shutterstock.com
ETH Zurich
Original author: Nermin Hajdarbegovic