Markets, Pools, Venues, Nodes, and China: a glimpse of the a Bitcoin topography (II)


I previously mapped the geographical distribution of nodes within the Bitcoin network, with special attention to what I refer to as strong nodes, i.e. nodes that store the full blockchain and have been connected uninterruptedly in the period from March to June 2015. This showed regions where strong nodes cluster; however, this map had a limited scope. The fuzzy origin, multifaceted present and opposing interests surrounding it, make Bitcoin an expression of complex digital entities. While the technical layer is a condition of possibility for its prevalence, it is by no means the only one. A plethora of different entities accumulate on this amorphous animal. To continue my questions towards the formulation of a Bitcoin space, I added three more layers to its topography. This second map shows the strong nodes in the Bitcoin network, the regulation status in some countries, the markets (exchanges) dealing with it, and some charted venues where it can be used. A map bloated with all these elements inherits the fuzzy nature of the animal, obscures some of its parts, sheds light to others, and generates new set of questions on the space it inhabits.

How to read the map?

The legal layer was obtained primarily from a Regulation Report of 2014. It gathers official statements of different countries on cryptocurrencies’ regulation. Many of this statements were made  in the media boom and second price bubble at the end of 2013 [1]. On a previous post I coded the negative, positive and neutral legal reactions of countries on cryptocurrencies and its (lack of) correlations with Bitcoin’s price jump at the end of 2013. The ecosystem-map shows the same colour coded reaction: green for permissive, yellow for cautious, and red for restrictive. Every coded country, when clicked, also shows an excerpt of the legal statement and the entity responsible for it. The market layer locates market exchanges by its headquarters (in light blue). The points are sized accordingly to their market volume share of bitcoins, from January 19th to June 19th of 2015. It must be said that these markets may have offices in other parts of the world, and the points in the map mark only the original HQ’s. They also show fiat currencies originally exchanged and the name of each market, when clicked. A final layer shows the venues accepting Bitcoin and the kind of venue, according to Coinmap. New venues can be created via the site’s API, and therefore the data is not reviewed (as far as I know), which would explain unexpected venues, e.g. a bunch of restaurants accepting Bitcoin in Pyongyang. Paraphrasing a Russian saying, I sell this last layer for the worth I bought it.[2]

full-screen version of the map

What does this map show?

One of the most noticeable things is the polarity of the topography. While the network has an obvious strong commitment in Europe and the USA, the coast of Asia plays a significant role for the share of the Bitcoin market. In particular, China is the strongest player in this area with an outstanding 80.07% of the share (49.8% if we don’t consider Okcoin, which is headquartered in China but trades in US dollars), while USA based markets have a mere 4.32 % (34.59% with Okcoin). The rest of the markets populate Europe, with a few noticeable exceptions, e.g. BitMarket Limited, located in the Seychelles and trading in Polish zlotys. Bitmarket is a good instantiation of the universal promises and possibilities of these devices as they can, in theory, be smoothly used everywhere. But this particular location also raises a flag on the abrasive regulation issue associated with cryptocurrencies, as Seychelles is a known tax haven. A bitcoin market legally located in the richest (GDP p/c) country of the poorest continent depicts a fair image of the actual uses of this technology.
Besides USA and Europe, China becomes the most interesting place for Bitcoin’s native geography. Considering its huge Internet population, one would expect China would host a big share of the strong nodes but, at least regarding nodes’ gateways, it shows a timid allotment. This immediately contrast with its huge share of exchange markets, which at the same time diverges with the country’s harsh regulation standpoint. China has forbidden banks and financial payment companies to deal with Bitcoin since the beginning of 2013. Last year it banned all financial institutions from offering banking services to Bitcoin, and has been accused of even censoring events related to it. While this explains the practical absence of retail venues to buy your day-to-day coffee with cryptocoins, it hasn’t stopped the buoyant exchanges, that now reportedly trade 80% of all Bitcoins.
China is also at this point the biggest producer of bitcoins. Also called mining, production of bitcoins is a reward for successfully validating and packing transactions within the network, via generation of a Proof-of-Work. This proof consists in the constant generation of aleatory hashes until one of them fulfils a number of zeroes at the beginning of the resulting hash. Due to the difficulty of the former operation, today’s mining looks more like your average industry than your average solo enthusiast. This evolution was foreseen by Nakamoto himself since Bitcoin’s earlier stages (cf. mailing lists), and the mining industry -at least since 2014- is mostly populated by pools. In them different miners (with one or many hardware mining units) contribute their processing power to calculate a block together and distribute the reward. Although it is difficult to individually identify where and who are the miners, it is reasonable to assume that strong nodes show a fair distribution of them. Regarding mining, however, the numbers weight not in the quantity of individuals, but in the total computational power of pools, and this figure is imprecise. Estimations of capacity of production –or hashrate within the Blockchain- show that a handful of pools generate the majority of the blocks (at least so far this year) and, what is more, three of the biggest pools of the last six months, BTCChina, Antpool, and F2pool are operated from China (see current state).

Mining pools hashrate distribution (18 june 2015)

Geographically, the Bitcoin-realm orbits around China: the vast majority of means of production and market performance are by far attached to Chinese players, according to strong nodes presence, hashrate power and market headquarters. There are no venues or practical uses for the cryptocurrency, which is in part explained by the harsh control measures imposed on it. But also because investment and mining have been the main interest for the Asian giant. A distribution based on anecdotal evidence (with no official figures or statistical data), shows that these uses are shared with many actors of eastern geopolitics, along with India using it as a financial service and Taiwan as an actual commodity.

The Bitcoin map ultimately shows a topological duality: with uses and performances that strongly contrast between East and West. An unequal distribution between production, circulation, and use is also visible, in the clusters of developed zones and the phantom areas in the rest of the globe. This map shows that Bitcoin, like many digital technologies, has noticeable material limits that disrupt the positive, global, empowering, and open discourse that fuels many of its expressions. The beacons of this map, however, show only facts that remain eager to its underpinning rationales.

1. A fairly up to date map for geo regulation, which uses different assessment techniques, can be seen at merkletree.
2. It is impossible for me, and far for my research goals at the moment, to review all the data in this map, so I’ll appreciate any feedback on its errors and inconsistencies.