The Effect of Cryptocurrency Price on a Blockchain-Based Social Network

Abstract

The massive spread of online social media platforms has favored the emergence of social media giants, like Facebook, Twitter, Instagram. These companies have been the center of many scandals related to privacy issues, data ownership and censorship. The issues that stem from their centralized architecture, brought the spotlight on alternative solutions based on decentralized or distributed architectures. In these alternative social media platforms, the data is not owned by a single company, the open nature makes censorship harder and users can profit from their contents. Here we focus on a specific solution - Steemit - built on top of a public blockchain, linked to the Steem cryptocurrency. In fact, in Steemit, the participation and the content quality are rewarded with a cryptocurrency through a network- and user-based voting system. This way, the network structure, the dynamics on top of it and the cryptocurrency market are strongly coupled. Such an interplay is the focus of the paper; specifically, we study the impact of the cryptocurrency Steem on the social network growth, using more than 4 years of data extracted directly from the Steem Blockchain. We find that the growth of the network is strongly tied to the fluctuations in Steem cryptocurrency price: it can be observed that rising Steem prices trigger the network growth, and similarly, when Steem value drops, so does the network’s growth. We also find evidence of a lead-follow relationship between Steem price and users’ behavior: our study suggests that the full impact of the Steem cryptocurrency price can be observed within 3–4 weeks. So essentially, the blockchain-based social network Steemit represents a valuable case study among the emerging online social media, where network dynamics and economic/financial aspects are strongly intertwined; and where the underlying blockchain is an unprecedented source of data for measuring such interplay.