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From code to market: Network of developers and correlated returns of cryptocurrencies

Lucchini, L., Alessandretti, L., Lepri, B., Gallo, A. ORCID: 0000-0002-8355-1689 and Baronchelli, A. ORCID: 0000-0002-0255-0829 (2020). From code to market: Network of developers and correlated returns of cryptocurrencies. Science Advances, 6(51), eabd2204.. doi: 10.1126/sciadv.abd2204

Abstract

"Code is law" is the funding principle of cryptocurrencies. The security, transferability, availability and other properties of a crypto-asset are determined by the code through which it is created. If code is open source, as it happens for most cryptocurrencies, this principle would prevent manipulations and grant transparency to users and traders. However, this approach considers cryptocurrencies as isolated entities thus neglecting possible connections between them. Here, we show that 4% of developers contribute to the code of more than one cryptocurrency and that the market reflects these cross-asset dependencies. In particular, we reveal that the first coding event linking two cryptocurrencies through a common developer leads to the synchronisation of their returns in the following months. Our results identify a clear link between the collaborative development of cryptocurrencies and their market behaviour. More broadly, our work reveals a so-far overlooked systemic dimension for the transparency of code-based ecosystems and we anticipate it will be of interest to researchers, investors and regulators.

Publication Type: Article
Subjects: H Social Sciences > HG Finance
Q Science > QA Mathematics > QA75 Electronic computers. Computer science
Departments: Business School > Finance
School of Mathematics, Computer Science & Engineering > Mathematics
Date Deposited: 18 Dec 2020 15:51
URI: https://openaccess.city.ac.uk/id/eprint/25422
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