Bitcoin was conceived by Satoshi Nakamoto in 2008 and the network went live in January 2009; since then, the genesis cryptocurrency never looked back, growing stronger on a yearly basis and immortalizing itself in financial history, irrespective of how all of this turns out later down the line. As we usher in a new year and an entire decade of Bitcoin, we look at some basic data from CoinMetrics to see just how far Bitcoin has come.
Numbers Versus Narratives and Agendas
“Bitcoin is dead. Bitcoin can’t scale.”
The number of obituaries for economic or technical reasons has grown every year, but Bitcoin has steadied on with remarkable resilience. Of course, nobody can predict how thewill turn out, but it’s safe to say Bitcoin was the best-performing asset of the 2010s with growth levels nobody could foresee.
In 2010, Bitcoin averaged 322 transactions per day and 587 active addresses contributing to this. In 2019, the average daily transaction count was 328,360 with 716,832 addresses contributing to this throughput.
Velocity is the number of times a single bitcoin changes hands over a given time period. 18.93 million BTC were transferred over the network in 2010, implying a year-end velocity of about 3.77. In 2019, 254.75 million BTC were transferred on-chain, which implies a staggering velocity of 14.05. The growth in velocity represents an evident increase in network usage. When price appreciates more than the money supply can increase, it leads to velocity expansion.
From Bitcoin’s first transaction till Dec 27, 2019, nearly $7.6 trillion worth of transfers have happened over the network. This number doesn’t account for multiple transactions moving the same funds from one wallet to another, so it is skewed to the higher side.
Big Blocks and Fees
Bitcoin Cash was born out of community infighting regarding the optimal size of each block. Since Bitcoin Cash forked from Bitcoin, it has raised its block size to 32 MB, and its offspring, , currently possesses the ability to process 128 MB blocks.
High fees were the main reason for the initial Bitcoin Cash fork, but it seems like using USD as the basis for fees created a mental illusion of sorts. In 2010, the average fee per transaction was 0.00224 BTC; in 2019 this number had fallen to 0.00016 BTC. Even at the height of the bubble, the calendar year 2017, the average transaction fee was 0.00536 BTC.
At the same time, miners went from earning an average of just 0.12 BTC per day in transaction fees in 2010 to earning an average of 54.65 BTC per day. The Bitcoin fee market might make it non-optimal for smaller transactions, but it prioritizes miner incentives which is key to Bitcoin’s economic security and keeping it’s censorship-resistant USP intact.
A Bitcoin economy will be denominated in BTC – not USD. Problems like this are likely to occur as long as the psychological peg to the dollar exists. And maybe Bitcoin price will berzerk, making it permanently unviable for smaller transactions, but this is precisely the reason scaling solutions like Lightning are being built.