What the data on Bitcoin tell us in 2017

January 10, 2019 Bitcoin

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Jameson Lopp is an engineer at BitGo and the creator of Statoshi.info.

The following article is an exclusive contribution to 2017 of CoinDesk in Review.

I've always been fascinated by the raw numbers related to the operational status and bitcoin growth, especially when we ride the rollercoaster cycle of adoptions.

That's why I created Statoshi.info in 2014 to track bitcoin metrics from the point of view of a complete node.

For that same purpose, I compiled the statistical measurements of bitcoin growth in 2017 from a variety of sources.

A couple of things are clear: bitcoin is at the forefront of an increasingly complex ecosystem that continues to grow in various ways. And for the ninth year in a row, he stubbornly refused to die.

While 2017 is known as the year when institutional investors started to show interest in bitcoin, it was also felt in smaller countries.

Academic interest has continued to increase, which is great for the long-term prospects of this sector, as we continue to gain a greater understanding of what we are building.

Financing and bifurcation

Venture capital loans have continued to bring it to fairly healthy levels, although there is more in this story.

VC funding may not be accelerated because new funding opportunities have opened up for entrepreneurs in this space. The initial boom in the 2017 coin toss (ICO) has seen unprecedented levels of funds generated in a non-traditional form. The CoinDesk ICO tracker has recorded over $ 3.5 billion of funds raised through ICO!

In addition to the ICO explosion we have also seen another type of boom: in a new type of bitcoin fork that has become known as "altcoin airdrop".

While most of the existing cryptographic resources have been created through the Bitcoin Core software forks, they have historically started with a new genesis block and then a new distribution scheme for the tokens themselves.

You can see a fairly complete list of airdrops on btcdiv.com, but many of them do not even appear on the market cap lists because they have little value.

From the analysis of the first forks it could be said that around $ 50 billion of value has been created / augmented by bitcoin forks in 2017.

As an engineer who had to deal with the fallout from the fork frenzy, it became tiresome quickly enough since it was clear that the vast majority of these forks would not have had sufficient value to justify the expense of scarce developer resources trying to support them.

Technical development

At the protocol level, there was a lot of work in 2017. The Bitcoin Core repository in particular was a hive of activity.

Use of Bitcoin

While you may think of bitcoin as a cryptocurrency, some users consider it a trust. By incorporating data into the bitcoin blockchain, other systems can acquire new properties such as tamper evidence and immutability.

The amount of output that has incorporated data into the blockchain has more than doubled from year to year, due to the growing popularity of platforms such as Blockstack, Colu and Omni.

As the adoption continued to increase, so did the size of the transaction set output of the unspent transaction (UTXO), AKA the status of all bitcoin ownership.

A more controversial aspect of the changing nature of bitcoins is transaction fees.

While the increase in taxes has caused considerable frustration for users seeking to conduct transactions in less valuable amounts, an optimistic view is that network security is on the right path to sustainability.

If the taxes do not eventually replace the subsidy by block, then the thermodynamic / computational safety of the network will have to decrease or "perpetual inflation" will have to be introduced in order to pay the miners to maintain the same level of hashing power.

Bitcoin's privacy properties are still pretty terrible, but at least we're seeing an improvement in address reuse metrics.

Network security and health

The size of the mesh network of nodes that validate and propagate bitcoin data has increased again after being stagnated for several years.

When the bitcoin becomes more valuable, the miners are able to spend more energy to secure the system from the computational attack.

Technical improvements to block propagation continued to reduce the latency with which new blocks are seen by most peers across the network. This means that the nodes arrive at consensus on the state of the blockchain faster, which reduces the occurrence of orphan blocks.

Bitcoin economy

With an increase in the exchange rate of over 1300 percent, bitcoin market capitalization has increased by over $ 230 billion, earning the 19th place globally in terms of M1 money supply.

While the volatility of the 30-day BTC / USD was down in 2015 and 2016, it began to rise again in 2017.

On average, it is estimated that $ 12,000 per second was traded via BTC in 2017 compared to ~ $ 2,000 per second in 2016.

Interestingly, the output value of the average transaction (without attempting to guess and subtract the change outputs) seemed to increase with the exchange rate. Almost as if BTC were used as a primary unit …

And indeed, we can see from the raw UTXO value spent that it was quite consistent in terms of BTC.

Bitcoin in 2018

Waiting for 2018, the development of Lightning Network is proceeding well. I wrote about the promise of Lightning Network two years ago and it is finally coming to fruition, although there are still many challenges to overcome.

We even saw the Lightning Network payments conducted on the main network!

The next phase of development in the ecosystem will accelerate economic interactions.

Payments through second-tier networks will be a step forward, but the "atomic era" will introduce even greater innovations such as trusted, decentralized and real-time peer-to-peer exchanges.

I expect 2018 to be another exciting year with a lot of development and drama. Stay tuned!

Revelation: CoinDesk is a subsidiary of the Digital Currency Group, which has a shareholding in Blockstack and Colu.

Lightning Network displays node data via Asinq.co

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