A very small percentage of the total recorded bitcoin transactions are of economic value, this is according to the latest report by research firm Chainalysis. In the report released on December 19th, Chainalysis found out that of the total bitcoin addresses in existence, only about 37% are economically relevant.
By Chainalysis’s definition, being economically relevant means that the addresses are owned either by businesses or individuals who currently own bitcoin. According to the report, there are approximately 460 million bitcoin addresses in total. Out of these, the “economically relevant” addresses are about 172 million.
Of the 172 million addresses only about 27 million actually hold any bitcoin. 86% of these were identified to belong to named services, such as a cryptocurrency exchange or a darknet marketplace.
Well, what about the non-economically relevant addresses? These, according to the report are addresses used typically once and only hold bitcoin for a very short period. As an example, most of these addresses (75%) have held bitcoin for less than a day.
Some of these addresses can be considered as ‘change addresses’ or payment facilitation addresses. Change addresses work by facilitating the sender of bitcoin to receive their balance once they effect a transaction.
If, for example, a user held 10 bitcoin in their wallet and they made a 2 bitcoin transaction, the whole amount is usually sent but the balance of 8 bitcoin is returned to the sending address.
Transactions recorded on the Bitcoin network were also analyzed and about 20% of these are actually of any economic benefit. What this means is that only about a fifth of the total recorded transactions involves the previously stated “economically relevant” addresses.
The assumption here is that these addresses either send or receive bitcoin as a result of making an economic exchange with these named services. The other unaccounted for 80% value is mainly the return balance or change explained earlier.
Looking at the chart above shared by Chainalysis, between the months of August and October 2018, there was about $41 billion worth of transactions recorded on the Bitcoin network but only about $9 billion had real economic value.