Only 37% Of Bitcoin Addresses Are Economically Relevant, Says Chainalysis Study

News | December 20, 2018 By:

The bitcoin blockchain currently has over 460 million addresses, but only 37% of these are economically relevant, according to a report released by research firm Chainalysis.

A bitcoin address is a single-use token. Like e-mail addresses, you can send bitcoins to a person by sending bitcoins to one of their addresses. Bitcoin addresses are free and easy to set up, and there is no limit on how many an individual or company can have. At present, the bitcoin blockchain forms a network of 460 million addresses.

According to the Chainalysis report, only 172 million bitcoin addresses are economically relevant and they are controlled by people or services who currently own bitcoin. Out of the 172 million economically relevant addresses, 86% are owned by named services, such as an exchange or a darknet market.

The research firm estimated that on average, only 20% of the bitcoin transaction value is economic, in that it is a final transfer between different people via economically relevant addresses. The remaining 80 percent is purportedly “returned as change.”

“Between August and October 2018, some $41 billion of transactions were executed — and only $9 billion had real economic value,” the report said.

The firm further said that non-economically relevant addresses are typically single use and hold bitcoin for only a short time.

“The majority of these addresses are either change addresses or ‘connective tissue,’ meaning they hold bitcoin for a short time to facilitate payments between people and services,” the report said. “To understand change, consider a person who has ten bitcoins and wants to sell one. Because of the way the technology works, the seller has to empty his or her address of all ten bitcoins but will receive nine back in change. Even though he or she only sold one bitcoin, the blockchain reports a total transaction value of ten bitcoins.”