Only 37% Of Bitcoin Addresses Are Economically Relevant

Chainalysis the famed blockchain research firm have recently completed a study in order to determine the economic relevance of all of the Bitcoin addresses in circulation. In their study, Chainalysis found that just 37% of all addresses are economically relevant.

“A bitcoin address is like an email address that can send and receive bitcoin. Like email addresses, they are free and easy to set up, and there is no limit on how many an individual or company can have. As a result, there are a lot of them — about 460 million as of December 2018.”

The research was carried out on all 460 Bitcoin addresses that are currently live and found that just 172 million of them are economically relevant due to the fact they are currently owned and controlled by people and services that actually own Bitcoin. Chainalysis have commented on this specific finding, stating that:

“Only 37% of these are economically relevant. At Chainalysis, we have identified that 86% of these belong to a named service. The remaining addresses are largely used to facilitate payments, meaning that just 20% of transaction value on the Bitcoin network is an economic transfer, moving bitcoin between two different parties.”

What does this mean?

Economically relevant addresses are those that hold significant amounts of Bitcoin and are active on the blockchain. The others are known as non-economically relevant addresses and generally aren’t used for holding large amounts of Bitcoin over any time frame, instead they are temporary sites used for the exchange of Bitcoin and for some temporary storage. These findings essentially suggest that over 60% of the Bitcoin network is made up of addresses that do not contribute to the network other than on a surface level.

According to the Chainalysis report, this can be economically problematic:

“If so many addresses are created just to pass Bitcoin between people and services, how much of the transaction value on the network is actually moving between economic addresses? We estimate 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% is returned as change. As you can see in the chart below, between August and October 2018, some $41 billion of transactions were executed — and only $9 billion had real economic value.”