Measuring Bitcoin’s Economic Activity

Measuring Bitcoin’s Economic Activity

Disclaimer: Your capital is at risk. This is not investment advice.

Transaction Value (USD)

The Bitcoin Network is first and foremost a global public payments infrastructure. Unlike traditional payments networks, the unique architecture of Bitcoin gives us a window into the volume, frequency and value of transactions across the Bitcoin Network. In this article we will look at how we measure the value of transactions and the historic state of transactions on the Bitcoin Network.

Defining transaction value:

Transaction value is the on-chain transaction value measured in BTC or US dollars. Transaction value indicates to us the value of economic exchange between two parties over the Bitcoin Network. We always measure transaction value in individual blocks or weeks, rather than days. This accounts for the weekday bias in Bitcoin’s economic activity.

Refining the transaction value output:

Transaction value is actually a more complex calculation then it appears. The architecture of the Bitcoin Network means that each transaction involves multiple inputs and two outputs, of which one is the transaction amount and the other is “change”. In order to identify the economic value of the transaction we need to identify and remove the change from the total spend. The result is the transaction value.

The ByteTree Terminal monitors transaction value across multiple time frames. The most granular level is in the blockchain section, where we measure the transaction value in the latest block. In the example above, we can see that a total of $0.78MM was transacted between wallets in the latest block, generating $390 of Fee income to the block miner.

We also track the cumulative transaction value over a 7-day rolling window to monitor short term trends. On the chart above we can see an initial increase in transaction value up to the 20th July, before subsequently falling around $6Bn to a 7-day total of $11Bn on 27th July. The steeper the gradient, the more aggressively transaction value is increasing or decreasing.

We will be unlocking a plethora of metrics and indicators in blockchain data over the coming weeks and months.