A New Approach To Analyze The Bitcoin Industry: A Result Of Scientific Methodologies

Parth Vig
Parth Vig is a Management student, and a keen observer of Cryptocurrency and blockchain technology, his interest in writing brings him to thecoinrepublic.com, He believes that he has many ideas that he pens down and he feels it would be a great asset for any kind of creative writing.
  • Approximately 23 million institutions have access to bitcoin across the globe based on statistical data and other research methodologies.
  • The Bitcoin network acts as an open ledger, the transactional history of the same is available to be accessed publicly.
  • The newly developed tool can analyze and trace multiple addresses to a single owner, thus resolving the complexity which arose from the conventional method.

According to a recent report from Glassnode, a blockchain analytics company known for its data analysis, approximately 23 million institutions have access to bitcoin across the globe based on statistical data and other research methodologies.

Traditional Method

Previously, the number of bitcoin holders was estimated by tracing the bitcoin addresses. Since the Bitcoin network acts as an open ledger, the transactional history of the same is available to be accessed publicly. This, however, was considered to be a traditional and time-consuming method.

Presently, researchers have come up with advanced scientific methodologies, through which the above data was confirmed. These techniques allowed the researchers to eliminate complexities arising from traditional methods.

The complexities which arose from the previous methodologies were notable factors that were aimed to be eradicated in the new methods. This included the absence of a one-to-one connection between the addresses and the users, thus affecting the genuineness of the data so collected.

Glassnode employed advanced algorithms, statistical data sciences, and industry-standard heuristics to come with innovation to avoid such problems. It was based on such advanced formulas they were able to publish a report to enable researchers to get a deeper understanding of the network. The algorithm has the number of users with the time period of each usage.

Glassnode’s Advancement

The newly developed tool can analyze and trace multiple addresses to a single owner, thus resolving the complexity which arose from the conventional method. However, the deliberate usage of the term entity in place of individuals is associated with the tool’s inability to map the number of people behind an address.

Apart from that, the report can also trace unique entities that presented itself in the network. Additionally, the Entities Net Growth metric is calculated based on the difference between new entities and disappearing entities.

Other notable terms include whales, which refer to unique entities holding at least 1,000 BTC, Active Entities, those which either received or sent funds, and finally Sending and Receiving entities, those who either only sent or received bitcoin respectively.

The end product of the Glassnode methodology is smaller than the number of new addresses as a result of continuous clustering. As an example, in 2019, the average number of new addresses added to the Bitcoin blockchain per day was over 355k. However, the average number of new entities was only slightly above 100k, representing a ratio of 28 percent, according to the report.

The impact and benefits

Researchers were able to arrive at new results which enabled the t to expand their study on the present topic. The report found that at the beginning of 2018, there was an increased discrepancy between new addresses and new entities. Meaning, the new addresses being created were ‘change addresses’ as opposed to new users joining the network.

The analysis found that the number of entities holding bitcoin (BTC) is 23.1 million. The current number of non–zero addresses is approximately 28.4 million. They are thus allowing the researchers to come to the conclusion that entities will typically control more than one BTC address.

The report also reveals the bitcoin growth to be positive on a general basis. According to the report, the sector has faced a negative impact only for 21 days throughout its history, which, according to researchers, is accounted to be healthy growth. As for whales, 75 entities hold 10,000 or more BTC as of January 2020.

Seven entities hold more than 100,000 BTC. Coinbase (983,800 BTC), Huobi (369,100 BTC), Binance (240,700 BTC), Bitfinex (214,600 BTC), Bitstamp (165,400 BTC), Kraken (132,100 BTC), and Bittrex (118,100 BTC) hold around 13 percent of the circulating bitcoin supply across the globe.

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