Active Bitcoin addresses served as an indicator of network activity. These wallets got related to entities that control a certain number of profiles.
After developing its methodology to understand the use of bitcoin, Coin Metrics revealed in its State of the Network # 133 report an estimate of how many bitcoin wallets are active daily. The analytical firm highlighted, with roots in measurements made last week, and based on 1 million Bitcoin addresses, a daily average of 500,000 active wallets.
The study aims at the number of active addresses and addresses with a non-zero balance of BTC; in the early days of Bitcoin, it was the best metric to study network use.
The study quickly discovered that this approach had many downsides, as it overestimated activity from services such as exchanges or even gambling services. These bodies manage millions of addresses, but these profiles do not correspond one-to-one with users or wallets.
The report highlighted that the study reflected on group addresses that belong to the same body. Heuristics is the set of techniques and methods that allow solving a problem related to the network. The research also clarifies that individuals can own multiple wallets, but this is much less likely than owning various addresses.
According to the report, there are many heuristic methods for gathering addresses into groups related to a wallet. The most efficient is the so-called “shared input heuristic,” which got even mentioned in the Bitcoin White Paper. This methodology, according to the authors, is called Shared Input Property or Co-expense Heuristics.
Metrics on Wallets to Understand More about Bitcoin Behavior
Active Bitcoin addresses usually overestimate unique users, as users generally tend to deal with multiple addresses. According to the study, the number of active addresses is generally more prominent than the active daily wallets by a factor of 2. Coin Metrics explained that last week, there were half a million active wallets on average per day, compared to 1 million addresses per day.
The researchers discussed that wallet metrics offer a better indicator of bitcoin users but they pointed out that wallets should not get interpreted as unique individuals. The analysis ends up by saying there are groups of addresses that could get managed by bodies such as exchanges, which could make the activity of many users per day easier.
The wallet metrics also bring another view on the distribution of bitcoin possession. The analysis even showed the current percentage of bitcoin supply connected to wallets of various sizes.
Coin Metrics highlights some limitations regarding these metrics. When the distribution takes effect by the balance of the addresses, the portfolios with a balance that surpasses 10,000 BTC appear with a higher percentage of supply than the addresses with more than 10,000 BTC.
This event shows large entities such as exchanges once they get all grouped into portfolios, according to the report, and represents a serious limitation of the current methodology that gather all address into entities.
By: Jenson Nuñez
