Written by: BitMEX Research
Source: Chain News
In this report, we analyze and discuss the average accuracy level (integer) of the output value of Bitcoin transactions. We evaluated nearly 1.3 billion non-zero bitcoin output since the launch of the network, which represents a total currency value of more than 5.4 billion bitcoin expenditures, worth more than $ 12 trillion. We then classify these transaction outputs into different levels based on accuracy. Over the past decade, accuracy has maintained a strong upward trend. Currently, more than 70% of Bitcoin output uses the highest available accuracy (1 satoshi), compared to about 40% in 2012. Since 2019, only 0.6% of the output has spent whole bitcoin, compared to about 10% in 2012. We conclude that the main reason driving this may be the increase in the penetration of fiat-denominated payments, and more people are using the network experimentally than in the past. The data also shows that, at least for now, Bitcoiner's (bitcoin holder) dream of achieving the status of a unit of account is still out of reach.
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Figure 1 — The proportion of bitcoin output divided by the "level" of currency value accuracy. Source: BitMEX Research, Bitcoin Blockchain (Note: The highest block height is 613,999, excluding zero currency output, the output is 1,000 Blocks as a group)
In this report, we have checked the accuracy or rounding of all Bitcoin transaction output. We evaluated all 1.3 billion outputs in Bitcoin history and classified them into tiers based on the accuracy of the output currency value. We used 14 levels (this is the 14th power of 10), where 1 satoshi is the highest accuracy and 100,000 Bitcoin is the lowest accuracy. The table below (Figure 2) illustrates all results, while the figure above (Figure 1) shows the penetration of each level of accuracy over time.
Our data shows that accuracy has improved significantly over the past decade, and even beyond 2018, this situation has continued unexpectedly. Currently, more than 70% of Bitcoin output uses the highest available accuracy (1 satoshi), which is a significant improvement over the 2012 level of about 40%. Since 2019, only 0.6% of the output has spent whole bitcoin, compared to more than 10% in 2012.
Explanation of obvious data anomalies:
- 10 Bitcoin Tier (2009 and 2010)-It should be noted that our data includes coinbase output. In 2009 and 2010, the block reward was 50 (a multiple of 10 Bitcoins), the transaction volume was very low, and there were almost no fees, so a large part of the output belonged to the multiple category of 10 Bitcoins. From 2011, the data more reflects non-Coinbase transactions.
- 10 satoshi level (2013)-By early 2013, the transaction volume in the 10 satoshi level picked up slightly, due to the Satoshi Dice gambling game. Our opinion is based on a brief analysis of address-related transaction volumes starting at 1 dice, which shows that the game peaked around March 2013.
- 1,000 satoshi level (2015)-In the summer of 2015, the output ratio of the 1,000 satoshi accuracy level increased significantly due to the so-called "flood attack". An example of these "attack transactions" can be viewed here. The transaction has 35 outputs, of which 34 have a currency value of 1,000 satoshis. This attack is often thought to be related to a "block capacity war," which plagued the entire community from 2015 to 2017. This situation is also illustrated in Figure 4 below.
results and analysis
Figure 2 below summarizes the main results. The table shows that, in general, the highest accuracy output is the most common, with 60.1% of the output using the highest available accuracy and 10.1% of the output using the second highest accuracy. In the lower part of the accuracy range, the lowest accuracy used is the 100,000 bitcoin hierarchy, which has only 15 outputs. There is no output on the blockchain with an accuracy of less than 100,000 Bitcoins.
Figure 2 — Number of Bitcoin Outputs by Level of Accuracy (All Bitcoin History), Source: BitMEX Research, Bitcoin Blockchain (Note: The highest block height is 613,999, excluding outputs with zero currency value)
The largest transaction output in the history of bitcoin in terms of value (500,000 bitcoins), which also happens to be one of the 15 bitcoin outputs in the 100,000 bitcoin accuracy hierarchy.
The following diagrams (Figures 3 and 4) illustrate the growth of the total number of Bitcoin outputs and how they will evolve over time. In the history of Bitcoin, there have been nearly 1.3 billion transaction outputs. Of course, only a small portion of these outputs are still unspent (sometimes called UTXO). At present, the UTXO collection exceeds 650 million, accounting for 5.1% of the cumulative total output.
The output of the gettxoutsetinfo command on Bitcoin Core shows approximately 65 million unspent outputs
Source: BitMEX research
Figure 3 — Cumulative number of Bitcoin transaction outputs, Source: BitMEX Research, Bitcoin Blockchain (Note: The highest block height is 613,999, excluding outputs with zero currency value, the output is in groups of 1,000 blocks)
Figure 4 — Bitcoin transaction output quantity and Bitcoin price, Source: BitMEX research, Bitcoin blockchain, Coinmarketcap provides Bitcoin price (Note: The highest block height is 613,999, excluding the output with zero currency value, the output is 1,000 blocks as a group)
Figures 5 and 6 below show the total value of Bitcoin output and how it has changed over time. About 1.3 billion outputs spent about 5.5 billion Bitcoin. Depending on the spot price of the bitcoin at the time of the expenditure, this may represent more than $ 12 trillion in expenditure.
Figure 5 — Cumulative total value of Bitcoin in transaction output, Source: BitMEX Research, Bitcoin Blockchain (Note: The highest block height is 613,999, and the output is in groups of 1,000 blocks)
Figure 6 — Bitcoin currency value and Bitcoin price in transaction output, Source: BitMEX Research, Bitcoin Blockchain, Coinmarketcap provides Bitcoin price (Note: The highest block height is 613,999, and the output is 1,000 blocks as one group)
The total cumulative average output value is 4.26 Bitcoin. As shown in Figure 7 below, this average value decreases over time, which may be due to the increase in the price of Bitcoin.
Figure 7 — Average output currency value, Source: BitMEX research, Bitcoin blockchain (Note: The highest block height is 613,999, excluding the output with zero currency value, the output is in groups of 1,000 blocks)
The level of accuracy of Bitcoin transactions can involve important privacy considerations. When performing standard Bitcoin denominated transactions, there will be two outputs, one output is sent to the receiver, and the other is used for change. Generally, the output with higher accuracy can be regarded as change, which reduces privacy.
As our data shows, the level of accuracy is increasing, so most outputs now have the highest level of accuracy. From a privacy standpoint, this could be good news.
Many believe that Bitcoin may achieve its goal of becoming a currency in three steps. First, its use as a medium of exchange may be driven by Bitcoin's potentially unique capability: censorship-resistant electronic payments. Second, Bitcoin can be a reliable means of value storage. Finally, the most ambitious and impossible step to achieve the status of bookkeeping unit. In this case, goods and services are denominated in Bitcoin, businesses report in Bitcoin, and economic decisions are based on the amount denominated in Bitcoin.
Potential ways for Bitcoin to become a currency
If accounting unit status is achieved or becomes more widespread, it can be speculated that accuracy should decrease rather than increase. The data in this report (Figure 1) shows that Bitcoin is moving in the opposite direction and average accuracy is still improving. This may indicate that, at least so far, the accounting unit argument is violated.
The improvement in accuracy may be driven by several factors. Early use of bitcoin was more experimental, and bitcoin-denominated payments were more likely at that time. For example, payment may be related to on-chain gambling, on-chain games, and users obtaining the first batch of Bitcoin or technical tests, at which time the accuracy may decrease. In the past few years, the economic application of bitcoin may have improved, but the economic application of fiat currency is increasing, which has improved the level of accuracy. For example, dollar-denominated transactions and speculation or dollar-based business activities. In addition, before mid-2010, there was no clear Bitcoin spot price at that time, and high accuracy was not required. As bitcoin has appreciated significantly, there is even more reason to need this accuracy. Another factor may be the long history of bitcoin, and the increasing accuracy of unspending output over time, allowing the increase in accuracy to be passed on. We believe that it is for these reasons that accuracy has improved significantly during the first decade of Bitcoin's development.
As for whether the trend will change, and whether bitcoin is increasingly used as a unit of account, and whether goods and services are denominated in bitcoin, the level of accuracy will decline again, which may take many years. Efforts related to the first step (in the stage of development as a medium of exchange in the currency path) are still ongoing, not to mention achieving accounting status. At least for now, the status of the unit of account is still a bit fantasy.
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