Data analysis: BCH and BSV gradually become data storage blockchains, which are inconsistent with the trading media vision

Foreword: Although BSV and BCH have some desirable features of trading media assets, such as low transaction costs, this is not enough to cause a significant increase in their activities compared to BTC. In addition, BSV and BCH are increasingly being used as a method of storing data on a chain, rather than as a transaction medium. In particular, BSV is primarily used as a way to record data on a chain, with 94% of transactions being OP_RETURN transactions.

In the past few years, a lot of bitcoin (BTC) forks have been born, most of which have gradually disappeared. But one of the forks has a very special status, and that is the "Prince" BCH.

In August 2017, BCH split from the BTC network with the goal of “fulfilling bitcoin as a point-to-point e-cash” original vision. BCH supporters believe that BTC is increasingly becoming a value store rather than a trading medium, which is seen as the original vision of Bitcoin. To achieve this, they believe it is necessary to increase the BTC block size from 1 MB to 8 MB (and eventually increase to 32 MB), which will allow each block to accommodate more transactions and reduce transaction costs (per Blocks can only add a limited amount of data – the smaller the block size, the more users tend to pay more to ensure that miners receive their transactions in a timely manner).

Conversely, opponents of BCH forks believe that increasing block size will eventually lead to stronger centralization, and larger blocks mean that the total size of the books will grow at a faster rate. Each full-node operator (including but not limited to miners, merchants, and auditors) needs to be able to download and store the entire ledger. They also need to propagate blocks in the peer-to-peer network. If the books grow too fast, the average cost of maintaining the necessary hardware and Internet bandwidth for the entire node operator will become higher and higher, which may lead to power concentration problems.

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In November 2018, a new fork was separated from the BCH network: the BSV. BSV is derived from the forked BCH, and its goal is to return to Nakamoto to "use bitcoin as the original vision of point-to-point electronic cash." BSV extends the scope of the BCH and further increases the block size to 128 MB (note: recently expanded the block). In addition, the BSV eliminates the size limit on OP_RETURN transactions, which results in higher data storage capacity on the BSV OP_RETURN . In addition, the BSV also chooses not to use the OP_CHECKDATASIG opcode added by the BCH (extended scripting language to verify the signature of arbitrary data). Ultimately, the goal of the BSV is to " replace every payment system in the world with a better user experience, cheaper merchant costs, and a higher level of security ."

As of now, the realized market capitalization (Realized Cap) of BCH and BSV ranks 5th and 11th respectively in the cryptocurrency market. These values ​​are calculated by the supply of each part and based on the price of the last move. The figure below shows the realized market capitalization of BTC, BCH and BSV:

In this article, we compare the chain activities of BTC, BCH, and BSV and analyze whether the two fork chains achieve the goals stated by their proponents. First, we check to see if there is evidence that they are being used as “peer-to-peer electronic cash”, which we will refer to later as “transactional media”. Then, we look at the differences in block sizes and analyze whether they will promote the use of block space. Finally, we examined the safety and analyzed the effects of forks on indicators such as computing power and mining revenue.

First, the analysis of trading media

In this section, we will examine the chain activities of BCH, BSV, and BTC and analyze the extent to which these assets are used as trading medium. Although there is currently no precise definition of how to measure “transactional media” assets, we expect that the cost of exchanging media assets is relatively low , the number of transactions is large , and the amount of value transfer is large . In addition, the network should have a large number of active, unique users. We analyze various indicators, including adjusted transfer values, transaction counts, and active addresses to measure the economic use of the three assets.

1, the cost

Both BSV and BCH are designed as low-cost blockchains. Low fees are an important aspect of trading medium tokens, because if users are forced to pay a large amount of money each time, they are less likely to use assets for regular payments.

For most of 2019, the median transaction costs for both BSV and BCH were close to $0 . The median cost of BTC fell to $0.03 in early 2019, but remained mostly between $1 and $ 3 in the past three months:

But low fees can also be a long-term security risk. Miners are motivated by block rewards and transaction costs, and as large block rewards decrease, costs become more important. If the total cost is too low, the miners may not be motivated to maintain the safety of the chain after the block rewards are zero.

The total daily cost of BTC is often as high as $1 million, while the daily total cost of BSV and BCH is still less than $1,000 per day for most of 2019:

2, transaction count

BTC still has an advantage in total transaction counts. By contrast, BSV and BCH are not far behind. Specifically, from November 2018 to early 2019, the volume of BSV transactions was large. The following table shows the total daily transaction count for each of the three assets:

Unfortunately, most BCH and BSV transactions do not transfer any value. Instead, they store data on the OP_RETURN as part of the OP_RETURN output.

Although blockchains are primarily used to record value transfers, they can also be used as distributed immutable databases for non-transaction related data. Short messages (bitcoin OP_RETURN messages must be less than 80 bytes) such as "The weather in New York City on July 15 is 80 degrees", can be written to the blockchain and stored permanently.

Therefore, the blockchain can be used as a notary or timestamp service (eg, proof of existence). To do this, the user needs to create a cryptographic hash (as a unique password identifier) ​​for the document they want to create a timestamp, and include that hash as part of the transaction. The transaction can then be used as evidence to prove the existence of the document at the time. This can then be used to refute plagiarists: if someone comes in later and tries to claim that they created the document, the original creator of the document can use their transaction to prove that they had created the document earlier.

To use a blockchain as a database, users need to be able to use arbitrary data as part of the transaction. Bitcoin added the OP_RETURN script opcode in 2013 to allow users to do so. OP_RETURN transactions can be used to record metadata on the chain, but not for efficient exchange of values. Any output with OP_RETURN is not expensive.

And BSV transactions are increasingly included in OP_RETURN. The table below shows the BSV trading day count with OP_RETURN and the BSV trading day count without OP_RETURN:

As of July 1, more than 94% of BSV daily transactions carry OP_RETURN :

Any application or user can use OP_RETURN to record data arbitrarily. For example, most of the BSV's OP_RETURN transactions come from a weather app called "WeatherSV." Weathersv records and retrieves climate data on the BSV ledger. According to the Weathersv website, based on current fees, a weather channel "can be activated for $5, including approximately 142 days of broadcast missions."

The table below shows the percentage of the total number of BSV OP_RETURN transactions sent by a single application. Since May, WeatherSV has sent most of the BSV OP_RETURN transactions:

In fact, most of the BSV transactions (including those without OP_RETURN) are also from WeatherSV. As of July 14, more than 94% of BSV transactions were sent by Weathersv:

Similarly, BCH is increasingly inclined to adopt OP_RETURN transactions. The following table shows the BCH transactions with OP_RETURN and the BCH transaction count without OP_RETURN:

As of July 1, more than 67% of daily BCH transactions are OP_RETURN transactions:

In contrast, only about 25% of BTC transactions are OP_RETURN transactions:

Among them, most of the BTC OP_RETURN transactions are from Omni and Veriblock. The chart below shows the OP_RETURN transaction counts that both occupy:

Compared to BTC, BSV and BCH are increasingly used as a means of storing data rather than as an exchange medium. In addition, Eitafang founder Vitalik Buterin recently proposed that blockchains such as BCH may become the data storage layer of other blockchains.

3. Adjusted transfer value

The total value of the transfer approximates the total amount of goods exchanged. We define value transfer as "local units moving from one ledger entity to another." Only transfer of positive (non-zero) values ​​of the transaction result is calculated. Therefore, the total transfer value can be used as a representative of the total economic activity.

However, this is not a perfect measure. Not every value transfer is necessarily a real exchange of economic goods. For example, many transfers are actually recycled by the user between different addresses they own.

To explain this, we use a metric we call "adjusted transfer value" that attempts to remove non-economic activity or other distracting data (such as self-sending and intentional junk transactions). And BTC has a huge advantage in the total value of transfer. The table below shows the total adjusted transfer values ​​for BTC, BSV and BCH:

The adjusted transfer value of both BSV and BCH is growing. BSV's 2019 daily adjusted transfer amount recently reached a peak of $144.2 million on June 26, 2019, while BCH peaked at $325.5 million on June 27, 2019. However, this is still much lower than the BTC order of magnitude. The latter reached a daily adjusted transfer value of $3.58 billion on June 20, 2019.

In June, BTC accounted for more than 85% of the total market share of adjusted transfer value (three assets), as shown below:

4, the intermediate transfer value

The intermediate transfer value of BTC is also significantly higher than BCH and BSV: the intermediate transfer value of BTC fluctuates between $50 and $100 during 2019, while the intermediate transfer value of BSV and BCH is mostly between $1 and $10. . In particular, the BSV has been relatively unstable over the past few months and has even dropped to an intermediate transfer value of $0 in a few days:

Note: A larger total transfer value or intermediate transfer value does not necessarily mean that an asset is used more as a medium of exchange. Perhaps BSV is used for small exchanges or microtransactions (similar to KIN, which we investigated in previous research reports). BTC is used to exchange more valuable goods and services. But this will be an important indicator to monitor future developments as it provides a clearer picture of the actual use of these assets.

5, active address

An active address is an approximate measure of the total number of unique users who use an encrypted asset. We define the "active address" as the count of the unique address (as the recipient or initiator of the book change) that was active on the network that day. The active address represents the maximum number of potential daily unique users, assuming that each user needs at least one address. However, it is important to note that many users actually control multiple addresses, which means that the actual number of unique users may be significantly lower than the total number of unique addresses. The address may belong to one person, or it may belong to multiple people (such as an exchange wallet), or multiple people may only have one address.

BTC once again dominated the number of active addresses. The chart below shows the daily active addresses of the three assets: BTC's daily unique active address for most of 2019, fluctuating between 600,000 and 1 million, while BCH and BSV remain at 100,000 respectively And below 50,000 (some exceptions):

6, address balance distribution (USD)

The address balance distribution band shows the count of unique addresses holding a certain dollar value currency at the end of the day.

This metric is also a way for a potentially unique user to count, which also assumes that each user needs at least one address with a non-negligible value. As of July 1, the balance of more than 1 US dollar, BTC is close to 20 million, and BCH and BSV are 5.5 million and 4.19 million respectively.

The chart below shows the number of unique addresses for three assets holding at least $1, $100, $1,000, $10,000, $100, $100, and $1 million:

7, the exchange of media summary

Although BSV and BCH have some desirable features of exchange media assets, such as low fees, this is not enough to cause a significant increase in their activities compared to BTC. When measured by metrics such as adjusted transmission values ​​and active addresses, BCH and BSV still account for only a small portion of BTC usage.

In addition, BSVs and BCHs are increasingly being used as a means of storing data on a chain rather than as an exchange medium. In particular, BSV is primarily used as a way to record data on the chain, with more than 94% of transactions being OP_RETURN transactions, most of which are from a single weather application. BSVs may eventually be used as data storage blockchains, probably because they remove the size limit on OP_RETURN transactions.

So far, BCH and BSV have not really been used as a medium of exchange, and it remains to be seen whether they can continue to occupy the market share of BTC.

Second, block size analysis

Block size is the main issue of BCH and BSV bifurcation. After many discussions, BCH increased the block size to 32MB, and BSV increased it to 128MB (note: recently increased to 2GB). In theory, the larger the block size, the more transactions each block can hold. But does this lead to the block being used effectively? In this section, we analyze various metrics related to block size and block integrity.

1, the total block size (unit: byte)

Although bitcoin has a small upper block size, BTC is still ahead of BSV and BCH in terms of total block size. The chart below shows the total block size (sum of all created block sizes in bytes) for each of the three assets. As stated in the “Exchange Media” section, the total block size of the BSV is largely due to the surge in OP_RETURN transactions:

2, the average block size (unit: byte)

The BTC is also ahead of the BSV and BCH in terms of the average number of bytes per block. Although BTC has remained at an average of 1MB per block, BSV and BCH are still well below the 1MB value per block in most cases. Of course, the BSV has a complete data block, but there is no continuous complete data block (within 1 day).

The complete BSV block also caused some lone blocks to occur. A lone block is a valid block that is not included in the main chain. Isolated blocks occur when multiple miners successfully exploit a new block at almost the same time. One of the blocks is accepted by the blockchain and the other block is "isolated" and is not accepted. Larger blocks exacerbate this situation because larger blocks take longer to propagate and verify, which can cause miners to lose synchronization. In April 2019, six consecutive BSV blocks were isolated , including a 128MB block.

BSV and BCH occasionally exceed the average daily 1MB/block value, as shown in the following figure:

3. Average transaction size (unit: byte)

Subdivided by a single transaction, the BSV has more transaction bytes than BCH and BTC. This is most likely related to OP_RETURN , many BSV transactions contain arbitrary data, which increases the overall transaction size:

4, block size summary

Although the block sizes of BCH and BSV are much larger than BTC, they do not take advantage of these extra space. In most cases, the average daily block size of BCH and BSV is less than the 1MB average of BTC.

Of course, both BSV and BCH have the appearance of oversized blocks, especially BSVs, which are increasingly being populated by OP_RETURN transactions, as described in the "Exchange Media" section.

If BCH and BSV are treated as data storage blockchains, then their increased block size may be useful. But as far as being used as a medium of exchange, this does not seem to be a relevant factor.

Third, safety and mining: the impact of computing power

Network security can be said to be the most important consideration for any blockchain. A major security failure can damage the value of an encrypted asset in a short period of time. In this section, we analyze indicators such as computing power and mining revenue to measure the security of three cryptocurrency networks.

1, computing power

When the blockchain passes a controversial hard fork (where the hashing algorithms of the two branches remain the same), their power is inevitably affected. Computational power is the speed at which all miners in the network complete the proof of work calculations and act as a proxy for energy expenditures. Miners need to choose to work on the original chain, but leave and start working on the new fork chain. The computing power will increase with the addition of more mining machines. On the contrary, if the miners leave the network and no new miners or more efficient hardware are added, the power value will drop.

In terms of computing power, BTC has a huge lead. Although the BCH was temporarily comparable to the BTC's computing power at the end of 2017 (because the miners had a boast of BCH's difficulty adjustment algorithm), BTC quickly gained a dominant position in computing power. In addition, when the BSV fork was born in November 2018, the computing power of BCH dropped significantly.

The chart below shows the average daily power of the three networks. The BTC's computing power reached a peak of 74.55 M TH/s on July 5, while the BCH and BSV peaks were 2.7 M TH/s and 1.49 M TH/s, respectively.

In general, BTC still has a huge computing power advantage compared to BSV and BCH. As shown in the chart below, as of July 2019, BTC has more than 95% of the computing power (between BTC, BCH and BSV):

2. Mining income

Mining revenue is another important safety indicator. We define mining revenue as “the sum of the dollar value of all miners’ income (cost plus newly issued block rewards) on a certain day”. Mining revenue represents incentives for miners, and this increase in value can encourage more miners to join the market.

The chart below shows the total mining revenue for the three blockchains. BTC's daily mining revenue is millions of dollars higher than the combined revenue of BCH and BSV:

Among them, transaction costs are becoming more and more important in the total revenue of mining. BTC (and BCH and BSV) will halve block rewards for every 210,000 blocks, and BTC's next halving of rewards is expected to occur in May 2020. And as block rewards tend to zero, the proportion of transaction costs in mining revenue will increase. This will be a particularly important consideration for BCH and BSV, and their current total daily cost is less than $500.

The chart below shows the daily mining revenue of the three networks:

3, rewrite the blockchain time

We also studied the time required for BTC miners to rewrite the BCH and BSV blockchains. In this theoretical attack, all BTC miners stopped mining the BTC blockchain and collectively worked to rewrite one of the other two chains. It takes three hours to rewrite the 10-day history of the BSV blockchain, and it takes seven hours to rewrite the 10-day history of the BCH blockchain (if the BTC miner performs the same attack on the BTC, it rewrites the history of ten days. It takes ten days):

Of course, on BCH, this kind of attack is only theoretical, because developers have introduced a deep reorganization protection measure.

4, safety summary

Of the four indicators we use to measure security, BTC is currently ahead of BCH and BSV. Although BCH has briefly threatened the BTC's computing power, it has since declined significantly and is further affected by the division of power at the time of BSV fork. As of July 2019, BTC had over 95% of the computing market share (between BTC, BCH and BSV).

BTC also dominates the daily mining revenue. BTC's daily mining revenue is 30 times and 60 times that of BCH and BSV respectively. And as block rewards continue to halve, this will become a bigger problem, because the total transaction costs of BCH and BSV can be said to be negligible compared to BTC.

We also found that if BTC miners theoretically attacked BCH and BSV, they could rewrite the blockchain in a shorter time.

In the end, BTC is still safer than BCH and BSV, and the latter two still have a long way to go.

Fourth, summary

Although BSV and BCH have some desirable features of exchange media assets, such as low transaction costs, this is not enough to cause a significant increase in their activities compared to BTC. When measured by metrics such as adjusted transmission values ​​and active addresses, BCH and BSV still account for only a small portion of BTC usage.

In addition, BSVs and BCHs are increasingly being used as a means of storing data on a chain (usually without associated economic transactions), rather than as an exchange medium. In particular, BSV is primarily used as a way to record data on the chain, with 94% of transactions being OP_RETURN transactions (mostly from a single weather application). BSVs may eventually be used as data storage blockchains, probably because they remove the size limit on OP_RETURN transactions.

In addition, although the maximum block sizes of BCH and BSV are larger than BTC, they have not utilized this extra space. In most cases, the daily average block size of BCH and BSV is still below the 1MB average of BTC.

Both BSV and BCH have large blocks, especially BSVs, which are increasingly being populated by OP_RETURN transactions. If used as a data storage blockchain, the increased block size of the BSV and BCH would be useful, but this seems not a relevant factor in terms of the current use as a medium for the exchange medium.

In addition, among the four indicators we use to measure security, BTC is currently ahead of BCH and BSV. As of July 2019, BTC had over 95% of the computing market share (between BTC, BCH and BSV).

BTC also has a dominant position in daily mining revenue. BTC's daily mining revenue is 30 times and 60 times that of BCH and BSV respectively. As block rewards continue to halve, this will become a bigger issue because the total transaction costs of BCH and BSV are negligible compared to BTC.

We also found that if BTC miners theoretically attacked BCH and BSV, they could rewrite the blockchain in a shorter time.

So far, BCH and BSV have not really realized the vision of switching media, nor have they taken advantage of their large blocks. BTC is still a safer blockchain than BCH and BSV. Whether BCH and BSV can further occupy the market share of BTC remains to be seen.

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