What the Data Tells Us About Bitcoin in 2017

15. January 2018.

What the Data Tells Us About Bitcoin in 2017

Jameson Lopp is an engineer at BitGo and the creator of Statoshi.info.

The following article is an exclusive contribution to CoinDesk’s 2017 in Review.


I’ve always been fascinated with the raw numbers relating to the operational status and growth of bitcoin, especially as we ride the rollercoaster of the adoption life cycle.

That’s why I created Statoshi.info in 2014 to track bitcoin metrics from the perspective of a full node.

To that same end, I’ve compiled statistical measurements of bitcoin’s growth in 2017 from a variety of sources.

A couple things are clear: bitcoin is at the forefront of an increasingly complex ecosystem that continues to grow in a variety of ways. And for the ninth straight year, it stubbornly refused to die.

Bitcoin obituaries proclaimed per year:

2010: 1

2011: 6

2012: 1

2013: 15

2014: 29

2015: 39

2016: 28

2017: 93https://t.co/ERqWe9S6Vi

— Jameson Lopp (@lopp) December 19, 2017

While 2017 is well known as the year that institutional investors started showing interest in bitcoin, it was also picking up steam in smaller countries.

Countries with the most relative interest in searching for Bitcoin in 2017. https://t.co/Wgrqev6fP7pic.twitter.com/YXZpK6Oqu2

— Jameson Lopp (@lopp) December 31, 2017

Academic interest continued to increase, which is great for the long-term prospects of this industry as we continue to gain a greater understanding of what we’re building.

Google Scholar articles published mentioning Bitcoin:

2009: 83

2010: 136

2011: 427

2012: 737

2013: 1,570

2014: 3,790

2015: 4.380

2016: 5,470

2017: 5,840 (will continue to rise due to listing lag)

— Jameson Lopp (@lopp) December 19, 2017

Funding and forking

Venture capital funding continued to flow it in at pretty healthy levels, though there’s more to this story.

Blockchain industry venture capital funding:

2012: $2.13M

2013: $95.05M

2014: $361.53M

2015: $490.48M

2016: $601.15M

2017: $554.45M

— Jameson Lopp (@lopp) December 19, 2017

It may be that VC funding did not accelerate because new funding avenues have opened up for entrepreneurs in this space. The initial coin offering (ICO) boom of 2017 saw unprecedented levels of funds raised in a non-traditional form. CoinDesk’s ICO tracker logged over $3.5 billion in funds raised via ICOs!

On top of the ICO explosion we also saw another type of boom: in a new type of bitcoin fork that has come to be known as an “altcoin airdrop.”

While most of the crypto assets in existence have been created via software forks of Bitcoin Core, they have historically started with a new genesis block and thus a new distribution scheme for the tokens themselves.

You can see a fairly complete list of the airdrops at btcdiv.com, but many of them don’t even show up on market cap lists because they have little value.

From looking at the top few forks you could claim that about $50 billion in value was created/raised via bitcoin forks in 2017.

As an engineer who had to deal with the fallout from the fork frenzy, it became tiring pretty quickly as it was clear that the vast majority of these forks would not have sufficient value to warrant spending scarce developer resources trying to support them.

No, @BitGo has no plans to support:

Bitcoin Platinum

Bitcoin Diamond

Bitcoin Ruby

Bitcoin Cash Plus

Bitcoin Clashic

Bitcoin Uranium

Bitcoin Silver

Bitcoin Hot

Bitcoin God

BitcoinG

BitcoinStake

Bitcoin Blue

Bitcoin Faith

Bitcoin Pizza

Super Bitcoin

Lightning Bitcoin

UnitedBitcoin

— Jameson Lopp (@lopp) December 15, 2017

Technical development

At a protocol level, there was a great deal of work done in 2017. The Bitcoin Core repository in particular was a hive of activity.

2017 reference impl commits & merges:

Bitcoin Core: 1,925

Litecoin: 1,298

IOTA: 1,166

Monero: 1,199

Bitcoin ABC: 1,104

Ethereum Classic: 895

Ethereum (geth): 833

Zcash: 491

Stellar: 453

Dash: 394

Bitcoin Classic: 374

Ripple: 271

Bitcoin Unlimited: 218

Bitconnect: 23

Dogecoin: 0

— Jameson Lopp (@lopp) December 31, 2017

Bitcoin Core Git Stats 2017:

– Total pull requests created: 1’843 (~5 per day)

– Merged pull requests: 1’195 (~3.27 per day)

– GitHub comments/reviews: 21’153 (~57.95 per day)

– Commits: 3’277 (~8.98 per day)

– Git contributors (merged code): 161

– GitHub contributors: 713

— Jonas Schnelli (@_jonasschnelli_) January 10, 2018

Bitcoin usage

While you may think of bitcoin as being a cryptocurrency, some users think of it as a trust anchor. By embedding data into bitcoin’s blockchain, other systems can gain new properties such as tamper evidence and immutability.

The amount of outputs that embedded data into the blockchain more than doubled year over year, due to the increased popularity of platforms such as Blockstack, Colu, and Omni.

Bitcoin OP_RETURN outputs created in:

2014: 13,000

2015: 655,000

2016: 1,040,000

2017: 2,253,000https://t.co/4dUv4bFMdapic.twitter.com/owoRrqdFmq

— Jameson Lopp (@lopp) December 31, 2017

As adoption continued to increase, so did the size of the unspent transaction output (UTXO) set, AKA the state of all bitcoin ownership.

Bitcoin’s UTXO set grew from 44M to to 62M unspent transaction outputs in 2017, adding a net new UTXO every 2 seconds. pic.twitter.com/1Anf9mZshZ

— Jameson Lopp (@lopp) December 31, 2017

A more controversial aspect of the changing nature of bitcoin is the transaction fees.

While rising fees have caused significant frustration for users trying to transact in smaller amounts of value, an optimistic view is that the network security is on the right path toward sustainability.

If fees don’t eventually replace the block subsidy, then either the thermodynamic/computational security of the network will have to drop or perpetual inflation will have to be introduced in order to pay miners to maintain the same level of hashing power.

Transaction fees collected by Bitcoin miners have surged over 100X from $100,000 per day to $11,000,000 per day in 2017. Bitcoin’s network security is becoming sustainable! https://t.co/8f2uPpKT1ypic.twitter.com/u5bpkBG4hw

— Jameson Lopp (@lopp) December 19, 2017

Bitcoin transaction fees relative to the block subsidy increased from 5.7% to 31.7% this year. If fee rates remain the same in terms of satoshis per virtual byte, Bitcoin’s computational security will be self-sustaining in 6.5 years after 2 more halvings. https://t.co/OA3oIhHeIjpic.twitter.com/xUCMs5BB6q

— Jameson Lopp (@lopp) December 31, 2017

Bitcoin’s privacy properties are still pretty terrible, but at least we’re seeing some improvement on the address reuse metrics.

Bitcoin address reuse (which is bad for user privacy) continued its downward trend in 2017. Still a long ways to go, as 42% of addresses receiving money are being reused! https://t.co/OA3oIhHeIjpic.twitter.com/8PK5XufJbc

— Jameson Lopp (@lopp) December 31, 2017

Network security and health

The size of the network mesh of nodes that validate and propagate bitcoin data is back on the rise after stagnating for several years.

The number of listening (publicly connectable) Bitcoin nodes doubled in 2017 to 11,000! Note: it’s estimated that there are over 10 times as many non-listening Bitcoin nodes. https://t.co/R9VBt6kghWpic.twitter.com/Osxx7HRw3d

— Jameson Lopp (@lopp) December 31, 2017

As bitcoin becomes more valuable, miners are able to expend more energy securing the system from computational attack.

Bitcoin’s thermodynamic security increased from 3 exahashes per second to 14 exahashes per second in 2017. https://t.co/fm3inll7uVpic.twitter.com/1lBPIJBhvL

— Jameson Lopp (@lopp) December 31, 2017

Bitcoin’s network security accelerated at an average rate of 463 GH/s^2 in 2017. https://t.co/dviehgkH9H

— Jameson Lopp (@lopp) December 19, 2017

Due to the record-breaking acceleration of Bitcoin’s hashrate in 2017, the days of work a miner with 100% of current hashpower would need to rewrite the entire blockchain dropped from 270 to 200. https://t.co/fm3inll7uV H/T @pwuillepic.twitter.com/UOebKERCLe

— Jameson Lopp (@lopp) December 31, 2017

Technical improvements to block propagation continued to decrease the latency at which new blocks are seen by most peers across the network. This means that nodes come to consensus about the state of the blockchain faster, which reduces the occurrence of orphaned blocks.

Bitcoin block propagation time halved again this year after halving last year as well. Average time to reach 50% of nodes is now under 1 second! https://t.co/lwJtJ818MGpic.twitter.com/jYEyOIZ9MT

— Jameson Lopp (@lopp) December 31, 2017

Bitcoin economics

With an exchange rate increase of over 1,300 percent, bitcoin’s market cap increased past $230 billion, earning it 19th place globally in terms of M1 money supply.

While 30-day BTC/USD volatility was on the decline in 2015 and 2016, it began rising again in 2017.

On average, an estimated $12,000 per second was transacted via BTC in 2017 compared to ~$2,000 per second in 2016.

https://t.co/W7qaVBd7R4 estimates (by removing likely change outputs) that ~$375 billion was transacted via BTC in 2017, averaging nearly $12,000 per second. https://t.co/sQke38CutBpic.twitter.com/0iJ13wwk9b

— Jameson Lopp (@lopp) January 12, 2018

Interestingly, the output value of the average transaction (without trying to guess and subtract change outputs) appeared to rise along with the exchange rate. Almost as if BTC is being used as the primary unit…

The value of the average bitcoin transaction rose from $4,000 to $80,000 in 2017. https://t.co/9bBhuz8gbWpic.twitter.com/tKNhWpdWPJ

— Jameson Lopp (@lopp) January 11, 2018

And indeed, we can see from the raw UTXO value being spent that it was pretty consistent in BTC terms.

The raw value of UTXOs being spent seems to be unaffected by the exchange rate and held a fairly steady average of 30 BTC per second in 2017. https://t.co/kUtVc9eWTQpic.twitter.com/VdMFGTo4sG

— Jameson Lopp (@lopp) January 12, 2018

Bitcoin in 2018

Looking forward to 2018, Lightning Network development has been progressing nicely. I wrote about the promise of Lightning Network two years ago and it’s finally coming to fruition, though there are still plenty of challenges to overcome.

.@acinq_co‘s testnet Lightning Network explorer currently showing 567 nodes with 1877 channels. https://t.co/MAPu0YU4tCpic.twitter.com/xvHCLDglcB

— Jameson Lopp (@lopp) January 8, 2018

We’ve even seen Lightning Network payments conducted on the main network!

ATT BTC Users: TorGuard now accepts mainnet Lightning Network BTC payments. Ask support for details! #bitcoin#lightningpic.twitter.com/6agWGvc5XM

— TorGuard (@TorGuard) January 8, 2018

The next phase of development in the ecosystem will be speeding up economic interactions.

Payments via second-layer networks will be one leap forward, but the “atomic age” will usher in even greater innovations such as trustless, decentralized, real-time peer-to-peer exchanges.

If you are developing sidechains, forkchains or altchains, you should be prepping for atomic swaps. The atomic age is coming, what cannot be swapped will be left behind. All that protects your trades today are “if” statements. In atomic swaps you get real cryptographic guarantees

— Alex Bosworth (@alexbosworth) January 3, 2018

I expect 2018 to be another exciting year with plenty of development and drama. Stay tuned!

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Blockstack and Colu.

Network image via Shutterstock

The leader in blockchain news, CoinDesk strives to offer an open platform for dialogue and discussion on all things blockchain by encouraging contributed articles. As such, the opinions expressed in this article are the author’s own and do not necessarily reflect the view of CoinDesk.

For more details on how you can submit an opinion or analysis article, view our Editorial Collaboration Guide or email [email protected].

Published at Sat, 13 Jan 2018 11:00:15 +0000

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