Coinmetrics, a crypto asset analytics and data service provider, recently reported that approximately two-thirds of daily Bitcoin (BTC) transactions do not involve trading the cryptocurrency or paying for products and services.
The open-source data company revealed the transaction volume on Bitcoin’s network mainly consists of crypto traders moving funds from one wallet or exchange to another. Per the firm, most other transactions involve spoofing, market manipulation, and mining pools transferring the cryptocurrency to their members.
The data service also said there have been times when up to 98% of transactions on Cardano’s (ADA) blockchain did not have economic value. Meanwhile Elementus Inc., another crypto data provider, claimed over 45 percent of daily transactions on Ethereum’s network are either spam or do not have economic value.
If this space is not a joke but serious, then people need to more. You’d want to know the facts. If institutional money is going to come into Bitcoin, they’ve got to understand what they are buying.
Morris, who manages $300 million in investment portfolios, aims to bring more transparency to crypto-related transactions by helping firms develop blockchain analytics software such as Elementus and Cryptocomposite.
Blockchain Data Lacks Clarity
Elementus CEO Max Galka, a former trader at Credit Suisse Group AG, revealed his company will be working with financial organizations to launch a crypto data service this year. He added:
You are sort of looking at a tiny piece of the blockchain through a keyhole, and you are not seeing the big picture. It’s really hard to understand the context around it. What we do is we allow you to get the full picture.
Notably, a number of market experts argue that the “full” picture may be very different from what’s available on blockchain explorers. Analysts also argue that being hard to identify who’s behind cryptocurrency transactions may pose serious issues if said transactions are associated with illicit activities.
Lucas Nuzzi, director of technology at Digital Asset Research, a company that focuses on providing “independent, rigorous, credible cryptocurrency” data, stated that “creating addresses in these networks is free, and transaction fees at this point are sufficiently low to enable a single user to send small balance through hundreds of transactions."
Making Transactions Untraceable
This, researchers say helps people to transfer digital currency between accounts in a manner that makes it hard to trace transactions. In fact, Coinmetrics’ research shows one user was behind nearly 90% of the transactions on the Ethereum network between February 2017 and February 2018.
Researchers think mixers, entities that move cryptocurrency between numerous accounts, may be custodians or exchanges who might be trying to make it hard for hackers to steal funds. These could also be malicious organizations or individuals attempting to make transactions untraceable, in order to orchestrate illegal activities, Coinmetrics states.
Nic Carter, co-founder of Coinmetrics, believes the value of real economic transactions on the Bitcoin blockchain is of around $2 billion per day and of approximately $700 million on the Ethereum network.