Most Cryptocurrency Transactions Have No Economic Value: Report

  • Nearly two-thirds of Bitcoin (BTC) transactions have no economic value, crypto analysis shows.
  • Researchers say publicly available cryptocurrency transaction logs do not show the “full picture.”

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.

Charlie Morris, chief investment officer at Newscape Capital Group Ltd, was quoted as saying:

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.

Charlie Morris

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.

Max Galka

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.

Senate Banking Hearing on Facebook’s Libra; 0.25% of Algorand Tokens Sell for $60 Million

The top daily news from the cryptocurrency and blockchain space:

  • The Senate Banking Committee books hearing on Facebook's Libra cryptocurrency.
  • Bitcoin developers to get 50 bitcoin (BTC) in funding.
  • 0.25% of Algorand's ALGO tokens sell for $60 million.

At the time of writing, bitcoin (BTC) and ether (ETH) are trading at $9,294.1 (+1.5%) and $269.5 (+0.6%), respectively. As for the MVIS CryptoCompare Digital Assets 10 Index, it is currently tracking at 4,314.6 (-0.2%).

 

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Senate Banking Committee Books Hearing on Facebook

The U.S. Senate Banking Committee announced it will hold a hearing on July 16 in order to question witnesses over Facebook’s new cryptocurrency and blockchain project, Libra. As of press time, it has not yet been publicly disclosed which individuals will testify before the Committee.

The hearing – entitled ‘Examining Facebook’s Proposed Digital Currency and Data Privacy Considerations’ – was scheduled just days after the social media giant officially revealed its plans regarding Libra and its new Calibra subsidiary.

Fund to Support Bitcoin Developers with 50 BTC

Primitive Ventures’ Dovey Wan has gathered 50 BTC – roughly $450,000 – on behalf of non-profit organization Hard Core Fund in an effort to sustainably fund Bitcoin developers.

When discussing why she decided to pursue the initiative, Wan told CoinDesk, “right now, you wouldn’t believe it, there are less than 10 full-time bitcoin developers... We want to fund full-time independent bitcoin developers.”

Established in 2018, the Hard Core Fund is managed by Pan Zhibiao, a former Bitmain employee. Wan – who serves as the executive director for the fund – is the only other team member listed on its website.

0.25% of Algorand’s ALGO Tokens Sell for $60 Million

Algorand – a scalable, secure and decentralized digital currency and transactions platform – closed its first Dutch auction with a clearing price of $2.40 per Algo (ALGO) token, the native token of the Algorand blockchain platform.

The auction was administered by the Algorand Foundation, which, in a blog post on Wednesday, said that it now stands as “the first organization to conduct a fully transparent global auction on its own blockchain.”

In total, a paltry 0.25 percent of ALGO’s total supply was sold to successful bidders for $60.4 million. Notably, the Algorand Foundation will – in exactly one year’s time – offer redemptions on tokens at 90 percent of the $2.40 clearing price.

The completion of the inaugural ALGO auction signalled the mainnet launch of the Algorand, also. It was first unveiled by MIT professor and Turing Award winner, Silvio Micali, in early 2017.