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.

Square Crypto on Hiring Legendary Bitcoin Developer Matt Corallo: ‘LET’S PARTY’

Siamak Masnavi

Square Crypto, the division of payments solutions provider Square that is focused on open source Bitcoin development, announced on Tuesday (August 20) that it had hired legendary Bitcoin developer Matt Corallo.

Square Crypto

The first mention of Square Crypto came on March 20 when Twitter and Square CEO Jack Dorsey sent out the following tweet:

In the tweets that followed, Dorsey explained the motivation for creating this new team:

  • "This will be Square’s first open source initiative independent of our business objectives. These folks will focus entirely on what’s best for the crypto community and individual economic empowerment, not on Square’s commercial interests. All resulting work will be open and free."
  • "Square has taken a lot from the open source community to get us here. We haven’t given enough back. This is a small way to give back, and one that’s aligned with our broader interests: a more accessible global financial system for the internet."

Then, on June 12, Square Crypto announced that Steve Lee, a former director at Google, had been hired to be the manager of this division:

On July 29, Lee held an Ask Me Anything (AMA) session via Square Crypto's Twitter account.

During this AMA session, the Square Crypto PM explained the focus of this group and its relation to the rest of Square: 

When asked how Square Crypto planned to support Bitcoin Core developers, Lee replied:

Lee also provided the first hint that Square Crypto would soon be hiring its first Bitcoin developer:

Matt Corallo

So, who is Matt Corallo? 

Corallo is one of the most highly respected and most prolific Bitcoin developers in the world, who has been making important contributions since May 2011. Currently, Corallo has the 6th most commits (640) in the "Open Source Bitcoin Project".

He is also a co-founder of Bloclstream, where he worked Between October 2014 and January 2017. After leaving Blockstream, he moved to Chaincode Labs, the stated mission of which is "to support and develop Bitcoin and other peer-to-peer decentralized systems."

Decrypto's Tim Copeland says that on February 7, at a meeting event in London, Corallo was introduced as “The bastard child of Satoshi," in response to which Corallo replied: "I can’t comment."

Square Crypto's Hiring of Matt Corallo

This is how Square Crypto ecstatically announced the news at 16:30 UTC on August 20:

As for the reasons for choosing Corallo to be their first full-time Bitcoin developer and how they see him helping this division of Square, they said:

This looks like a very smart move by Square, and judging by the comments on Twitter, the Bitcoin community seems to see this move as very bullish for Bitcoin and its ecosystem.

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