'Transaction Count' On Blockchain Networks is An 'Inferior Measure', Coinmetrics Co-Founder Explains

  • "Transaction count" on cryptocurrency networks are not an accurate measure of the effectiveness of their "value transfer system" - Coinmetrics co-founder, Nic Carter says.
  • Carter noted that we must consider transaction capacity and "settlement assurances" when assessing the performance of value transfer systems.

Nic Carter, the co-founder of Coinmetrics.io, an online resource for technical analysis of cryptocurrency prices, recently published a blog post in which he noted that we must consider “transaction capacity (tps)”, “typical transaction characteristics (transaction size)”, and “settlement assurances” - in order to assess the effectiveness of a “value transfer system.”

According to Carter, the “financial bandwidth” of a system during a given time period may be measured by looking at its transaction size and capacity. Meanwhile, the settlement assurances of a value transfer system help us assess whether or not we will receive a “chargeback” or be “defrauded”, Carter noted.

Bitcoin Is More Like A "Physical Settlements System"

Going on to explain how bitcoin (BTC) transactions work, Carter wrote that even though the flagship cryptocurrency is a digital form of money, it more closely resembles a “physical settlements system than a deferred-settlement system like credit cards.”

The Coinmetrics co-founder also pointed out that bitcoin can be considered a “virtual bearer instrument” - meaning that the owner of the private key associated with the crypto account (address) may “unlock unspent output.”

Possessing the private key linked to cryptoassets means ownership, and “you are entitled to do with them whatever you like”, Carter explained.

"No Recourse" If Cryptoassets´Are Lost

However, truly owning cryptocurrency may have its drawbacks as “there is no recourse if you lose your coins or send them to the wrong address.”

On the other hand, credit card users are able to dispute transactions - which can then be reversed in cases where the user’s account may have been overcharged or if there was fraudulent activity detected on it.

Although “recourse has its advantages in certain contexts”, Carter mentioned that “the costs of credit fraud and the remediation infrastructure are passed on to end users in the form of merchant fees.”

So, if we are going to compare “dissimilar value-transfer systems” such as bitcoin, Visa, Paypal, and physical cash, then we should look at the “average transaction size * the number of transactions”, Carter recommended.

TRX's High Transaction Count Is Due To "Zero Value" Transactions 

Curiously, some crypto proponents use transaction volumes to assess which blockchains are performing better. As CryptoGlobe reported recently, the TRON (TRX) network’s transaction volume is now greater than that of bitcoin (BTC), bitcoin cash (BCH), XRP, and ether(ETH) combined. A closer examination, however, reveals that although TRX’s transaction count is increasing, its average transaction value (in USD) is considerably lower than most major cryptocurrencies.

CoinMetrics TRON.pngAverage Transaction Value, From CoinMetrics

Moreover, TRX’s high transaction count may be attributed to the large number of gambling DApps (decentralized applications) deployed on its blockchain - as DApps usually use “zero value” transactions in order to interact the game with a blockchain network.

Time to Be ‘Cautious or Short' Bitcoin, Says Bollinger Bands Creator

Francisco Memoria

John Bollinger, creator of the popular technical analysis tool Bollinger Bands, has tweeted out it’s time to be “cautious or short” on the price of bitcoin, after the cryptocurrency’s price dipped below $10,000 for the third time since the so-called black Thursday.

On social media, Bollinger pointed out that bitcoin’s last move p over the $10,000 mark, which came shortly after U.S. President Donald Trump finished a speech on law and order in which he vowed to take “immediate presidential action to stop the violence” and said he was “mobilizing all available federal resources — civilian and military — to stop the rioting and looting,” was a head-fake.

A head-fake, Investopedia writes, occurs when the price of a security moves in one direction initially, but then reverses its course and moves in the opposite direction. These trades occur most frequently at key breakout points – for bitcoin, a key point was the $10,000 mark.

The price of the cryptocurrency dropped suddenly after breaking its key breakout level earlier this month over a flash crash on BitMEX that saw its price dip to $8,600 before it started recovering. CryptoCompare data shows that bitcoin is now trading above $9,600, but that since the March 12 coronavirus-induced market crash it has tested the $10,000 mark three times already.

Bollinger, it’s worth noting, has a decent track record looking at cryptocurrencies. In October 2019 the analyst accurately said the price of BTC dropping to $7,300 was a head-fake, and the price of the cryptocurrency then moved up in a significant rally to $9,500.

In April of this year, Bollinger tweeted out BTC was “moving into squeeze territory,” shortly before the cryptocurrency’s price started surging. He was, however, caught off guard by the Black Thursday sell-off, as were most investors and analysts.

It’s worth noting many in the cryptocurrency space are still bullish long-term. As reported early BTC developer Adam Back – who some believe could be Bitcoin creator Satoshi Nakamoto – has said he believes the price of the cryptocurrency will hit $300,000.

Featured image via Unsplash.