Bitcoin: a new and complex technology that almost no one can explain to you. Even so, people are always talking about Bitcoin; however, the focus is not on the technology, but on the price. The bitcoin price fluctuations are often used by both proponents and critics to herald the success or impending failure of bitcoin. For example, there are fancy predictions claiming price predictions of up to $ 1 billion per bitcoin, as well as articles claiming the end of bitcoin:
“Cryptocurrencies are about to become worthless – and that will happen when they crash” – Independent
Bitcoin appears to have died up to 431 times at the time of writing. Doom predictions are often accompanied by the idea that Bitcoin is a Ponzi scheme and that it is useless. Unfortunately, these types of claims make up the vast majority of articles found online. Hence, it is not surprising that the average person would have a similar opinion, considering that this is practically all the news is talking about.
Today we decided to talk about something else … use and acceptance.
Let’s focus on the Bitcoin protocol (and not the virtual coin) first and list some use cases:
Financial inclusion
- Offer financial services to people without banks
- (Relative!) Stable alternative currency for people in “inflation nations”
- Accessible cheap transfer (money transfer from abroad to a home country)
Microtransactions
- Payment per article (news, blogs, etc.)
- Online arcade games
- Machine-to-machine payments
This is not an exhaustive list, just a few use cases. While using wire transfers is just a cheaper alternative to existing money transfer methods, machine-to-machine payments is opening up a whole new industry. As people started to explore these areas, bitcoin usage has increased exponentially over time.
I often run into people who say, “Nobody uses Bitcoin”. But the reality looks different. In fact, millions of people are already using Bitcoin. How can we be sure? By using metrics.
Let’s look at some of the top Bitcoin usage metrics:
Network metrics
For a network perspective of the users, we can look at Unspent Transaction Outputs (UTXOs). These are coins that humans own and that are now ready to be spent.
Image source
Today there are ~ 76 million UTXOs, a far larger amount than in 2011. This gives us an indicator of the increase in the use of Bitcoin as an asset over the past 10 years.
Next we can look at block storage usage: source
Source: Blockchain.com
The amount of data that is transferred to the blockchain per block has increased over the past 10 years, which shows an increase in the number of data obligations (“transactions”) made and the amount of data transferred. This is an indicator of the usage of the network itself. This metric will not change as quickly now that the block limit has been reached.
Transactions are still growing rapidly thanks to scaling solutions like Lightning, Liquid and Rootstock. The Bitcoin network is also used for non-financial “transactions”, such as merge mining for other networks or for data binding for services such as Microsoft ION.
A quick look at Lightning:
Source: bitcoinvisuals.com
The Lightning Network is a second layer to Bitcoin; It instantly processes transactions at low fees using a technology called payment channels. The use of lightning has increased exponentially in the past few months. The technology has reached a level of maturity where it is easy to use for consumers. Because of how Lightning works, we cannot see how many transactions are being made on this network, we can only observe capacity. The people of El Salvador use the Lightning Network for payments because Bitcoin is legal tender there.
More people own bitcoin, either in the ledger of bitcoin or in the ledger of an exchange; and more people are making data commitments (“transactions”) on the bitcoin ledger.
Social indicators
Bitcoin’s social networks have also grown over the past 10 years. In addition, public awareness of Bitcoin has also grown. Most people have heard of Bitcoin and have a vague idea of what it is.
subredditstats.com
Reddit has also grown in the number of users; this reflects the wider growth of the bitcoin communities and participation in bitcoin projects. Twitter recently added tipping that would allow anyone in the world to tip btc over Lightning. Consumer research by the UK Financial Conduct Authority found that 78% of adults in the UK are aware of cryptocurrencies. This varies from country to country, but by and large, most adults are familiar with Bitcoin.
Integration metrics
Bitcoin ATMs can be found in 78 countries around the world. We are also seeing a pattern of rapid growth that is doubling every year.
coinatmradar.com
The proliferation of ATMs reflects the integration of Bitcoin into people’s daily lives. ATMs are also a way for people working overseas to send money back to their families or to receive money. ATMs are used for small purchases by normal private individuals, not by merchants who prefer to use exchanges.
The Cambridge Center for Alternative Finance’s 3rd Global Cryptoasset Benchmarking Study estimates that the lower limit for crypto users in early 2020 was 101 million based on the number of individually identified users (“KYC’d” customers).
That number has grown to around 200 million this year, with the Coinbase exchange alone having more than 56 million users.
200 million users is the lower limit; these are only the people who are registered on exchanges. However, many people use Bitcoin without exchanges or even without a bank account. People can access Bitcoin either by getting it from friends and family, earning it, or by using an ATM. Bitcoin Beach in El Zonte is an example of a circular bitcoin economy where people make and spend with bitcoin, many of whom do not have traditional bank accounts. It’s hard to track or estimate the number of users who are not participating in exchanges.
Peer-to-peer trading platforms like Localbitcoins have a high bitcoin trading volume in developing countries and in countries with ailing currencies.
Acceptance and usage metrics tell us whether Bitcoin is useful or not. So far, every year more people have chosen to use the bitcoin protocol and bitcoin asset in their life.
Each of these metrics show a doubling in 1-2 years, or a growth rate of 50-100% per year. With a pessimistic estimate of 200 million users and a lower growth of 30% per year, we will see 2 billion users within 10 years. Realistically speaking, reaching 2 billion users could be much faster, as we don’t know the true number of current users, nor the ultimate network effects of giants like PayPal, Visa, Amazon, Google, etc. if they all join in, and that in a short amount of time could easily bring hundreds of millions on board.
This is a guest post by Carlos Massiah. The opinions expressed are solely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.
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