The state of the network in numbers

We often write that we think things are going well with Bitcoin. Because the blockchain is public, this does not have to be an opinion, but can be substantiated with figures.

The table below was shared by Bitcoiner PlanB on Twitter and shows an overview of Bitcoin’s eleven-year history with some key figures highlighted. Unfortunately, a dataset was missing and that makes it difficult to verify the data, but in our own estimation the information is not far from reality.

The table successively shows: the relevant year, the number of blocks that were mined in that year, the average price per bitcoin in that year, the average degree of difficulty, average hash rate , the number of transactions, the number of inputs and outputs, the amount of bitcoins that years have been sent and the total dollar value of all these transactions.

Overview history of existence of Bitcoin. Source: PlanB

From these figures it can be concluded that year in, year out the network has experienced exceptional growth on almost all fronts that still does not seem to have come to an end. Every year has led to better average figures than the year before. Entirely following that line, most records were again broken in 2019.

Value & Quantity

$9269 billion dollars

Based on the figures in the table, a total of more than $9,269 billion in value has been sent via Bitcoin transactions during Bitcoin’s eleven-year existence. Before that, more than 489 million transactions were made via the Bitcoin blockchain.

Each year, significantly more value was sent through the Bitcoin network than the year before. 2019 was certainly no exception. On the contrary, because last year a whopping $3734 billion worth of bitcoins was sent; that is about 35% of the total value ever sent over the Bitcoin network.

Less BTC, more value

What is also striking in the overview is that the amount of bitcoins sent in 2019 was lower than in other years. That is perhaps not surprising, because the average price per bitcoin is (so far) higher every year. Someone who sent $600 worth of value over the Bitcoin network in 2016 averaged about 1 BTC, but in 2019, sending the same amount of value averaged less than 0.1 BTC.

It is therefore actually surprising that such a large number of bitcoins were still sent in 2019. In absolute numbers, the number of bitcoins sent may have decreased by half compared to 2016, but the value it represented was eight times higher in 2019.

Transactions

The figures also show that the number of bitcoin transactions on the blockchain was greater than ever in 2019.

Number of bitcoin transactions. Source: Bitcoinity

A caveat should be added, because the space available for transactions per block is limited. This limit has been regularly reached for several years, which is why there is increasing attention for second-tier scalability solutions such as the Lightning Network and side-chains .

These types of solutions increasingly ensure that bitcoin transactions take place ‘off chain’ . In such cases, multiple transactions are often bundled, as it were, and the Bitcoin blockchain is only updated occasionally.

A single transaction on the Bitcoin blockchain can therefore represent a multitude of second-tier off-chain transactions. The actual number of bitcoin transactions is therefore probably slightly higher than the number of transactions on the blockchain. In the future, it will become increasingly difficult to say anything about the total number of bitcoin transactions based on the number of blockchain transactions.

Still, it is good to see that despite nuances and new technologies, the total number of blockchain transactions is still increasing. Perhaps new technologies such as SegWit, which allow more transactions to fit in a block, will also contribute to this. In the future, the arrival of Schnorr Signatures and other scalability solutions will further improve efficiency at the base layer.

Difficulty adjustment mechanism

The adjustment mechanism that regulates that one block is found on average every ten minutes, apart from some deviations in the early days, works like a well-oiled machine and has consistently delivered about 54,500 blocks per year, especially in recent years; one block every ten minutes on average.

This consistency is important for technical reasons, but it also serves an important economic purpose. The controlled issuance of new bitcoins on the network ensures reliable and predictable inflation in the bitcoin economy.

How does it work?

Broadly speaking, the mechanism works as follows. Miners compete with each other to find the next block in the blockchain to which they can add transactions. They do this because the miner who finds the next block receives a reward of (currently) 12.5 BTC, plus transaction costs. The rest get nothing. The more calculations a miner does to find a block, the greater the chance of successfully finding the next block.

Miners are therefore in competition with each other and are encouraged to use as much computing power as possible to do as many calculations per second as possible in order to increase their individual chances of winning. This creates a kind of arms race, which increases the total computing power of the network.

Bitcoin mining difficulty. Source: Bitcoinity

To prevent the increase in computing power from flooding the market with newly mined bitcoins, the adjustment mechanism adjusts the difficulty of finding a block in proportion to the increase or decrease in computing power. In this way, the adjustment mechanism always strives for a block time of ten minutes and a controlled inflation is achieved.

Protection

At the same time, the computing power used serves as protection against network takeovers; a malicious person will have to own at least half of all computing power to take over the network. More computing power therefore means more protection against these types of takeovers.

The miners’ pursuit of profit is thus deployed game-theoretically in favor of the network, while the competition between the miners themselves contributes to further decentralization. That makes the Bitcoin network and its economy robust and reliable.

hash rate

The total computing power of miners is usually measured by adding up the number of hashes per second, i.e. calculations to find the next block, and expressing it as the hashrate or mining power. Thanks to the incentives described above, the hashrate of the Bitcoin network has been growing every year so far.

Bitcoin hash rate. Source: Bitcoinity

In 2019, the hashrate rose to 93 ExaHashes per second (EH/s), more than doubling from the previous year. At the moment the hashrate is even more than 100 EH/s. You could also express that as 1 PetaHash per second (PH/s), or possibly as 100,000,000,000,000,000,000 hashes per second.

Theory in practice

On the basis of the figures in the table, it seems that the mechanism, especially in the last five years, is working properly and maintaining itself in a stable manner, achieving its intended purpose. Of course it is also very special and an achievement in itself that the mechanism works at all and that Bitcoin has managed to survive and even grow for eleven years despite all kinds of setbacks with the help of this mechanism .

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