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Intact bitcoins and their impact on bitcoin monetary policy


The Bitcoin network is known for two features: the predictability of bitcoin supply and the ability to monitor and audit transactions. But what effect do lost bitcoin units have on the monetary supply of this digital currency? Mike Co, economist and author of digital currencies, at an essay For the Medium website, it examines the index features of the Bitcoin network and the status of potentially lost coins on the network.

Bitcoin has strong fans and long-term investors. This digital currency is an asset with a limited and predictable supply and is designed to become less and less scarce over time. Bitcoin production and supply rates are halved almost every four years in the form of an event called Howing. Currently, there are more than 18 million bitcoins in circulation, and this number is gradually approaching the final limit of 21 million units.

Intact bitcoins and their impact on bitcoin monetary policy
Bitcoin money supply and hawing events. Source: Coin Matrix

With that in mind, there is a belief among the bitcoin community that fiat money is for spending and bitcoin is for saving. In addition, bitcoin transactions, compared to traditional money transactions, are publicly recorded and can be independently evaluated and verified at a general ledger distributed worldwide. But the question has always been, how many of the 18 million bitcoins currently in circulation are actively active on the network?

Intact bitcoins and their impact on bitcoin monetary policy
Bitcoin Hodl Waves. Source: Glassone

In the diagram above, Glassnode uses the diagram and method invented by Unchained Capital.

Currently, these 18 million bitcoins can be tracked using the last transfer time. In other words, we can check their status by the last time these coins were transferred to the Bitcoin network. Existing bitcoin units can be categorized in the following order, according to the in-chain data of the GlassNood data provider platform on April 26, 2020.

7.52% of coins were last transferred more than 10 years ago.

8.29% of coins were last transferred between 7 and 10 years ago.

6.21% of coins were last transferred between 5 and 7 years ago.

5.64% of coins were last transferred between 3 and 5 years ago.

15.30% of coins were last transferred between 2 and 3 years ago.

15.95% of coins were last transferred between 1 and 2 years ago.

13.86% of coins were last transferred between 6 and 12 months ago.

6.43% of coins were last transferred between 3 and 6 months ago.

11.66% of coins were last transferred between 1 and 3 months ago.

5.41% of coins were last transferred between 1 week and 1 month ago.

3.13% of coins were last transferred between 1 day and 1 week ago.

0.61% of coins were last transferred in the last 24 hours.

In other words, about 60 percent of the bitcoins in circulation have not been traded for more than a year (statistics: registered April 26). In addition, about 1.3 million bitcoins have not been traded for more than ten years. Of course, on May 20, 50 bitcoins were transferred, which had been stagnant since February 2009, about a month after the creation of bitcoins. This event aroused the surprise and curiosity of the Bitcoin community. The coins may have been moved by Satoshi Nakamoto, the anonymous creator of Bitcoin; However, many experts immediately rejected the idea. The Bitcoin network, on the other hand, is skeptical, and in the end, all ideas remain speculative.

The last time these coins were moved, only a handful of miners were active, and one of them is the late cryptographer Hal Finney. Also, the transfer of these old coins can be related to what Hall Finney, a year before his death in 2014, wrote in the bitcoinintalk forum:

This is the story of my life. I am a lucky person in general. Even with ALS, I am satisfied with my life. But I will not be alive for long. Those discussions about bitcoin inheritance go beyond a few academic papers. My bitcoins are stored in a safe deposit box and my son and daughter have a lot of knowledge in the field of technology. In my opinion, the place of these bitcoins is safe and I am satisfied with the legacy I leave.

Hall Finney died of the deadly disease ALS, which causes irreparable damage to the nervous system and motor neurons, and the person eventually becomes completely paralyzed and often dies after a few years.

Of course, examining the behavior of bitcoin investors is only possible using in-chain data. Although Bitcoin is a universally distributed general ledger; But it has a pseudo-anonymous function and, if used properly, preserves a person’s privacy. It is almost impossible to predict which coins will be lost forever and which may be reused. However, the data as a whole provide an overview of the feelings of long-term bitcoin investors.

Intact bitcoins and their impact on bitcoin monetary policy
Bitcoin inventory in digital currency exchanges. Source: Glassone

Since March, significant amounts of bitcoins have been withdrawn from major digital currency exchanges, according to GlassNood. Of course, this data can not track the wallets of all exchanges with 100% accuracy. It is likely that a new generation of bitcoin savers will emerge who will take on the task of directly holding their bitcoins and believe in the long-term storage of the top digital currency.

Rarity, auditing and privacy are the main features of the Bitcoin network that distinguish it from other currencies. Most importantly, Bitcoin is a completely global network. Thousands of ninety in more than 100 countries are constantly processing and verifying bitcoin transactions. By doing so, they contribute to the monetary supply of Bitcoin and the general ledger validation of all transactions.

Intact bitcoins and their impact on bitcoin monetary policy
Map of the distribution of accessible nodes around the world. Source: Bit Nodes

The distribution of available nodes in the above map from the Bitnodes site shows that on August 12, 2020, the highest number of nodes in the United States and Germany, with 2,390 nodes, respectively (23.65%) From the network) and 1,874 nodes (18.55% of the network). Anyone in any geographical location can participate in the bitcoin network by running a full node and independently confirm transactions.

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