We seem to hear about it all the time, but what do the numbers say?
It’s been well over 11 years since Bitcoin — an entirely new financial concept — was released into the public domain. There’s no question it’s grown substantially since then, but is it growing as fast as those of us who are “in the industry” might think it is?
Recently, Bitcoin reached another milestone. Not in price this time, but in the number of wallets created, which surpassed 50 million on June 12, 2020, according to data taken from the blockchain.
That seems like a lot at first, but if we add some context, that view may change. Using current figures, for example, this means that 0.64% of the world’s population is using Bitcoin. Or, to put it another way, 99.36% of the world’s population isn’t.
In fact, because most people have more than one address, we can safely conclude that the real percentage is far lower. To hazard an educated guess based on previous analytic reports by companies such as Chainalysis, known trends, and a bit of good old fashioned gut feel, the real percentage is probably more like 0.23%.
Further, in the 11 years since it’s creation, there is still no real clarity surrounding regulations in many countries, and the entire market capitalization of the flagship cryptocurrency is less than one-quarter of the world’s largest company, let alone currency.
So, now that we know that the numbers are actually tiny in terms of both the financials at large and the population in general, what does this tell us?
The most obvious answers are that either we’re on the verge of explosive adoption, growth, and price action that we can’t even begin to imagine, or that the whole thing will fail as an experiment and the world will eventually move on.
But those obvious answers are also two extremes — is there any possible middle ground?
The ‘imminent’ growth explosion
If there are two things everyone who owns bitcoin agrees on, it’s that they all wish they bought more and they had purchased it earlier.
In my own case, I first read about it in a random newspaper article way back in 2014 on a train to Reading in Berkshire and no idea what it was about, other than that I wanted to know more.
It didn’t help that I’d accidentally misread “Bitcoin” as “Britcoin” (as in “Brit-pop” or “Britannia”) and were several articles in before my brain stopped auto-correcting the word for me, which wasn’t a good start.
However, by 2016 I was hooked, invested by early 2017 and in early 2018 I sold my business to concentrate full time on the nascent industry that was growing up around this new global concept. There was no doubt in my mind that it was the start of something as big, if not bigger, than the internet.
Part of the reason for this was that through all of this time, it felt like the cryptocurrency’s global adoption was imminent, especially during the retail bitcoin buying boom that took place in late 2017. In fact, I distinctly remember apologizing to my partner after I’d bought our first Bitcoin — thankfully prior to this — for getting involved so late into the game.
It was surely the case that everyone was about to start accepting it, and it was about to go mainstream. Everybody said so.
However, “everybody” was wrong.
New wallet growth means big things ahead?
Even if “global adoption” hasn’t yet happened, we do know that there are tens of millions of people engaged directly with bitcoin, and a much larger number who say they are intending to get involved at some point in the future. And no matter which survey you look at, that set of numbers is growing.
While we can’t directly equate new wallet addresses with new users, we can still look at wallet creation rates and make a judgement as to how quickly Bitcoin as a whole is growing. So, let’s see what the numbers say.
Blockchain data is utterly precise, so we can see for sure how many addresses existed on any date we choose, and then, by looking at different data points, we can calculate rates of growth.
For example, the day I started to get “properly” involved with Bitcoin (rather than just poking it with stick) was in March 2017.
On that day, 12,656,618 wallets had already been created. At the time of this writing, there were 50,166,790 wallets in existence, an increase of 37,510,172. Clearly, something must be happening here.
In fact, doing a bit of cursory analysis on the numbers directly off Bitcoin’s blockchain shows that not only has the number of new wallets increased, but the rate of new wallet creation has also increased.
In all of 2018, 10,377,248 new wallets were created, at the rate of 28,509 per day on average, or just over 20 per minute.
In 2019, that figure rose to 12,804,514, providing an increased rate of 35,177 a day or 24 per minute, roughly 23% faster than 2018.
To put that into context, if you were to take 2 hours and 12 minutes out of your schedule to watch Parasite, this year’s Oscar winner for Best Film, 3,168 new wallets would have been created by the time you’d finished.
And while people often have more than one wallet for any number of reasons, I think we can safely rule out the possibility of one overzealous hardcore Bitcoiner creating them all for himself.
Whichever way you cut the numbers, the starting point from which people can access the Bitcoin network is becoming busier by the moment.
At the current rate, Bitcoin will hit the 100,000,000-wallet milestone somewhere around January 2023, assuming there’s no further increase in sign up rate, which would make it considerably earlier.
Cool those jets
But here’s where we need context again. It’s easy to get carried away and think these numbers are looking pretty good. After all, a (potentially) new Bitcoin user every 2.5 seconds seems impressive, right?
Except that the global population is increasing at roughly 150 people per minute, at current 2020 rates. So, doing the math, during that 2.5 seconds a new bitcoin user comes online, the population increases by a net of 6.25 people on average. This, of course, means that the percentage of the global population using bitcoin is currently falling in real terms.
Maybe that’s true for percentages, but what about absolute numbers?
The truth is that any app that we use had to start at zero, and the same, of course, applies for any invention.
For example, 20 years ago, no one used Facebook, but now it commands a user base of some 1.69 billion people or almost 22% of the entire planet. Other social network systems show similarly impressive growth numbers that just aren’t present with Bitcoin itself.
But perhaps this isn’t a fair comparison. It could be argued that these Web 3.0 apps fulfilled a latent need at exactly the same time as the tech was enabled for it to happen, the funding was there and they had a natural network effect that all but guaranteed their enormous growth.
This is all true, but even if we look at an app that is utility-driven and only solves a very limited problem, the numbers still don’t look too good.
For example, I recently downloaded a piece of software for my kids on my PC called BlueStacks. It was an emulator designed to do just one thing — allow Android apps to be used on another platform, something that would seem to be fairly innocuous.
However, I was staggered to see a large claim emblazoned across the splash screen as it installed:
100,000 people a day download BlueStacks.
I’d never heard of it before googling the solution I was looking for, and yet I was looking at an app that was downloaded 100,000 times a day, or almost 70 times a minute, with a total download number exceeding 400,000,000. That’s over four times the entire (maximum) community of Bitcoin. And BlueStacks is two years younger than Bitcoin.
It seems the number of people who want to use Android apps on a PC or Mac outweighs, four-to-one, the number of people wanting to use a whole new form of currency that carries enormous advantages over the ones they are used to.
And even with those numbers, BlueStacks’ usage, as a percentage of the global population, is also decreasing, minute by minute.
That really provides some perspective, doesn’t it?
The bottom line
So, does this mean Bitcoin is destined for failure, even if, in the time it took you to read this, roughly 168 wallets have been created?
Well, if you compare it to Bluestacks’ downloads of 490 at the same time, it first seems that way. Now imagine it compared to how many people download Whatsapp or Uber apps in a few minutes — or even how may dollars were printed in that time — it seems impossible to catch up.
But, of course, this is not a fair comparison.
Most of those apps are built on existing, well developed, infrastructure with enormous funding from private ventures who also go on to advertise those products relentlessly. Most solve a problem that we didn’t even know we had, and most have a natural network effect that expands exponentially over time.
Bitcoin, on the other hand, is an open-source invention given to the world that simply solves a problem of digital scarcity — a term that most people have no idea exists or why it even matters. There is no funding. There is no central body, there is no advertising, no organized or formal training except given by those who are already using it. Even a new “mining” network had to be built.
Worse, there is an existing financial system which, although it is a bit of a mess, is used by almost everyone because they truly believe it’s the only option.
It also works (more or less) most of the time, so in developed countries, it’s seen as a mere second rate alternative that won’t be relevant until the system they’re used to actually breaks in a way that is relevant to them. (There’s a different view, incidentally, in less developed countries where the chances of financial leapfrogging are now real.)
Finally, there is real truth in the fact that certain parties absolutely do not want Bitcoin to succeed, and will often dig out stores as to why it can’t and why it should be avoided. And those parties are frequently the ones who have the best access to media.
Yet, despite all these headwinds, Bitcoin is still growing, at least in absolute terms. Yes, it may only be a measly 100,000 people a week or so — the tiniest drop in a gigantic ocean by comparison — but there are two things we can draw absolutely from this:
First, the overall demand for Bitcoin and the transactions that occur as a result are increasing in line with wallet growth. The claims (although far less common these days) that “Bitcoin is dead” are simply unfounded.
Second, with each day that passes, and the total number of users increases in absolute terms, the chances of the network effect kicking in increase significantly. This is especially true as the traditional barriers to entry (usually based around ease of use) continue to be addressed and constantly improve.
In conclusion, I think it’s accurate to say those who were here early did expect Bitcoin to be further along the curve than we are right now. Many of us, myself included, underestimated the scale of change required to make this incredible alternative to traditional finance available to all. We often compare it to the early development of the internet, but in reality, it’s probably much bigger than that.
At the same time, however, this knowledge also brings reassurance if you’re still in the “bought too little too late” camp concerning bitcoin; that the ship has definitely not sailed.
Actually, I doubt it’s even been built yet.
