Bitcoin days destroyed. Grillers asks: “Bitcoin days destroyed is calculated by taking the number of bitcoins and multiplying by the number of days that it has been since those coins were last spent. What is the significance of this? What does this actually tell us?

Well, what it tells us is it gives us an idea of maturity of coins which means it gives us an idea of the how often coins are moved and in how big amounts their moves. So you can either look at somebody moving one bitcoin after a hundred days is equivalentish to someone moving a hundred Bitcoin after just one day of it sitting somewhere. And so that’s Bitcoin days destroyed. It’s the amount of Bitcoin multiplied by the number of days that that amount has been sitting in the same UTXO.

And it gives you an idea of kind of the velocity of the network. So velocity in economic terms is the volume of money moving on some time factor. So how much money is circulating in the economy. So I leave this place. I take a taxi. I give the taxi driver let’s say $20 and they stop at the gas station and they pay $20 to the gas station and then somebody buys cup of coffee and something else and they get changed and they get that $20 back and then they go and buy a muffin and they pay with that and they get some change and then the next the end of the day the muffin company pays its employees and gives them one of the 20. So that 20 has now moved six times in a day. And the important thing to recognize is that while it’s one unit of $20 it has participated in 12 so in a hundred and twenty dollars’ worth of economic activity over all, by changing hands rapidly.

So, in Bitcoin, in order to be able to get an appreciation for velocity of the economy, we use the metric of Bitcoin days destroyed, because it tells us either that money is moving very soon after it stopped moving or that very large volumes are moving and kind of the product of those two numbers is kind of the metric. I hope that helps explain it. I think i’ve only really seen one place track fat which is blockchain.com they had the chart running since the very early days. It was one of the first charts that they offered that nobody else was offering kind of in terms of analysis of the blockchain.

And I still think it’s really one of the few places where you see that metric, I find it fascinating and every now and then you’ll see a news article or someone tweeting and saying: “there’s a lot of money on the move” and they’ll use bitcoin days destroyed to give people an idea of the magnitude and maturity or age of the money that just moved.

A very interesting point by Camilo that velocity of money means nothing for Austrian economics. Velocity of money as a concept that underlies value or economic value is definitely a Keynesian principle. But hey, I’m not doing the economic analysis on this one. I’m just explaining what It means. So, thank you for jumping in and making that observation, Camille, that’s very interesting.

What are bitcoin days destroyed обновлено: October 31, 2018 автором: