Coin Metrics’ State of the Network: Issue 35

Weekly Feature

Re-examining Four of the Largest Bitcoin Hacks

By Antoine Le Calvez and the Coin Metrics Team

When cryptoasset exchanges get hacked and large monetary amounts get stolen, news tends to spread fairly quickly. However, articles tend to focus largely on the monetary amount stolen. Rarely do they explore the deeper consequences and fallout resulting from these shocks.

In this feature, we use both on-chain and market data to analyze four of the largest Bitcoin exchange hacks and look at the deep consequences of each, both positive and negative.


Often unknown by newcomers to the industry, the Bitcoinica hack was one of the most influential hacks of all-time. Bitcoinica launched in September 2011 and was a Bitcoin trading platform created by Zhou Tong, a teenager at the time. It quickly gained traction and attracted deposits from many prominent community members. In late 2011, Zhou Tong sold Bitcoinica to Intersango (a UK-based exchange) but stayed involved as CEO and lead developer.

From March to July 2012, Bitcoinica suffered a series of catastrophic incidents:

Linode compromise

In March 2012, Bitcoinica’s servers were hosted by Linode. A Linode web portal was compromised by someone that explicitly looked for customers showing any signs of Bitcoin activity. Bitcoinica’s server was therefore targeted and its wallet emptied out.

Very quickly, Zhou Tong made the theft public, even publishing the hacker’s transactions. The theft was made possible by the use of an un-encrypted wallet.

Hot wallet theft

A few weeks after the Linode compromise, another 18.5k BTC was stolen. Zhou Tong promptly disclosed the theft, along with the transaction’s hash. The publicly known cause was the exploit of an email server that escalated into an exploit of the exchange’s hot wallet. Zhou Tong took control quickly enough to avoid the theft of Bitcoinica’s Mt. Gox API key, which could have led to another 15k BTC being stolen (Bitcoinica held BTC on Mt. Gox in order to fill orders). 

Mt. Gox API key exploit

Following a leak of Bitcoinica’s source code, its old Mt. Gox API key was revealed. Unfortunately, it was used as a password to a LastPass account which contained the new Mt. Gox API key. Someone took advantage of this and proceeded to steal 40k BTC + $40k out of Bitcoinica’s Mt. Gox account (the maximum daily withdrawal possible).

Source: Coin Metrics Reference Rates


Overall, 102,101 BTC and $40k of user funds were stolen from Bitcoinica. Roger Ver was probably one of the largest creditors, having held 24,841 BTC on Bitcoinica prior to July 2012. Bitcoin’s price was largely unaffected by all of the hacks and even rallied following the Mt. Gox API key exploit. 

On the positive side of things, the publication of Bitcoinica’s source code inspired many new entrepreneurs. Most notably, Bitfinex’s early codebase was directly issued from Bitcoinica’s. The disappearance of a very successful exchange also left room for competitors to grow.

Unfortunately for its creditors, the downfall of Mt. Gox tied up 64,673 of Bitcoinica’s BTC in bankruptcy proceedings that are still ongoing to this day.

Mt. Gox

Of course, when speaking about Bitcoin exchange hacks, one has to mention Mt. Gox. It was one of the first fiat on-ramps and quickly gained the majority of fiat inflows into Bitcoin from 2010 to 2013. Originally created by Jeb McCaleb (who then went on to help create Ripple and Stellar), it was later purchased and operated by Mark Karpelès. From its inception to its death, Mt. Gox went through a series of hacks that went largely unidentified eventually culminating in its collapse in 2014. 

Following its catastrophic collapse in early 2014, the public finally learned the scale of its mismanagement. An excellent analysis by Kim Nilsson, using Mt. Gox proprietary data, shed more light into how BTC was siphoned off Mt. Gox.

The following excerpt is from the transitional period between Jeb McCaleb and Mark Karpelès, when the first major Mt. Gox hack occurred in March of 2011.

Excerpt from chat log between Jeb McCaleb (Mt. Gox) and Mark Karpelès

79,956 BTC (worth around $70k) were taken out of Mt. Gox’s wallet in March 2011 after the server hosting the wallet was hacked. As mentioned in a previous State of the Network feature, none of this BTC has ever moved since, so it is unknown whether the thief still has the address’ private key.

Later, in September 2011, someone got access to Mt. Gox’s hot wallet file. It contained keys that held BTC at the time, and also unused keys that would end up as deposit addresses afterwards. Over time, the thief slowly withdrew money from the wallet, undetected by inexistent wallet monitoring.

As the thief’s wallet was a copy of Mt. Gox’s, some of the thief’s spending was interpreted as deposits by the Mt. Gox system further muddying the traces of the thefts.

By 2013 practically no BTC was left to be stolen, and Mt. Gox was fully insolvent (apart from 200k BTC held in cold storage, now at the center of bankruptcy proceedings). It wasn’t until February of 2014 that the public became fully aware of the hacks when Mt. Gox halted withdrawals. The price of Bitcoin subsequently crashed. 

Source: Coin Metrics Reference Rates


Mt. Gox’s insolvency had a major impact on Bitcoin. Suspicious trading behavior attributable to Mt. Gox occurred during the late 2013 price run-up leading some to think the incredible rise of Bitcoin’s price at the time was not entirely natural.

Its collapse durably depressed Bitcoin’s price following the 2013 run-up. It took slightly more than 3 years for Bitcoin to reach another all-time high.

Mt. Gox was also the introduction to Bitcoin for many in the mainstream crowd. The stigma associated with Bitcoin due to Mt. Gox is still very strong to this day. Had Mt. Gox not happened, one can only imagine what Bitcoin’s current public image would be.

As Mt. Gox concentrated most of Bitcoin’s trading for years, its disappearance left the field open for many competitors. Since then, no other exchange has dominated Bitcoin exchange market share as much as Mt. Gox at its peak. It also highlighted the need for exchanges to monitor their Bitcoin holdings on a constant basis, something even Bitcoinica managed to do.

At Coin Metrics we track on-chain exchange activity as part of our CM Network Data Pro offering.  Specifically, we track the supply of BTC and ETH held by most major exchanges, as well as the amount flowing into and out of each exchange. We believe that tracking exchange on-chain activity is more important now than ever, and it’s crucial to keep exchanges accountable and hold them to a high standard. We have also vouched for the concept of “Proof of Reserves” as a means of exchanges publicly verifying their holdings. Check out State of the Network Issue 34 for more information on how we track exchange health using on-chain data.


Born from Bitcoinica’s ashes, Bitfinex grew over time as it added more currencies and features to become one of the largest and more influential exchanges of today. From our estimates, Bitfinex had at least 225k BTC under custody on August 1st 2016, just prior to its largest hack.

On August 2nd 2016, 119,756 of these BTC were stolen. They were jointly custodied by BitGo and Bitfinex in 2 out of 3 multisig addresses (meaning 2 out of 3 keys have to sign a withdrawal transactions) where BitGo held one key and Bitfinex the others.

While the details are still unclear, Bitfinex’s BitGo API key was compromised. Due to the lack of checks on how much BTC could be withdrawn in a given time window, very large amounts of BTC were stolen.

At the time news of a breach was made public, there was uncertainty about the amount involved. However, it was possible to get a very accurate estimate using on-chain analysis.

BitGo uses special addresses, known as P2SH (pay-to-script-hash), which enable complex multisignature setups and are well-suited to custody large amounts of BTC. The thief elected to withdraw the heist money to non-P2SH addresses. The specialized website (now, a joint BitMEX and Coin Metrics property) tracked the number of BTC stored in P2SH addresses and reflected this large movement a few blocks after they happened, which according to the timeline above, made it the first source of the existence and size of the breach.

Reconstitution of what’s (now homepage would have displayed just after the hack

At the time of the hack, the price of Bitcoin dropped more than $200 but it recovered quickly, in just under 3 months. 

Source: Coin Metrics Reference Rates


Bitfinex’s hack is unique inasmuch the exchange survived despite losing 36% of its reserves (on a USD basis). Bitfinex even managed to thrive afterwards, generating $730M in profit over 2017-2018.

Instead of electing to go into a very long and complex bankruptcy procedure (as highlighted by the Bitcoinica and Mt. Gox cases), Bitfinex management decided to use financial engineering to get out of the hole created by the breach.

Each account received a 36.067% reduction in all balances (even though only BTC was stolen) and was credited with an amount of BFX tokens. Bitfinex would either buy back BFX at a ratio of 1 BFX per dollar lost or convert for shares in iFinex Inc, the BVI registered company behind Bitfinex.

Creditors electing to convert their BFX for iFinex Inc shares would also receive Recovery Right Tokens (RRT) allowing them to get exposure to any recovered heist funds once all BFX had been bought back or converted for shares. Any RRT held would give rights to $1 in heist funds recovered.

Furthermore, an open market allowing trading of BFX and RRT tokens was created on Bitfinex allowing creditors to sell their BFX and therefore enable a market-based pricing of each token.

At first BFX traded at 38 cents on the dollar and RRT at 20 cents on the dollar. BFX trading ended in April 2017 close to par when all tokens were either redempted or converted to iFinex Inc shares. RRT still trades to this day at 2.9 cents on the dollar.

All BFX tokens were redeemed or converted to iFinex Inc shares. The use of the BFX token allowed Bitfinex to survive this otherwise critical event. It even turned out to be a profitable trade for creditors that converted their BFX to iFinex Inc shares, as the entity distributed over $500M in dividends in the 2 years that followed.

Bitfinex also used a similar idea to get past the seizure of $850M deposited at payment processor Crypto Capital to raise $1B by selling 1B Unus Sed Leo (LEO) tokens. Each LEO token gives exposure to any recovery of funds from the heist. Any money left after redemption of RRT tokens, legal and other fees, will go towards buying LEO on the open market.

To this day, only 28 BTC have been recovered from this heist. In June 2019, two Israeli brothers were arrested in relation to the Bitfinex hack, but no more funds have been recovered yet.


The last hack covered by this feature happened on Binance, an exchange that went on to dominate altcoin trading from late 2017 onward. Binance attracted many retail traders and amassed considerable Bitcoin and altcoin reserves.

On May 8th 2019, a 7,000 BTC withdrawal from its hot wallet was triggered. Hackers supposedly broke into many retail accounts via various methods and managed to fool Binance’s hot wallet system into processing such a large withdrawal.

While the details of how the hackers managed to pull-off this heist are sparse, one theory has emerged over time as to how hackers managed to withdraw large amounts of BTC.

Binance lists many exchange pairs (601 active pairs as of writing), the majority of which are illiquid, and therefore cannot support large trades. Hackers can exploit these pairs to concentrate funds from many hacked accounts into fewer ones.

Over time and through various methods, hackers acquired two types of Binance accounts:

  • trade-only API keys that can only be used to send trades from unsuspecting accounts
  • full accounts, authorized to withdraw large amounts of BTC

The hackers placed buy orders at very high prices on illiquid pairs from accounts authorized to withdraw large amounts of BTC and used the many hacked API keys to exhaust the order book of that pair all at once, filling all the buy orders, reaching the orders the hackers placed on the withdrawal accounts. Once all this is done, a large percentage of hacked funds were funneled into the right accounts for withdrawals.

News of the hack had no impact on Bitcoin’s price, in fact, the price rallied shortly thereafter.

Source: Coin Metrics Reference Rates


Thankfully for Binance, a prior initiative called SAFU (Secure Asset Fund for Users) was launched in August 2018 and allowed them to avoid insolvency following the theft. They were saving 10% of trading fees in a separate, cold, wallet to handle exactly this kind of situation.


From the genesis of Bitcoin exchange hacks with the Bitcoinica hacking of a single server to the highly complex and well-orchestrated Binance hack, the constant duel between exchanges and whoever wants to steal their reserves has intensified.

Despite the millions in lost funds and the many victims of these hacks, each stands as an important milestone in the maturation of an asset and asset class, providing many lessons for future market participants:

  • Bitcoinica traumatized many, but at the same time allowed new exchanges to be born via its open codebase
  • Mt. Gox’s implosion pushed Bitcoin into the mainstream, resulting in a more fragmented but industrious spot market and granted long-term enthusiasts low Bitcoin prices for many years
  • Bitfinex’s hack and subsequent recovery via financial engineering might have been the genesis idea behind many exchange tokens
  • Binance’s recent hack showed the usefulness of self-insurance as well as the increased sophistication of hackers

Network Data Insights

Summary Metrics

Source: Coin Metrics Network Data Pro

BTC had a relatively stable week, with market cap, realized cap, active addresses, and transaction count all fluctuating by less than 3% week-over-week. ETH, however, saw more of a usage drop over the week, with active addresses decreasing by 17.8% and transactions falling by 21.2%. XRP also had a particularly bad week, as active addresses dropped by over 67%. 

On a positive note, security metrics were mostly up across the board. BTC and BCH led the way, with BTC estimated hash rate growing by 5.7%, and BCH growing by 7.4%.

Network Highlights

The rise of Tether on Ethereum was one of the big stories of 2019. Over the course of the year, Ethereum-based Tether (USDT-ETH) rapidly overtook the Bitcoin-based, Omni protocol version of Tether (USDT) in terms of market cap and usage.

Towards the end of 2019, Tether started gaining traction on a new platform: Tron. There is now close to a billion dollars worth of Tether issued on Tron (USDT-TRX), in addition to the $2.29B and and $1.55B issued on Ethereum and Omni, respectively. 

We recently added USDT-TRX data to our Network Data Pro offering. Find out more about Coin Metrics Network Data Pro here

Source: Coin Metrics Network Data Pro

Tron-based Tether is starting to gain some of the share of Tether transfer value, but the Ethereum version still dominates. The following chart shows the percent share of the total adjusted transfer value of USDT, USDT-ETH, and USDT-TRX. As of January 26th, they have 11%, 74%, and 15% share, respectively.

Source: Coin Metrics Network Data Pro

Market Data Insights

Markets were largely unchanged this week. Tezos (+6%) and Cardano (+6%) were the only notable gainers among major assets. The start of the Chinese New Year celebration which lasts  for one week may have contributed to the muted market activity. 

Developments surrounding the 2019-nCoV novel coronavirus and its uncertain future impact have already had significant impacts on financial assets. Equity markets around the world, particularly Chinese markets, have sold off sharply and we have observed safe haven capital flows to gold, U.S. treasuries, and the typical reserve currencies. Interestingly, Bitcoin sold off slightly in concert with Chinese equities. This risk-off behavior seen in Bitcoin complicates the Bitcoin safe haven theory that has been advocated by many market participants.

While the evidence suggests that Bitcoin may react in a risk-off manner to the 2019-nCoV novel coronavirus, another event that occurred over the weekend provided evidence that further bolsters the safe haven theory. On January 26, 2020 at 16:38 UTC, reports on Twitter surfaced that the U.S. embassy in Baghdad was under attack by several rockets

In a previous issue of the State of the Network, we found that there may be limitations to the degree of Bitcoin’s market efficiency in our study of Bitcoin’s price response to the recent U.S.-Iran military conflict. The most recent developments show, however, that Bitcoin was able to respond instantaneously to an unexpected increase in geopolitical tensions.

Returning to market performance, Ethereum Classic (+7%), Dash (+6%), and ZCash (+4%) continue to outperform the broader market. Maker (-5%) and NEO (-4%) saw slight losses this week. 

Source: Coin Metrics Reference Rates

CM Bletchley Indexes (CMBI) Insights

This week Coin Metrics announced the launch of the CMBI Bitcoin Index and CMBI Ethereum Index. These indexes mark the first to be launched under the CMBI branding, with more single asset indexes, market cap weighted indexes and smart beta indexes to be designed and launched in the future. These initial single asset index products complement the Bletchley Indexes which currently provide a broader market perspective.

To read and learn more about our indexes and how they fit into our broader strategy please check out our website or the recent CMBI launch announcement.

This week, the CMBI Bitcoin Index fell 1% against the USD, whilst the CMBI Ethereum Index finished slightly up. The best performing market cap weighted index was the Bletchley 20 (mid caps), which ended the week 1.5% up, outperforming the CMBI Bitcoin Index by 2.5%. In what has been a recurring theme for the start of 2020, all even weighted indexes continued to outperform their market cap weighted counterparts.

Source: Coin Metrics Bletchley Indexes

Coin Metrics Updates

This week’s updates from the Coin Metrics team:

  • Coin Metrics is hiring! We recently opened up 5 new roles, including Blockchain Data Engineer and Data Quality and Operations Lead. Please check out our Careers page to view the openings.

As always, if you have any feedback or requests, don’t hesitate to reach out at [email protected]

Subscribe and Past Issues

Coin Metrics’ State of the Network, is an unbiased, weekly view of the crypto market informed by our own network (on-chain) and market data.

If you’d like to get State of the Network in your inbox, please subscribe here. You can see previous issues of State of the Network here.

Check out the Coin Metrics Blog for more in depth research and analysis.

Coin Metrics Launches the CMBI Bitcoin Index and CMBI Ethereum Index

Coin Metrics, a leading provider of independent and transparent cryptoasset data, is pleased to announce the launch of the CMBI Single Asset Indexes. These indexes form the initial series of a wide range of index products to be launched under the Coin Metrics Bletchley Indexes (CMBI) brand. Indexes have been a focus of Coin Metrics’ strategy since raising funds to develop wider and deeper community coverage of cryptoassets and an institutionally focused suite of cryptoasset data, as evidenced by the acquisition of the Bletchley Indexes in early 2018 and the subsequent creation of the CMBI brand. 

The initial launch will include the CMBI Bitcoin Index (CMBIBTC) and the CMBI Ethereum Index (CMBIETH), with more single asset, multi asset and smart beta indexes to be added in the future. 

For both the CMBIBTC and CMBIETH indexes, Coin Metrics calculates two return types which vary in their treatment of legitimate forked assets. For more information on legitimate forked assets, please refer to the CMBI Fork Legitimacy Policy.

  • Price Return values are calculated without crediting any value for a legitimate fork.
  • Total Return values reinvest the value of a legitimate fork without consideration of taxes. 

The CMBIBTC and CMBIETH utilize and produce two different level types 

  1. Intraday levels, which are currently published every 15 seconds to reflect the real time price of the index based on the most recent trades from eligible markets.
  2. Close levels, which are published at 4pm ET daily, have been designed to represent a more robust and manipulation resistant end of day price based on a time weighted, volume weighted median of trades from eligible markets over the previous hour

Indexes play a critical role in allowing Coin Metrics to achieve its mission of providing markets with transparent and actionable cryptoasset data, by providing investors, asset managers and financial advisors with the tools required to direct their investments towards opportunities in the cryptoasset ecosystem. 

“The presence of robust and transparent cryptoasset data and products that meet the standards of traditional capital markets is essential to institutional adoption. Our CMBI indexes have been designed to lower barriers to entry by aligning ourselves with traditional capital market principles and meeting the standards and quality expectations of institutions” stated Tim Rice, Coin Metrics CEO

As one of the early and only providers of both cryptoasset market and network (on-chain) data, Coin Metrics is uniquely positioned to design, construct and administer high quality cryptoasset indexes to the market. Further, as an independent benchmark administrator, Coin Metrics maintains the highest level of integrity and independence throughout the indexes design and administration process.

“As a pure play data provider and independent benchmark administrator, Coin Metrics indexes have been designed to bring transparency and industry best practices to cryptoassets”  commented Ben Celermajer, CMBI Index Manager

Since the Bletchley Indexes acquisition, Coin Metrics have been developing market and network data tools, conducting relevant research and establishing the governance and operational features required to launch robust, transparent and objective index products to help with the professionalization of the cryptoasset market. To meet the highest industry standards, CMBI Indexes have been designed to align with IOSCO Principles for Financial Benchmarks.

CMBI Benchmarks leverage CM Reference Rates whose methodologies have been extensively tested to perform as designed in all foreseeable market conditions and have strict market selection criteria to ensure relevant pricing of assets. Information on the methodology for CM Real-Time Reference Rates (intraday) and CM Reference Rates (close) levels can be found on the Coin Metrics website.

In conjunction with the release of the CMBI Single Asset Indexes, Coin Metrics is happy to announce an engagement with CMBI’s first partner and client, Stack. The CMBI Bitcoin Index will serve as the benchmark for Stack’s flagship Bitcoin Index fund.

For information on licensing CMBI Indexes for use in structured financial products, as a derivative product settlement price, as a performance benchmark or other, please contact us at info (at) coinmetrics (dot) io 

For further information on CMBI indexes or Coin Metrics data, please visit our website at

Coin Metrics’ State of the Network: Issue 34

Weekly Feature

Analyzing Exchange Health Using On-chain Supply

by Nate Maddrey and the Coin Metrics Team

On February 7th, 2014, Japan based exchange Mt. Gox halted all Bitcoin withdrawals, claiming that they were trying to resolve an issue that was caused by “a bug in the bitcoin software.” Unbeknownst to the general public at the time, Mt. Gox had suffered number hacks and security breaches from various attackers over the previous few years. In all, about 850,000 BTC was lost, which was close to 6% of the total supply. 

On February 6th, the day before the hack became public, BTC price was $763, and had topped $1,000 for the first time ever just two months earlier. 

On February 24th, the Mt. Gox website went offline for good. That same day, BTC price dipped to $542, and would not top $700 again for over two years.

Source: Coin Metrics Network Data Pro

At the time of the hack, Mt. Gox reportedly accounted for over 70% of BTC trades. Exchanges can be a big potential systematic risk factor for the industry as a whole. If one particular exchange has a huge portion of the market share and that exchange is compromised, the entire market is adversely affected. Therefore, it’s crucial to track exchange activity to know if an exchange is becoming too dominant, and also in order to keep tabs on exchanges and look out for any suspicious activity. 

In retrospect, the Mt. Gox hack was an inflection point for the cryptocurrency industry. It kickstarted a new push for accountability and regulation of exchanges that is still underway today. “Proof of reserves” is the idea that exchanges should publicly verify the reserves that they claim to hold. Although Kraken released a proof of reserves audit in 2014, the industry at large has still done little to move towards implementing proof of reserves. This is partially because proof of reserves poses operational challenges, and also presents potential security risks due to exchange addresses being publicly exposed. Exchanges allowing third party assessments of their balances could be an intermediate step. We welcome the opportunity to collaborate with exchanges on this domain, as they try and build user trust.

In this issue of SOTN, we analyze the amount of BTC and ETH held by exchanges over time using on-chain data. Analyzing supply held by exchanges gives a picture of which exchanges are getting the most usage, and if any exchange (or the market as a whole) is at risk.

Exchange Data Overview

At Coin Metrics we track exchange activity as part of our CM Network Data Pro offering.  Specifically, we track the supply of BTC and ETH held by most major exchanges, as well as the amount flowing into and out of each exchange. We do this by finding and tagging all of the addresses operated by each exchange and tracking the aggregate activity for those addresses. This requires a mix of automated and manual processes with daily oversight. 

For this report, we cover the following exchanges: Bitfinex, BitMEX, Binance, Bitstamp, Bittrex, Gemini, Huobi, Kraken, and Poloniex. Although these exchanges cover a significant portion of the overall volume, it’s important to note that there are hundreds of other exchanges that we did not include in this analysis. Furthermore, our metrics are estimates of the real number of BTC/ETH held by exchanges – there is no way to know the true number unless exchanges prove their holdings through an independent audit. Notably, Coinbase is not included in this report, but we are actively working towards tracking it in the future.

The amount of supply held by exchanges can be thought of as an estimate of the exchange’s usage. Of course, it’s not a perfect measure. Exchange supply increases could mean there are more traders using the exchange, or it could be because more traders are effectively using the exchange as a bank to store their assets. But there’s some evidence that usage correlates with the amount held on exchange. 

The following chart shows Poloniex’s BTC reserves compared to the amount of users connecting to the exchange’s websocket API (that is, the number of users that are online at a given time – not the total number of users with accounts). As BTC reserves declined, so did the number of active API users.

BTC and ETH Supply Held by Exchanges

Over the last five years, the total amount of BTC held on the nine exchanges in our sample (Bitfinex, BitMEX, Binance, Bitstamp, Bittrex, Gemini, Huobi, Kraken, and Poloniex). has generally trended upwards, regardless of market conditions. The following chart shows the aggregate amount of BTC held on the exchanges plotted against BTC’s USD price. 

Source: Coin Metrics Network Data Pro

Individual exchanges, however, have more volatility. While some exchanges, like Binance, have continued to grow after the 2018 price bubble, others, like Gemini and Bittrex, saw a large increase in early 2018 and have since leveled off. One other thing to note is that Bitstamp previously moved their cold storage back and forth between Xapo, which caused a sudden dip in their supply.

Source: Coin Metrics Network Data Pro

This is reflected in the following chart, which shows each exchange’s percentage share (on a monthly basis, averaged over the month) of the total BTC held on the nine exchanges in our sample. Over the last five years, exchange supply distribution for the exchanges in our sample has become significantly more distributed, which is a positive sign for the health of the overall market. 

Source: Coin Metrics Network Data Pro

Unlike BTC, the total amount of ETH held on exchanges in our sample has not consistently trended upward over the last five years. It is difficult to draw global conclusions from this chart since our exchange sample for ETH supply only includes eight exchanges and does not include Coinbase, among others. But one interesting observation is that the the amount of ETH dropped significantly in 2017 and throughout 2018 during the price bubble peak and burst, and has since leveled out. 

Source: Coin Metrics Network Data Pro

Kraken was the first major fiat exchange where ETH was tradeable, so accumulated a relatively large amount of ETH early on. But Kraken was unable to hold onto this early lead. Kraken held close to 9M ETH in January 2017 and had less than 3M by January 2018. Gemini and Poloniex also had their peak ETH supplies by early 2017 and have since declined. 

Source: Coin Metrics Network Data Pro

ETH exchange supply has gotten more distributed over the last five years. As of January 2020, Huobi, Bitfinex, and Binance had 23%, 20%, and 15% of ETH supply, respectively. 

Source: Coin Metrics Network Data Pro

Exchange Case Studies

On-chain exchange supply is also useful for tracking individual exchange activity. Below, we take a look at how key events affected the BTC and ETH supplies for three exchanges: Poloniex, BitMEX, and Huobi.


Poloniex launched in January 2014 and quickly became one of the largest exchanges in the world. During its early years, Poloniex thrived in a largely unregulated market. During 2016 and 2017, Poloniex handled a lot of altcoin trading. But by late 2017, Poloniex was plagued by support issues and was having trouble scaling quickly enough to cope with its new users.

Poloniex was acquired by Circle in February, 2018, with plans to work with regulators and improve Poloniex’s infrastructure. Those plans had a dramatic effect, as Poloniex’s BTC and ETH holdings began to plummet immediately after Circle’s acquisition. By October 2019, Circle announced that they were spinning out Poloniex as a separate entity. Poloniex officially ended support for US customers in November 2019 (and subsequently dropped KYC requirements for accounts with balances of less than $10k), sending their on-chain supplies to their lowest levels since January, 2016. 

Source: Coin Metrics Network Data Pro


BitMEX is a Seychelles-registered derivatives trading platform that offers high leverage trading (up to 100x) on futures and perpetual contracts. BitMEX only allows for BTC deposits (and not ETH), but allows BTC to be traded against many other currencies. 

Similar to Poloniex, BitMEX was also founded in 2014. But unlike Poloniex, BitMEX started off slowly and has been steadily growing over the last few years. Notably, BitMEX has increased their BTC supply during the 2018 bear market. However, it’s important to note that BitMEX has a relatively large “insurance fund” of BTC that reportedly grew by over 63% in 2019. 

BitMEX has also suffered some recent setbacks due to regulatory issues. In July 2019, Bloomberg reported that BitMEX was officially under investigation by the U.S. Commodity Futures Trading Commission (CFTC) about whether BitMEX broke the law by allowing Americans to trade on their platform. This caused BitMEX BTC supply to temporarily dip, but it has since recovered. In November 2019, BitMEX revealed that over 20,000 client emails had been leaked as part of a security breach. However, this did not appear to affect BitMEX BTC holdings. 

Source: Coin Metrics Network Data Pro


Huobi was founded in 2013. Huobi had moderate success over its first five years of operations, but is most notable for its large increase in both BTC and ETH supply during the second half of 2019. 

The PlusToken scam was a China based ponzi scheme which was similar in structure to Bitconnect. PlusToken reportedly stole billions of dollars worth of cryptocurrency over 2018 and 2019. It reportedly first started in early July, 2018 then abruptly stopped accepting payments on June 30th, 2019 after publicly posting the message “sorry we have to run.”

In August, 2019, reports first started coming out that BTC and ETH from the PlusToken scam were being sold in large quantities on Huobi. In December 2019, Chainalysis published research claiming that PlusToken coins can be tracked to a few OTC desks that were operating on Huobi. There has also been speculation that the PlusToken selloff may have been directly linked to the BTC rally and subsequent crash during the summer of 2019.

Source: Coin Metrics Network Data Pro


Tracking exchange on-chain activity is more important now than ever. As the industry continues to evolve and regulatory pressure increases, it is important to keep exchanges accountable and hold them to a high standard. Overall, exchange supply appears to be getting more distributed, and the public is starting to become more aware when exchanges are involved with suspicious activity, which is a positive sign for the health of the industry. Up to this point, exchange balances have largely been characterized by third parties like us. Moving forward, we welcome the opportunity to work with exchanges to attest to these findings, and hope to continue to see the industry moving towards transparency and accountability.

Network Data Insights

Summary Metrics

Source: Coin Metrics Network Data Pro

The major cryptoassets continued to trend upwards this past week. ETH and XRP transfers were both up, growing 10.5% and 20.7%, respectively. XRP also led the way in active address growth, growing 34.1% week over week. However, it’s important to note that XRP still has significantly fewer active addresses and transfers than BTC, ETH, LTC, and BCH. Notably, BTC usage and security numbers increased less than the other four assets in our sample, which was not the case for most of 2019.

Network Highlights

BSV thirty-day active supply increased 43% over the past week (from Jan. 13th – 19th), more than any other asset in the below sample of 17 major cryptoassets. This was likely related to BSV’s upward price action as it outpaced all major assets with a 67% price increase over the last week, as noted in the below Market Data Insights section.

Source: Coin Metrics Network Data Pro

BSV active address growth, however, was negative on the week. BSV active addresses decreased by 7% over the week, which is less than most of the other assets in our sample. 

Source: Coin Metrics Network Data Pro

Market Data Insights

Nearly all cryptoassets are continuing to see moderate gains this week. Among the major assets, Bitcoin Cash SV (+67%) performed the best with some market participants attributing the price action to legal developments surrounding Craig Wright. 

Recent market action demonstrates that cryptoasset markets are still susceptible to short-lived bouts of violent price swings. Bitcoin Cash SV was particularly susceptible because a significant number of its holders have not yet claimed their coins since the fork occurred (narrowly defined here as moving their coins from one address to another) and many reputable exchanges have delisted the asset. This creates a situation where liquidity is low, order book depth is shallow, and price discovery occurs on second-tier exchanges that are more amenable to price manipulation. Furthermore, gaining short exposure to assets like Bitcoin Cash SV is either extremely difficult or impossible. 

Source: Coin Metrics Reference Rates

Ethereum Classic (+53%), Dash (+58%), ZCash (+44%), and IOTA (+30%) have similarly seen outsized gains over the past week. The fact that these types of movements happen with regular frequency suggests a momentum-based strategy related to these assets may be possible. 

Source: Coin Metrics Reference Rates

We previously examined Bitcoin’s historical price cycles in State of the Network Issue 27. We found that the previous cycles indicate a pattern of lengthening where each cycle takes longer to complete than the previous cycle — an expected result if cycles are driven by a new wave of adoption and awareness from a certain group of users, each bigger than the last. 

Source: Coin Metrics Reference Rates

Bitcoin’s price correction following the summer of last year has put the current cycle inline with the previous cycle that started in early 2015. If historical price cycles are reliable guide, we should expect further periods of only moderate price growth interspersed with brief periods of rapid growth and corrections. 

Source: Coin Metrics Reference Rates

Still, market sentiment seems to have significantly improved over the past month. Looking at the distribution of estimated cost basis (an extension of the realized capitalization concept that we discussed in The Psychology of Bitcoin Bubbles as Measured by Investor Cost Basis) reveals that about 72% of all Bitcoin now has unrealized gains. This is a significant improvement from one month ago where this metric stood at 50%. The current distribution shows that the vast majority of Bitcoin has an estimated cost basis less than $12,000 and that at these levels, only a small increase in price is needed to dramatically improve investor sentiment. 

Source: Coin Metrics Network Data Pro

CM Bletchley Indexes (CMBI) Insights

All CM Bletchley Indexes continued their impressive start to the year, performing extremely strongly again last week. Over the last year, it was infrequent to witness Bitcoin underperform the entirety of the Bletchley indexes by as much as it did this week, with the CMBI Bletchley Index only returning 6.5% over the week. Comparatively, the Bletchley 20 (mid cap assets) performed the best during the week with the Bletchley 40 (small cap assets) not too far behind, returning 20.5% and 17.5% respectively.

Despite Bitcoin being one of the weaker market performers over the week, the Bletchley 10 Even was the strongest weekly performer. This was largely due to the staggering performances of Bitcoin SV (67%), Bitcoin Cash (26%) and Stellar (23%).

Source: Coin Metrics Bletchley Indexes

As mentioned above, this week’s performance continued the exciting start to the year for cryptoassets. From the first of Jan, all CM Bletchley Indexes have returned between 25% and 48%. The breadth of the performance across the market can be witnessed in the below chart, where it can be observed that the annual returns of the even weighted indexes has exceeded or been relatively similar to its related market cap weighted index.

Source: Coin Metrics Bletchley Indexes

Coin Metrics Updates

This week’s updates from the Coin Metrics team:

  • Coin Metrics is hiring! We recently opened up 5 new roles, including Blockchain Data Engineer and Data Quality and Operations Lead. Please check out our Careers page to view the openings.

As always, if you have any feedback or requests, don’t hesitate to reach out at [email protected]

Subscribe and Past Issues

Coin Metrics’ State of the Network, is an unbiased, weekly view of the crypto market informed by our own network (on-chain) and market data.

If you’d like to get State of the Network in your inbox, please subscribe here. You can see previous issues of State of the Network here.

Check out the Coin Metrics Blog for more in depth research and analysis.

Coin Metrics’ State of the Network: Issue 33

Weekly Feature

Is Bitcoin Becoming a Safe Haven Asset?

By Kevin Lu and the Coin Metrics Team

Discussion regarding Bitcoin’s status as a safe haven asset during times of elevated geopolitical risk and macroeconomic uncertainty has existed almost since Bitcoin’s inception. Despite anecdotal evidence that Bitcoin has reacted positively to certain historical events and a compelling narrative that Bitcoin has the fundamental properties to serve as a safe haven asset, the actual body of empirical evidence (prior to recent events) is inconclusive. 

Recent events have transpired that significantly expand the body of empirical evidence — the intensification of military tensions between the United States and Iran. In this issue of State of the Network, we examine events related to the conflict to further our understanding of Bitcoin’s reaction function to geopolitical events. Additionally, we use high time-resolution price data to study the degree of market efficiency and speed of information diffusion.

Major Events in the United States-Iran Conflict 

We conduct event studies on three major events related to the intensification and subsequent de-escalation of military tensions between the United States and Iran in January 2020. A description of the three major events is found below: 

  1. On January 3, 2020 at 01:00 UTC, major news sources began to report on a drone strike executed by the United States which killed Iranian Major General Qasem Soleimani. The actual drone strike occurred roughly three hours earlier to first publication and initial reports in the immediate aftermath were short on details.
  2. On January 7, 2020 at 22:43 UTC, Iran launched a missile attack against United States military bases located in Iraq as retaliation to the assassination of Major General Qsem Soleimani. This event marked a dramatic escalation in the military tensions between the United States and Iran. 
  3. On January 8, 2020 at 16:27 UTC, President Trump addressed the nation regarding the Iranian missile attack, stating that “no Americans were harmed” and that “Iran appears to be standing down”. President Trump concluded his ten-minute speech by stating, “the United States is ready to embrace peace with all who seek it”. These comments were interpreted as a cessation of hostilities and a deescalation of tensions. 

During this time period, oil futures and gold futures both experienced immediate positive reactions to events that marked an escalation of tensions and negative reactions to the de-escalation. This shows their high degree of market efficiency and the speed and effectiveness of information diffusion during a volatile situation. Market participants were able to quickly and accurately adjust prices due to changes in the probability of disruption of oil supplies in the Middle East. 

We examine Bitcoin’s response to these events using Coin Metrics’ Real-Time Reference Rates, which represent a global price quoted in U.S. dollars for a set of cryptocurrencies, updated once per second. Real-Time Reference Rates are calculated using a robust and resilient methodology that adheres to international best practices for financial benchmarks, including the International Organization of Securities Commissions’ (IOSCO) Principles for Financial Benchmarks. Constituent markets used in the calculation of the Real-Time Reference Rates are carefully selected using a framework which evaluates markets and exchanges along numerous dimensions. 

United States Drone Strike 

Major news sources began reporting on the U.S.-led drone strike which killed Iranian Major General Qasem Soleimani on January 3, 2020 at 01:00 UTC. Reports were first circulated on Twitter and examination of timestamps from major publications indicates that the information was widely disseminated by 02:00 UTC. By this time, both oil and gold futures had already made significant moves in response to the attack. 

Although many observers point to Bitcoin’s response as evidence of its safe haven properties, a close examination of the timing suggests that multiple explanations are possible. While Bitcoin did subsequently move upward mirroring the response seen in oil and gold, it did so with roughly a three hour delay. Significant movement in Bitcoin’s price was not observed until 04:00 UTC. 

One possible explanation is that market participants bid up the price of Bitcoin in the face of greater geopolitical uncertainty (a validation of the safe haven theory) but did so with a delay because the market is inefficient. Under this explanation, market participants are slow to learn about or act upon information. 

An alternative explanation points to the timing of Bitcoin’s response and concludes that this event indicates no strong relationship between Bitcoin and geopolitical events. Bitcoin’s price movement did not occur at the same time as other financial markets such as oil and gold futures despite Bitcoin’s market being open 24/7. And for several hours after the event, Bitcoin prices declined or remained stable which is incompatible with an explanation that Bitcoin markets are inefficient due to slow information diffusion. If the slow information diffusion explanation were true, we would expect prices to gradually reflect available information, and not react suddenly and sharply as it eventually did. 

Finally, Bitcoin has historically seen sharp intraday price changes without any apparent news catalyst. Instead, these price changes are driven by forced liquidations on futures products which can have a disproportionate impact on short-term prices and are often the cause of bouts of short-lived volatility. 

When examining this one event in isolation, multiple explanations are possible. Despite loud claims that Bitcoin’s price movement was driven by the U.S.-led drone strike, a spurious relationship cannot be ruled out. 

Iranian Missile Attack 

While the previous event illustrates the potential limitations in market efficiency for Bitcoin and the slow speed of information diffusion during normal conditions, an examination of the Iranian response illustrates how rapidly market efficiency can improve. 

In response to the United States-led drone strike, Iran retaliated by launching several missiles to United States military bases located in Iraq. Initial reports were again short on details, and information first circulated through journalist Twitter accounts before being picked up by mainstream news publications. The earliest known mention of the Iranian missile attack was on January 7, 2020 at 22:43 UTC. 

In contrast to the multiple explanations in the previous event, Bitcoin’s response to the Iranian missile attack suggests a much narrower set of possible explanations. First, Bitcoin moved in concert with oil and gold futures with no noticeable delay. Second, prices moved upward over the subsequent hours with a steep but gradual slope — not the sharp price movements that are commonly observed during forced liquidations on futures positions. In fact, few forced liquidations on futures positions were observed on BitMEX despite the large change in prices. 

The body of evidence strongly suggests a connection between Bitcoin and the escalation of military tensions between the United States and Iran and serves as a validation of the safe haven theory. 

Deescalation of Military Tensions 

President Trump’s remarks indicating a de-escalation of military tensions is perhaps the strongest evidence in the history of Bitcoin that there is a direct connection between Bitcoin and geopolitical events. While the previous two events in our study measured Bitcoin’s response on the order of hours, its response to this event can be measured on the order of minutes. 

President Trump started his address to the nation on January 8, 2020 at 16:27 UTC. Bitcoin, in concert with traditional financial markets, responded immediately to the news that both the United States and Iran would not seek further military action. This event and the other two events in our study show that under the proper circumstances, Bitcoin’s market efficiency can increase and has the potential to be as efficient as the largest financial markets in the world. Circumstances were ideal for optimal market efficiency because market participants were already attuned to the significance of the unfolding situation and the time of President Trump’s remarks was widely known in advance. This conclusion is consistent with a similar study we performed for TRON in State of the Network Issue 10, where we found that under optimal conditions, even markets for a mid-capitalization asset can become very efficient. 

While many observers have pointed out this connection, we feel the implications of this event are still not widely appreciated. We have witnessed perhaps the strongest validation of the Bitcoin safe haven theory in its 11 year history, and this watershed moment marks an important milestone in Bitcoin’s maturation as a legitimate asset class. 

Why has this event in particular invoked such a strong reaction from Bitcoin? We feel that there are both first order and second order effects at play. 

First, the escalation in military tensions increased policy uncertainty. This heightened uncertainty increases the attractiveness of safe haven assets such as gold. 

Second, these events caused a short-lived but significant decline in real yields (nominal interest rates adjusted for inflation) which increases the attractiveness of holding Bitcoin. Nominal interest rates declined slightly in part because U.S. sovereign bonds were bid due to safe haven capital flows. But inflation expectations also rose because market participants were pricing in the possibility of a disruption in oil supplies — products derived from crude oil (most notably gasoline but also many consumer products) are a key determinant in headline inflation rates. Declines in real yields can be driven by declines in nominal interest rates which reduce the opportunity cost of holding a non-yield producing asset like Bitcoin. Declines in real yields can also be driven by increases in inflation expectations which drive an increased need for store-of-value assets like Bitcoin. 

It is worth noting, however, that releases of pure macroeconomic data (without an increase in geopolitical risk) which have resulted in large changes in real yields have failed to spark a reaction in Bitcoin’s price thus far. Such events include important meetings of the Federal Open Market Committee and releases of key macroeconomic indicators like the U.S.’s employment report and important survey-based indicators like manufacturing PMI. 

Taken together, this confluence of events caused a perfect storm that led to Bitcoin having an extremely strong reaction. On the first order, it appears that Bitcoin is a source of safe haven capital flows during times of uncertainty, at least for now. On the second order, Bitcoin may begin to exhibit some sensitivity to changes in real yields and the macroeconomic events that lead to changes in real yields. In addition, while the initial reaction in Bitcoin to the United States-led drone strike may have been spurious, it renewed discussion about Bitcoin as a safe haven asset and introduced the idea that other traders are considering it for safe haven capital flows. Ultimately, assets attain a safe haven status by a combination of their fundamental properties and due to game theory-driven consensus among investors. 

Finally, these events serve as a contemporary study of market efficiency with serious implications surrounding the debate on whether the upcoming block reward halving is priced in. The speed of response indicates that under normal circumstances, there are still limitations  to Bitcoin’s market efficiency, but under special circumstances in which market participants become attuned to the significance of upcoming events, market efficiency can increase to levels comparable to the largest financial markets. 

Network Data Insights

Summary Metrics

The major cryptoassets rallied over the past week after a rocky start to 2020. Usage was up for BTC, ETH, XRP, and BCH, while LTC saw a slight decrease. XRP, notably, had a 117% increase in active addresses and close to a 50% increase in transaction count.

Both BTC and BCH adjusted transfer value grew by over 33% week-over-week with ETH not too far behind at nearly 18%. But BTC still has a huge lead in terms of average daily transfer value. BTC had a daily average of $1.7B adjusted transfer value over the last week, while ETH and BCH had $195M and $130M, respectively.

Network Highlights

ETH annual issuance percentage (i.e. the monetary inflation) fell to an all-time low of 3.45% at the end of December, 2019 as the Ethereum ice age approached. The Ethereum ice age was a planned difficulty increase which made it more difficult to mine blocks, and therefore increased the time between new blocks. Lower block count led to lower total daily block rewards, and therefore led to decreased issuance. 

The ice age was originally designed to grind the Ethereum network to a halt in order to encourage users to shift over from Ethereum 1.0 to Ethereum 2.0. However, Ethereum 2.0 did not launch by the end of 2019 as once expected. Ethereum therefore hard forked on January 2nd, 2020 in order to increase difficulty and delay the ice age. After the fork, ETH annual issuance is now back up to 4.56% as of January 12th.  

Ethereum ERC-721 transactions have cooled off at the beginning of 2020 after a strong close to 2019. The following chart shows transaction count growth over the past year (1/13/2019 – 1/13/2020)  for ETH, ERC-20’s, and ERC-721’s, smoothed using a seven day rolling average.

Market Data Insights

Tensions between the United States and Iran this past week are largely responsible for a widespread rally in cryptoassets. Bitcoin is up 11%, outpacing gains seen in some smaller cryptoassets. Historically, altcoins have had a high beta to Bitcoin returns and having exposure to altcoins during upswings has been used as a method to increase overall portfolio return.. 

Still, we do see some isolated examples of extreme price movements that cannot be easily explained. Bitcoin Cash SV (+49%) is the strongest performer among major cryptoassets perhaps due to speculation about positive developments  surrounding the legal developments of Craig Wright, a vocal proponent of Bitcoin Cash SV. Bitcoin Cash (+20%), EOS (+19%), and Litecoin (+18%) are all strong performers this week on no clear news catalysts. 

Mid-cap cryptoassets are also mixed with some assets outperforming Bitcoin and others underperforming. Dash (+30%) and ChainLink (+25%) are notable movers. Ethereum Classic (+14%) and ZCash (+16%) continue with a strong performance over the past several weeks. Cosmos, one of the strongest performers over the past three months, is only up 1% this week. 

Volatility for most cryptoassets continues to steadily decline. Many cryptoassets are at or approaching all-time lows when measured on a three month rolling basis — only Bitcoin’s volatility appears to be stable or trending upwards. This reflects the proliferation of leveraged products and how investor interest has become increasingly concentrated in Bitcoin. Volatility for nearly all cryptoassets are now inline with Bitcoin’s.

The relationship between Bitcoin and gold deserves continued observation. Observers have pointed to Bitcoin’s performance during the summer of 2019 in which both Bitcoin and gold saw large gains in response to a sudden shift in monetary policy from the world’s major central banks. This shift involved unexpected interest rate cuts, causing many developed world countries’ sovereign bonds to trade with negative yields, and renewing concerns about the sustainability of the current path of monetary policy and the long-term consequences of such actions. More recently, both Bitcoin and gold jumped simultaneously in response to military tensions between the United States and Iran. 

While the recent conflict presents quite convincing evidence in support for theory that Bitcoin has benefited from safe haven capital flows, the correlation between Bitcoin and gold has always been low and inconsistent when measured over longer time frames. 

Here we show the correlation of Bitcoin daily returns and gold daily returns over a 90 day rolling window. While correlation was weakly positive for the majority of 2019, it has since recently flipped to be negative, although the sharp decline has reversed over the past several days due to the situation between the United States States and Iran. 

In order to see higher correlations between Bitcoin and Gold, Bitcoin would need to begin to react instantaneously to releases of surprising macroeconomic information that reflect changes to growth, inflation, and real yields. Thus far, there has been no evidence that Bitcoin consistently exhibits such behavior. 

CM Bletchley Indexes (CMBI) Insights

All indexes started the year in a stellar fashion off the back of very strong market performance across most cryptoassets this week. The Bletchley 10 (large cap) and Bletchley 20 (mid cap) performed best, each returning ~12% for the week with the Bletchley 40 (small cap) lagging the higher cap indexes, returning only 6%.The relative uniformity of the market movement this week can be seen through the low return profile of indexes when denominated in Bitcoin terms.

The Bletchley 10 Even was the strongest performer of the week, outperforming all indexes, demonstrating for the second week running that there is merit in considering index calculation designs other than market cap weighting for cryptoasset managers.

Coin Metrics Updates

This week’s updates from the Coin Metrics team:

  • Coin Metrics is hiring! We recently opened up 6 new roles, including Blockchain Data Engineer and Data Quality and Operations Lead. Please check out our Careers page to view the openings.

As always, if you have any feedback or requests, don’t hesitate to reach out at [email protected]

Subscribe and Past Issues

Coin Metrics’ State of the Network, is an unbiased, weekly view of the crypto market informed by our own network (on-chain) and market data.

If you’d like to get State of the Network in your inbox, please subscribe here. You can see previous issues of State of the Network here.

Check out the Coin Metrics Blog for more in depth research and analysis.

Coin Metrics’ State of the Network: Issue 32

Weekly Feature

Investigating the Failed Stellar Inflation Experiment

By Antoine Le Calvez and the Coin Metrics Team

Each blockchain has a unique process for issuing new supply. For some, like Bitcoin, the full issuance schedule and final supply are encoded into the protocol (and is unlikely to change, due to social consensus). 

Bitcoin issues new supply through block rewards issued to the miner of each block. Bitcoin block rewards halve on a predetermined schedule — the next halving is expected to take place on May 11th, 2020. Other blockchains have issuance schedules that are not as resolutely encoded, and are subject to change. Ethereum issuance has been adjusted several times since 2017, most recently reducing the reward from 3 ETH per block to 2.

Whenever new supply is issued, monetary supply is inflated (we will therefore refer to this process as monetary inflation). This (at least theoretically) dilutes the value of the rest of the supply, unless an equal amount of existing supply is burned. 

In the case of Bitcoin and Ethereum, the new supply is used to reward the protocol’s miners. But the new supply can also go to other destinations. Some blockchains, such as Stellar, reserve some of their newly issued supply for use by an official protocol-focused foundation. The Stellar Development Foundation (SDF), for example, is a non-profit organization that has a mandate to support the development and growth of the Stellar network.

From its genesis in 2014 until the activation of the version 12 of its protocol, the Stellar network featured a monetary inflation process that issued new units at a rate set to 1% per annum.

Here’s how it worked: each Stellar account could designate an “inflation destination” account that would get as many votes as lumens (XLM) the designating account held. Votes were tallied weekly and each inflation destination account that got voted by at least 0.05% of the supply would receive a share of the inflation pool proportional to the total balance of all its designating accounts, with any unallocated amount to be distributed during the next week. Any account could be designated as an inflation destination but only those that got voted by at least 0.05% of the supply would qualify to receive the new issuance. 

In addition to newly minted units, transaction fees were also redistributed this way. However, they only account for a tiny amount of value compared to the inflation.

On September 30th, 2019 following a year of discussion within the community, the SDF announced that the monetary inflation process would be phased out. This protocol change was completed on October 28th 2019.

In this feature, we’ll look at the on-chain data to get to an understanding of the process, look at the reasons why it was phased out and finally, evaluate the impact it had on Stellar’s on-chain metrics.

Goals vs reality

In an email to the stellar-dev mailing list, Jeb McCaleb (co-founder of Stellar) listed 2 main reasons behind the existence of the inflation process:

  1. A way to “address some criticisms of cryptocurrencies being deflationary”
  2. To “give people incentive to collaborate and decide how network rewards are allocated”

Jed also elaborated that “any early inequities or problems with the initial distribution would get less important as time went on.”

Reality however proved different. 

In a blog post announcing the deprecation of the inflation process, the SDF explained that the new supply, which should have helped “support the development and growth of the ecosystem,” was instead being claimed by individuals who were not actively working on development projects. This primarily happened through the creation of inflation pools, which allowed individuals to pool their resources together to pass the 0.05% supply threshold to qualify for receiving an inflation payout. 

Inflation payouts overview

Over the roughly 4 years the inflation process was running (from October 2015 to October 2019), it was run 280 times and only 23 unique recipients got to share 5.482B XLM as the designated inflation destination accounts. 

Astute observers will have noticed that the number of times the inflation process was run (280) is greater than the number of weeks that the process was running for (roughly 212 weeks). 

From the Stellar protocol’s point-of-view, the inflation process didn’t start at the time the current public network was launched (Sept 30th 2015) but earlier, when the first public Stellar network was launched on July 1st 2014.


From the list of inflation recipients, we can identify several types of addresses using public sources:

  • Stellar Development Foundation (SDF) addresses
  • Exchange addresses
  • Inflation pool addresses
  • Unknown addresses (unknown large balance holders, etc..)

Inflation pools are a way for users to benefit from the inflation process if they own less than the qualifying amount to participate themselves (0.05% of the outstanding supply, roughly 50M XLM or $2.5M at current prices). Inflation pools users would designate the pool address as their inflation destination and get paid their due share weekly.

Exchanges started partaking in the inflation process too, with Binance and Poloniex even distributing the proceeds to their XLM balance holders.

In total, 1,087,306 accounts designated an inflation destination. This means that only 18.3% of the accounts ever created before the end of the inflation process participated in it. While this represents only a fraction of the accounts, it likely represented a large proportion of the supply since many of the largest accounts participated. Only a small minority (6.6%) of the accounts that designated an inflation destination voted for one that never passed the 0.05% threshold.

Looking at the payout recipients of the 2 largest inflation pools’ (Lumenaut and XLM Pool), we can see how many accounts participated in inflation pooling (and received payouts) as well as several key milestones: the end of the inflation process (late October 2019) and a change in policy from Lumenaut (in April 2019) which made it so they would only payout accounts holding at least 100 XLM.

This means that despite there being millions of Stellar accounts, only a few tens of thousands got to regularly enjoy the benefits of the inflation process (perhaps not surprising given that only 18.3% of accounts ever designated an inflation destination account).

Payouts flows

Putting it all together, we can paint a picture of how this newly minted money flowed:

As we can see, the great majority (98%) of the inflation payouts accrued to the SDF. This can be explained by two factors:

  • The SDF controls 80% of the supply and likely designated itself as an inflation destination
  • It has always participated in the inflation process

Given that Stellar became very popular in 2017, the SDF had a 2 year head start where it was nearly the only participant benefiting from the inflation process.

Furthermore, only a paltry amount of supply (834K XLM, $41K at current prices) went directly to community projects the way the inflation process intended it (it is unclear how the unknown destinations used their funds). Furthermore, since 98% of the newly created money went to the SDF despite it controlling 80% of the total supply, the inflation process arguably worsened inequities. For its part, the SDF has spent roughly 340M XLM (or $16.7M at current prices) from a total mandate of nearly 30B XLM since November of 2019 on development and growth.

Impact on network metrics

Looking at activity around Stellar’s native token (XLM), we can see the impact of the end of the inflation process:

The weekly spikes in addresses receiving XLM is now gone. These were caused by the inflation pools paying out their users. The Stellar inflation is therefore a good example as to why network data metrics have to be contextualized to take into account each network’s idiosyncrasies. Rather than measuring on a daily basis, Stellar active receiving addresses (the number of unique addresses that received XLM at least once in the observed week) could be measured instead on a weekly basis to smooth out the effect of this irregular issuance.

Doing so, we can see that it is now reaching lows unseen for months:


The SDF blog post announcing the end of the inflation process ended by mentioning that they would soon shed more clarity about their plans for handling their XLM, including the 5.4B XLM they received via the inflation process.

Indeed, a few days after the deactivation of the inflation process, the SDF burned 5B XLM from its operating fund and 50B XLM from its funds earmarked for giveaway, bringing the circulating supply to exactly 50B XLM, 20B of which is now outside the SDF control.

What we are left with is a few tens of millions of XLM having been doled out to exchanges and XLM owners over 5 years, with very little of it going to its intended use: helping community projects.

The Stellar inflation process was an interesting economics experiment. Analyzing it draws parallels with current hot topics like the Cantillon effect. It also helps in showing that each network has idiosyncrasies that have to be taken into account in order to better understand its activity and usage.

Network Data Insights

Summary Metrics

Ethereum (ETH) usage suffered a down week after completing its second hard fork in less than 30 days. ETH active addresses fell 16% week-over-week, and transfer count fell over 10%. Comparatively, BTC was marginally up in both active addresses and transfers, increasing 0.6% and 2.7%, respectively. 

XRP, LTC, and BCH adjusted transfer value all increased by at least 50% from the previous week. BTC adjusted transfer value, however, went in the opposite direction, decreasing by 6.2%. 

Network Highlights

The major stablecoins are off to a hot start in 2020. The following chart shows the weekly growth in the number of addresses with a balance of at least $10 for 18 large cryptoassets. The Ethereum version of Tether (USDT-ETH), Paxos (PAX), and USD Coin (USDC) all grew by at least 2.2% over the past week, while BTC and ETH grew 0.52% and 0.94%, respectively.

The number of addresses with a balance of at least $10 can be used as an approximate measure of the number of total “retail” holders of an asset. However, it’s important to note that one address does not necessarily mean one user (users often have multiple addresses), so it should be thought of as a maximum number of potential holders. 

The number of stablecoin addresses with a balance of at least $1M has also been increasing over the past year. The following chart shows the annual growth for the same 18 cryptoassets. USDT-ETH, USDT Omni (USDT), and USDC all outpaced Bitcoin over the course of 2019.

Read more on this plus similar charts for 18 other metrics in our State of the Network 2019 Year in Review.

Market Data Insights

Despite the increase in prices over the weekend, most major cryptoassets are flat or down over the week with a few important exceptions. Both Bitcoin Cash (+5%) and Bitcoin Cash SV (+9%) saw outsized gains relative to the overall market. 

Coins with privacy features including Monero (+15%), Dash (+14%), and ZCash (+5%) have performed well over the past week. Monero briefly entered the top 10 coins ranked by market capitalization at the tail end of the previous week. Ethereum Classic (+4%) continues its outperformance over the past month. 

Bitcoin and the broader cryptoasset reaction function to macroeconomic and geopolitical events is still not understood. Over the past weekend, an event transpired which provides additional data to help us understand Bitcoin’s reaction function — the United States led a drone strike that killed Iranian Major General Qasem Soleimani. Over the subsequent days, tensions between the United States and Iran have escalated as both countries consider their response. 

The drone strike occurred at approximately 22:00 UTC time on January 2, 2020. News of the strike started to be published approximately three hours later at 01:00 UTC time on January 3, 2020. It was during this time that oil and gold futures had a sharp reaction — oil likely due to market participants pricing in a higher probability of disruption in oil supplies in the Middle East and gold likely due to a standard flight-to-safety response in the face of geopolitical conflict. 

Bitcoin did not immediately respond to the publication of the drone strike. A sharp increase did occur about three hours after the initial reports started coming in, suggesting either a delayed reaction or a spurious connection. Oil, gold, and Bitcoin are all markedly higher since the incident, adding some support that Bitcoin responds positively to such events. However, the difference in timing suggests that a spurious connection between Bitcoin and the event or limitations on the speed of information diffusal are still possible explanations. We previously examined the speed of information diffusal of cryptoasset markets using TRON in State of the Network Issue 10

As the weekend progressed and the situation continued to escalate, oil and gold continued to rise with a large increase on the night of January 5, 2020. Again, Bitcoin saw a positive movement delayed approximately three hours. 

CM Bletchley Indexes (CMBI) Insights

2019 was a story of two halves. After the bear market of 2018, the first half of 2019 saw much promise as cryptoassets, led by Bitcoin, all performed strongly. Large-cap assets were the best performers with the Bletchley 10 returning close to 200% leading up to July. However, after this rapid marketwide recovery, cryptoassets struggled to maintain these growth levels, and saw declines through the second half of the year. Many cryptoassets, including ETH, even returned to the levels where they started 2019. 

Large-cap assets still finished the year relatively strong, but low-cap assets struggled particularly through Q3. This is evidenced by the Bletchley indexes with the Bletchley 10 returning 49%, the Bletchley 20 returning 17% and the Bletchley 40 returning -45%.

Cryptoassets started 2020 with a relatively quiet week as the Bletchley Indexes saw mixed returns. The Bletchley 20 performed best, returning 1.7%, with the Bletchley 10, Bletchley 40 and Bletchley Total all finishing the week relatively flat. It is interesting to observe that most of the even indexes outperformed the market cap weighted indexes this week, indicating that the larger-cap assets in each index underperformed the lower-cap assets in each index where this outperformance occurred.

Coin Metrics Updates

This week’s updates from the Coin Metrics team:

  • In case you missed it, check out our State of the Network 2019 Year in Reviewover 30  pages of charts and analysis about the major cryptoassets’ performance in 2019.
  • Coin Metrics is hiring! We recently opened up 6 new roles, including Blockchain Data Engineer and Data Quality and Operations Lead. Please check out our Careers page to view the openings.

As always, if you have any feedback or requests, don’t hesitate to reach out at [email protected]

Subscribe and Past Issues

Coin Metrics’ State of the Network, is an unbiased, weekly view of the crypto market informed by our own network (on-chain) and market data.

If you’d like to get State of the Network in your inbox, please subscribe here. You can see previous issues of State of the Network here.

Check out the Coin Metrics Blog for more in depth research and analysis.

State of the Network 2019 Year in Review

By Nate Maddrey and the Coin Metrics Team

In this special edition of State of the Network (SOTN) we take a look back at how the major cryptoassets performed over 2019 across four categories:

  1. Valuation
  2. Usage and Adoption
  3. Economics
  4. Security and Health 

We selected several metrics for each section and analyzed how 18 of the largest cryptoassets performed across those metrics. Each section includes charts which show the yearly change for a metric for each asset as well as a summary table with yearly averages from 01/01/2019 to 12/30/2019 (the valuation table shows end-of-day values for 12/30/2019 while all other tables show yearly averages).

Note: If you received this piece through email it might be truncated due to length. View on the website ( for the full piece.


Table values are end-of-day values for 12/30/2019

Price, USD

Despite the downturn at the end of the year, most of the major cryptoassets actually finished significantly up on the year in terms of price. 

Bitcoin (BTC) finished the year up 90% while Ether (ETH) finished down 6%. After Tezos (XTZ) was added to Coinbase and XTZ staking was released on Coinbase Pro and Binance, XTZ had a late surge to finish the year up a stunning 182%. 

A few mid-cap assets also had a strong year, including Chainlink (LINK), up 513%, and Basic Attention Token (BAT), up 45%. XRP, Stellar (XLM), and Zcash (ZEC) on the other hand all finished in the red, down 47%, 60%, and 52% respectively. 

Chart values are annual percent change (1/1/2019 – 12/30/2019) of the USD daily midnight UTC closing price (CM Reference Rates)

Market Capitalization

Market capitalization (market cap) is calculated by multiplying the current total supply by the current market price. For example, if BTC’s price today was $10,000, every coin would be valued equally at $10,000. This would result in a total market cap of $178,981,250,000 (17,898,125 total BTC multiplied by $10,000). 

For the most part, yearly market cap changes align closely to price changes with one big exception: stablecoins.

It was a big year for Tether on Ethereum (USDT_ETH). As we covered in SOTN Issue 17, USDT_ETH rapidly overtook Tether on Omni (USDT) in market cap in 2019. USDT_ETH’s market cap grew by almost 3700% over the past year to a total of nearly $2.3B, while USDT Omni’s market cap fell by nearly 39% to a total of about $1.6B. Two other stablecoins, PAX and USDC, grew by 65% and 100%, respectively. 

Note that we use total (or current) supply for our market cap calculations. This is supply inclusive of all funds held in treasury (or otherwise restricted) and visible on the ledger. This is in contrast to market cap calculations which use circulating supply which removes coins restricted from trading. Using total supply will yield larger market caps for assets such as XRP or XLM that have large tranches of restricted supply in treasuries. 

Chart values are annual percent change (1/1/2019 – 12/30/2019) on a 1 day (1d) basis

Realized Cap

Unlike market cap, realized cap values each coin at the time it last moved (i.e., transferred between two distinct addresses) on-chain. So if a coin last moved in 2017 when the price of the asset was $2,500, that particular coin would be priced at $2,500 instead of the current market price. The sum of the prices of all coins priced this way gives the realized cap. 

Realized cap can be thought of as a measure of the average cost basis of all holders of an asset. Read more about realized cap in SOTN Issue 14 and Issue 28.

Note that for assets for which founders hold large portions of supply in treasury, such as XRP, realized cap should be interpreted with caution. If founders move large portions of supply between treasury wallets at a time when prices differ significantly from the current price, it could result in large and unnatural moves in realized cap. Coin Metrics currently does not calculate realized cap for all assets covered in this issue; however, these will soon be available in the new year.  

BTC’s realized cap increased by nearly 28% over the course of 2019. ETH’s realized cap, however, fell by 19%. The differences in market cap vs realized cap can be interpreted as a difference between market expectations and investor behavior. In BTC’s case where its market cap grew by 97% while its realized cap only grew by 28%, price increased more than the average cost basis, which signifies that most investors held onto their coins rather than realize their profits.

Chart values are annual percent change (1/1/2019 – 12/30/2019) on a 1d basis

Market Value to Realized Value (MVRV)

Market value to realized value (MVRV) is calculated by dividing the market cap by realized cap. A low MVRV is a potential signal that market participants are minimally in profit or not in profit (if MVRV is negative), while a high MVRV ratio may signal that asset holders are well in profit.  

BTC MVRV increased over 2019 finishing at 1.33 indicating that BTC holders were increasingly in profit since the start of 2019 and remained in profit by the end of the year. ETH MVRV on the other hand grew modestly, signifying ETH holders were also increasingly in profit, but finished at 0.61 indicating that holders were collectively underwater at the end of the year. Bitcoin SV (BSV) MVRV dropped considerably over 2019 indicating that BSV holders were increasingly underwater, but still finished the year at 1.70, well into profit. 

Note that a high MVRV doesn’t necessarily signify future expected price increases. In fact, the opposite may hold. When holders are increasingly highly in profit, they are increasingly more likely to sell, and this has held true historically (for example, an MVRV of more than 4 has coincided with all the major post-bull run price declines in Bitcoin history). Whether this will hold true going forward remains to be seen. 

Chart values are daily (end-of-day) values (1/1/2019 – 12/30/2019) 

Volatility, Daily Returns, 30d

The 30-day (30d) volatility is measured as the 30d standard deviation of log daily returns. Read more about our analysis of volatility in the Market Data Insights sections in SOTN Issue 22 and Issue 29.

Volatility decreased across the board in 2019, finishing the year at 2.6% for BTC and 3.3% for ETH. Although there are some positives to price stability, lowered volatility can reduce profits for traders and may incentivize traders towards increasing leverage. 

Chart values are daily (end-of-day) values (1/1/2019 – 12/30/2019) 

Usage and Adoption

Table values are annual averages of daily values (1/1/2019 – 12/30/2019) 

Active Addresses

One way to measure the number of potential blockchain users is to look at active addresses, which we define as the number of unique addresses active in the network that day, either as a recipient or originator of a ledger change (“ledger changes” include anything that changes a blockchain’s on-chain ledger, including transactions and other operations).

Active addresses can serve as a proxy for daily active users of the underlying blockchains. However, one active address does not necessarily equate to one active user. Individual users can create and operate as many addresses as they want. Therefore active addresses represent a maximum number of potential blockchain users, while the actual number of daily users is lower. 

Active addresses increased for most of the major cryptoassets over 2019, a positive sign for overall crypto adoption. USDT_ETH, LINK, and XTZ  saw the largest growth in 2019 while XRP, XLM, and ZEC saw decreasing activity over the course of the year with XLM decreasing by a whopping 66%. The XTZ active addresses line appears thicker than other assets because XTZ has staking payouts on a regular basis, which leads to high variance in activity day-to-day. 

Note: ZEC active address metric and other usage metrics do not take into account shielded transactions.

Chart values are annual percent change (1/1/2019 – 12/30/2019) on a 7d moving average basis

Number of Addresses with Balance of At Least $10

The number of addresses with a balance of at least $10 can be used as an approximate measure of the number of total “retail” holders of an asset. $10 is a somewhat arbitrary number but is a small enough balance to be considered an average, non-institutional investor, and large enough to not be dust (amounts smaller than the fee required to move them).

However, the same caveat as with active addresses also applies here: one address does not necessarily mean one user, so it should be thought of as a maximum number of holders. Contract addresses or various exchange deposit addresses (of which there are many) would be included in these figures. 

Similar to active addresses, the number of addresses with a balance of at least $10 also increased for most of the major cryptoassets over 2019, another positive sign for overall crypto adoption. All of the stablecoins in our sample increased considerably. Of the non-stablecoins, XTZ and LINK saw over 100% gains on the year. Only BSV, XRP, and ZEC saw decreases. BSV is particularly odd since it saw a large increase in active addresses of over 600%. 

BTC and ETH both have significantly more addresses with a balance of at least $10 than all other major cryptoassets. ETH has nearly 2x as many as any other asset (besides BTC) and BTC has almost 4x as many as ETH.

Chart values are annual percent change (1/1/2019 – 12/30/2019) on a 7d moving average basis

Number of Addresses with Balance of At Least $1M

The number of addresses with a balance of at least $1M can be used as an approximate measure of the number of total “institutional” investors (or institutions), including exchanges, custodians, foundations, and others. 

BTC has a large lead over every other asset in institutions or institutional investors (keep in mind it also has the largest market cap by a large margin). On average, BTC finished the year with over 11,000 addresses with a balance of at least $1M, while ETH finished with over 1,800. No other asset finished with more than 700. In terms of growth however, LINK and USDT_ETH led the way posting 538% and 5817% growth respectively. 

Chart values are annual percent change (1/1/2019 – 12/30/2019) on a 7d moving average basis

Active Supply Percentage, 30 Days

Active supply percentage, 30 days measures the percent of total supply (visible on ledger) that was transacted at least once in the trailing 30 days. Coins transacted more than once are only counted once. 

A decrease in active supply percentage may signal that an asset is being increasingly used as a store of value, while an increase could be a sign that an asset is being used more as a medium of exchange. However, these are just proxies. A decrease in active supply can also occur if an asset’s usage is generally declining. There are also other factors that could affect active supply, such as exchanges or foundation treasuries shuffling large amounts of supply between cold wallets that can result in large changes in activity.

Of the large cap assets, BTC decreased in percentage of supply active in the last 30 days from 14% to 9% while ETH decreased from 32% to 24%. In contrast, stablecoins showed large percentages of active supply ranging from 50-75% suggesting they are being used as intended, as mediums of exchange. 

Chart values are daily (end-of-day) values on a 7d moving average basis

Block Size, Bytes

Block size, bytes measures the total sum (in bytes) of all blocks added to a blockchain that day. This metric is only possible to measure for the public blockchains and therefore does not apply to ERC-20 tokens or other tokens built on top of public blockchains.

Increasing block sizes could indicate that a blockchain is seeing more usage overall (as transaction counts increase, demand for block space increases) or is seeing increasing usage in “costlier” transactions (such as complex contract transactions that take up more block space). However, increased block size could also be caused by a small number of users spamming the chain (particularly on low-fee blockchains) so it is important to look at block size increases on a case-by-case basis and consider other contextual clues. It’s also worth noting that if blocks are already mostly full as they are for some blockchains such as Bitcoin and Ethereum, there may be little space for additional increase unless block size limits are increased. 

Block size increased for most blockchains in our sample, meaning blockchains are becoming increasingly fuller as demand for block space increases. Notably, BSV block size increased by a huge amount: nearly 14,000%. This is likely because BSV is being used heavily for data storage, as opposed to monetary transactions (such as transfers of BSV coins), as we covered in SOTN Issue 8. BTC, ZEC, and Cardano (ADA) all saw decreases with ZEC seeing the largest at nearly 45%. 

Chart values are annual percent change (1/1/2019 – 12/30/2019) on a 7d moving average basis


Table values are annual averages of daily values (1/1/2019 – 12/30/2019) 

Transaction Count

Transaction counts increased for most major assets over 2019. After USDT_ETH, which saw an incredible 59,303% increase, BSV saw the next largest increase in transaction counts (20,688%) with the majority (74%) being non-economic OP_RETURN transactions used to store data on-chain. Of the major assets, XRP, saw an average of nearly 1M transactions, largely due to a late surge towards the end of the year, as noted in SOTN Issue 28.

Chart values are annual percent change (1/1/2019 – 12/30/2019) on a 7d moving average basis

Transfer Count

Transfers are transactions that include an exchange of the native blockchain cryptoasset. In other words, a transfer is any transaction where a cryptoasset is moved from one address to another. For protocols like Ethereum, only transfers of ETH are counted, not ERC-20 or other tokens. 

BTC and ETH led all assets in terms of annual average daily transfer count. BSV and USDT_ETH however saw the largest increases at 19,254% and 60,647%, respectively. 

Note that the XTZ active addresses line appears thicker than other assets because XTZ has staking payouts on a regular basis, which leads to regular variance in activity day-to-day. 

Note: ZEC payment and adjusted transfer value metrics do not take into account shielded transactions.

Chart values are annual percent change (1/1/2019 – 12/30/2019) on a 7d moving average basis

Adjusted Transfer Value, USD

Transfer value is the sum value in USD of all native blockchain cryptoassets transferred over the course of a day. For protocols like Ethereum, only transfers of ETH are counted, not ERC-20 or other tokens. Raw transfer value can be relatively noisy. Some value transferred might be the result of change being sent back to the sender (on UTXO-based blockchains such as Bitcoin) or the result of exchanges shuffling single deposits between many addresses. We therefore created an “adjusted transfer value” metric which removes such noisy “non-economic” behavior.

BTC and ETH saw the largest annual average daily transfer value at $1.8B and $364M per day, respectively. USDT_ETH however had the largest growth posting a huge increase of over 60,000%. Many other assets saw declines in daily transfer value over 2019. Despite these declines, transfer value is highly variable day-to-day and few assets saw visible trend towards decline over the year with most remaining either flat or increasing. 

Chart values are annual percent change (1/1/2019 – 12/30/2019) on a 7d moving average basis

Annual Issuance Percentage

Public blockchains have different methods for issuing and releasing new supply. For example, Bitcoin and Ethereum (and many others) issue new supply through block rewards. Each block, new supply is released and existing supply gets slightly diluted. Annual issuance percentage is calculated by taking the amount of new units of supply issued daily, extrapolated to one year (i.e., multiplied by 365), and divided by the current supply. Increasing issuance percentage signifies that supply dilution is increasing, while a decreasing issuance percentage means that dilution is decreasing. We measure issuance only for public blockchain native cryptoassets at the moment so ERC-20 or other assets are not included in our sample. 

2019 marked some notable declines in issuance with Litecoin (LTC) seeing a protocol-mandated halving of its issuance (as covered in SOTN Issue 30), ZEC seeing a decline from 47% to 32%, and ETH seeing a drop from 6.6% to 3.5%. BTC will see its issuance halve in 2020. Notably, no asset in this sample saw an increase in issuance. 

Chart values are daily (end-of-day) values on a 7d moving average basis

Median Fees, USD

Median fees are calculated by taking the median transaction fee (USD) over a day. Fees are only calculated for native blockchain cryptoassets and thus are not available for ERC-20 tokens or some other assets in our sample for which determining transaction fees is challenging. 

BTC and ETH are the only assets that had daily median transaction fees of over $.06 on average over the year. Most other assets saw fees below one penny on average over the year suggesting that the demand to transact for these networks is still so low (in relation to their capacity) that there is little need to pay more. 

Chart values are daily (end-of-day) values on a 7d moving average basis

Security and Health

Table values are annual averages of daily values (1/1/2019 – 12/30/2019) 

Hash Rate

Without connecting to all mining pools and miners directly it is impossible to determine the exact hash rate of the network. Thus, many data providers, including Coin Metrics, estimate the hash rate by looking at the mining difficulty on any given day and the number of blocks produced in that 24 hour period. 

Hash rate is the speed at which computations are being completed across all miners in the network. The unit of measurement varies depending on the protocol. It serves as an estimation of the amount of computing power devoted to securing the network. Since hash rate is only relevant for base blockchains, it cannot be computed for ERC-20 tokens or blockchains that do not use proof-of-work mining. 

Hash rate cannot be directly compared between protocols that use different hashing algorithms, like BTC and ETH. However it can be compared across protocols that use the same algorithm, like BTC, BCH, and BSV.

Read more about how we calculate hash rate in Weekly Feature #2 of SOTN Issue 19.

BTC is still the clear leader in terms of hash rate growth, growing by over 130% over 2019. BTC hash rate is orders of magnitude higher than BCH and BSV, as covered in our research piece “A Comparative Analysis of Bitcoin Forks.” LTC had a large increase in hash rate leading up to its halving; however, hash rate plummeted after, as covered in SOTN Issue 31. ETH also saw a decline in hash rate over the year perhaps due to upcoming plans to launch its proof-of-stake blockchain in 2020. 

Chart values are annual percent change (1/1/2019 – 12/30/2019) on a 7d moving average basis

Total Fees, USD

Unlike median fees, total fees measure the sum USD value of all fees across all transactions over a day. Fees do not include new issuance (i.e., block rewards) and are therefore only a portion of the revenue that goes to miners.

BTC and ETH both have an enormous lead over all other assets in terms of total daily fees, with an annual average of $427K and $95K, respectively. No other asset in our sample had more than $1,200 in daily total fees on average over the year.

Chart values are annual percent change (1/1/2019 – 12/30/2019) on a 7d moving average basis

Miner Revenue, USD

Miner revenue measures the sum USD value of all transaction fees plus newly issued supply (i.e., block rewards), both of which are paid to miners or other validators (such as staking validators). Miner revenue represents the incentives pool for miners of a blockchain. The more total revenue there is, the more money miners can potentially earn. Therefore total miner revenue is an important indicator for the long term health and security of a protocol and the industry that surrounds it. Miner revenue is only calculated for native public blockchain cryptoassets that utilize miners or staking validators and thus is not available for ERC-20 tokens or other blockchains that do not utilize mining or staking. 

As with total fees, BTC and ETH have a large lead over most other assets in terms of miner revenue. In 2019, BTC generated an average of $14.2M in revenue per day for miners while ETH generated an average of $2.6M. No other asset generated more than $900K per day on average. 

Chart values are annual percent change (1/1/2019 – 12/30/2019) on a 7d moving average basis

Fee to Revenue Percentage

The fee to revenue percentage is the percentage of miner revenue derived from fees, or in other words, fees divided by the miner revenue. In the long run, many blockchains’ block rewards will gradually decrease towards zero due to regularly scheduled block reward halvings or other decreasing issuance schedules. As block rewards decrease, fees begin to become a larger percentage of overall mining revenue and therefore become a more and more critical part of a chain’s long term sustainability and health (read more in SOTN Issue 24).

As noted above, BTC and ETH are the only two assets that currently have a meaningful amount of fees, and therefore have a large lead in terms of security and health going forward. ETH however comes far ahead in terms of the proportion of miner revenue earned by fees, finishing the year at 3.2% vs. 0.8% for BTC. 

Chart values are daily (end-of-day) values on a 7d moving average basis


2019 saw a rise in prices, decreases in volatility, and general increases in usage for the majority of major crypto assets. All of these are positive signals heading into 2020. We look forward to continuing to cover crypto in 2020, and providing more insights and analysis throughout the new year.

Coin Metrics Updates

This week’s updates from the Coin Metrics team:

  • SOTN will be back to its regular, non-holiday schedule starting next week
  • Coin Metrics is hiring! We recently opened up 6 new roles, including Blockchain Data Engineer and Data Quality and Operations Lead. Please check out our Careers page to view the openings.

As always, if you have any feedback or requests, don’t hesitate to reach out at [email protected]

Subscribe and Past Issues

Coin Metrics’ State of the Network, is an unbiased, weekly view of the crypto market informed by our own network (on-chain) and market data.

If you’d like to get State of the Network in your inbox, please subscribe here. You can see previous issues of State of the Network here.

Check out the Coin Metrics Blog for more in depth research and analysis.