Are you tired of hearing only about Bitcoin’s price? Yeah me too! The fact is, the price of Bitcoin (or the price of any crypto for that matter) is the least interesting aspect of crypto currencies. When we hear about Bitcoin on the news, it’s usually because of the price or some sort of regulation, but the reality is that a lot of things are going on underneath the surface. We are seeing just “the point of the iceberg”.
In this post, we’re going to dig in and analyze other Bitcoin metrics that will help us to evaluate how the Bitcoin network is performing, its current state and its general “health”.
Therefore, we’re going to explain a few metrics that we can find on one of the best Bitcoin Blockchain explorer websites www.blockchain.com/en/explorer. What is a Blockchain explorer? Well, it’s basically a web site with all the information on real time of a blockchain. They are quite useful when you want to check the status of a transaction for example. Also, we are going to explain some metrics on Github and a few other sites for the Lightning Network. We are going to go one by one covering some of the most important aspects and explaining what it is and why it’s important! So let’s get into it:
Latest Blocks
On entering the blockchain explorer site, we see this table with four entries. These are the latest blocks that were mined on the bitcoin blockchain.
Height of the block
In the first column you can see the height, which basically means the block count. At the time this blog post was written, it was on the 530258th block. The first block ever created on the blockchain was the genesis block with the height of 0.
The block age
This is the time passed since the block was mined — up until the present moment. It should be around 10 minutes time between each block but sometimes it is more or less.
Transactions
Transactions indicate the number of transactions that are contained on a single block. This number can vary depending on the size of each individual transaction—as a general rule the block should be around 1MB size.
Total spent
This indicates the total amount of Bitcoins that are included on the transactions inside the single block.
Relayed By
‘Relayed by’ indicates the mining pool that has solved the Proof of Work algorithm and won the “race” to spread that particular block. Some people see this column as an argument against Bitcoin really being a decentralized currency. Can you understand why? If you expand the list by clicking on “SEE MORE” and explore a little bit you can see that the same 4 or 5 mining pools are constantly repeated. This means that we have just a few big mining pools with all the hashing power concentrated, a very dangerous threat if we consider the 51% attack possiblity.
Size(kB)
This simply indicates the size of the block in Kilobytes.
Weight(kWU)
The Weight column is related to SegWit (a backwards-compatible patch that increases the Bitcoin block size). Weight units are a measurement used to compare the size of different Bitcoin transactions to each other in proportion to the consensus-enforced maximum block size limit. Weight units are also used to measure the size of other block chain data, such as block headers.
In the above chart, the transactions per day and bitcoin price are pretty self explanatory. We’ll look into the other two: market capitalization and hash rate.
Market capitalization
Market capitalization is a measure of the market size of a coin or stock. It is calculated by multiplying the price of the coin by the circulating supply, which is the approximate amount of Bitcoins that exist circulating the market and in the general public’s hands. So:
Market Cap = Price * Circulating Supply.
If we take the chart values, we get the circulating supply by dividing the market cap by the bitcoin price:
108.801.529.650/6.624.83 = 16.423.293,8
This metric is useful to understand how big a cryptocurrency is. The more the circulating supply or the highter the price, the bigger market capitalization. You can check the top 100 cryptocurrencies by market capitalization on CoinMarketCap page.
Hash Rate
First the formal definition: the Hash Rate is the speed at which a computer is completing an operation in the Bitcoin network. The higher the hash rate the better when mining as it increases the opportunity of finding the next block and receiving the reward. The big number that we see is an estimated number of tera hashes per second (trillions of hashes per second) the Bitcoin network is performing. We can see in a year period time, how the hash rate is growing on the chart:
This metric serves to see that as the time goes by, more and more hashing power is allocated on the network by the miners in order to get the blocks. Also, we can see on the chart the “corrections” of the hash rate by the Bitcoin network. This is related to the increase or decrease of the mining difficulty that we’re going to see next.
Difficulty
This is a relative measure of how difficult it is to find a new block. The difficulty is adjusted periodically as a function of how much hashing power has been deployed by the network of miners.
As we’ve looked at in other posts, the difficulty is adjusted every 2016 blocks based on the time it took to find the previous 2016 blocks. At the desired rate of one block every 10 minutes, 2016 blocks would take exactly two weeks to find. If the previous 2016 blocks took more than two weeks to find, the difficulty is reduced. If they took less than two weeks, the difficulty is increased. The change in difficulty is in proportion to the amount of time, over or under two weeks, the previous 2016 blocks took to find.
We can see the relationship between the Hash rate and the difficulty on bitcoinwidsom.com (check the difficulty history as well). Here’s the chart, at the time the post is being written:
Hash rate Distribution
This metric is very useful for knowing who’s responsible for the big mining pools, and how they are performing. It shows an estimation of the hash rate distribution amongst the largest mining pools. As it says on the page, it’s not 100% accurate:
Very interesting argument again for those who claim bitcoin is not totally decentralized, we can see 4 or 5 really big mining pools, and there’s no way to know if these different pools are one big company split under different names to appear decentralized. BTC.com pool is the aparently the biggest one getting 22.4% of the block being created in the last 24 hours.
Mempool Size
We talk about mempool in other posts, but basically the mempool is a place where all the transactions go in first place, and wait to be picked by a miner and be confirmed in a blockchain block.
This metric show us how big is the pool in bytes of the transactions waiting to be confirmed. The bigger the size, the more transactions that are waiting to be confirmed, this could mean more time to wait if you send a transaction to the network. On the contrary, if it’s size is getting small, it means there are less transactions waiting, so your own transaction could take less time to be picked by a miner.
We can also check the amount of transactions on the mempool:
You can see a correlation between the charts of the size and the amount of transactions. Between 0 and 5000 transactions seems to be the average amount of transactions over the last few days. Not too many if we consider that on December 2017 we reached a peak of more than 175,000 transactions on the mempool. In those days, it took a long time to get a transaction confirmed!
Median Confirmation Time
Median Confirmation Time is quite interesting. It indicates the median time for a transaction to be accepted into a mined block and added to the public ledger, note that this only includes transactions with miner fees.
With this metric we can check how many minutes, on average, a transaction with miner fees took to be picked from the mempool. This includes being added to a valid block and being accepted by other miners (which is all that you want when using bitcoin by the way! =P). Note how most of the chart is around the 10 minute line, because the Bitcoin network is always trying to get a block every 10 minutes. The higher the fee we pay, the more probable that our transaction will be mined faster. It’s also useful to check this chart and the mempool one when a transaction is taking a long time to be confirmed.
Total Transaction Fees (in USD)
This one is quite interesting from the finance point of view: total transaction fees are the total value of all transaction fees paid to miners, not including the coinbase value of block rewards (the reward for solving the PoW and spreading the new block).
We can appreciate a big increase around December 2017 when bitcoin fever was at its peak. It’s important to understand that this chart shows the total value of fees, not individual per miner. On the next chart, we can see the total revenue including the coinbase reward, note the correlation between the two charts:
Total confirmed transactions per day
This one is pretty self explanatory, but let’s take a look anyway:
Here we can see how the network is performing by day. We see that for the last 6 months there are around 150,000 — 200,000 confirmed transactions per day.
Number Of Unique Addresses Used
Another particularly interesting point. It shows the total number of unique addresses used on the Bitcoin blockchain on a given day, which can give us an idea about how big is the range of existing bitcoin addresses is. Check out my post on bitcoin addresses! for more info.=P Also interesting to note that on the December 2017 peak more unique addresess were used, this could be translated (although not entirely sure) to more people entering to the space, more “new peope” trading bitcoin.
Other useful stats:
Github
Check the Bitcoin development github page to see the state of the project. Actually this one is great for checking the state of the community of every crypto project. I recommend to explore the github page and look into some of this sections to get some clue of what’s going on with the development:
Issues
Here you will see all the bugs, fixes, improvements, proposals and discussions of the project. It gets quite technical but you can check out how the community discusses new features, fixes and bugs. You can see how often the community interacts, which it will give you a clue on how “alive” is the project.
Pull Requests
Pull Requests (aka PR’s) are a very important part of every open source project (where everyone can collaborate). PR’s let you tell others about changes you’ve pushed to a GitHub repository. Once a pull request is sent, interested parties can review the set of changes, discuss potential modifications, and even push follow-up commits if necessary. You can see here which changes are being develop, which ones were approved and which ones were rejected.
Insights
Insights is a very powerfull tool to check the state of a github software project. You can see an overview of the contributors interactions, lines of code written/deleted, pull requests, issues, code commits, etc. All very technical stuff, but very useful to know if you want to have a good perspective on how to evaluate an open source project!
Lightning Network
There are a few sites to check the state of the Lightning Network (“LN”). They are useful to check from time to time to see how the LN is growing. For checking the topology of the network this site was quite good, but now that it has grown so big (thankfully) it’s difficult to appreciate. I found this one more useful with much more information about the nodes, their states and connections. You can see the network topology and note that there are big players on the LN, who have just a few nodes with all the connections and are getting all the fees for routing the payments!
For a more clear general stats, you can check https://1ml.com
Conclusion
We’ve looked at a few metrics of Bitcoin and general crypto projects. There are a lot more to see and understand about Bitcoin and Blockchain in general, but I believe this post should be a good starting point to have a picture of what is going on “under the hood”. Remember when you hear about the Bitcoin price raising or falling, it’s just another aspect of this big social experiment. I hope you have learned something new today.
