Crypto Usage Rate

Daily Transactions/Active Addresses provide strong insight into adoption & usefulness of crypto networks

Being a nascent market, valuation methods and metrics still have a long road ahead. But that can’t stop us from clamping down on the chaos that is the crypto market by assessing the activity with each project that are all essentially early-stage startups. One of the biggest questions in the space today and probably for quite a few tomorrows is “will people actually use this?” While looking at the number of transactions can give a better idea of the “activity” going on with a certain crypto, it really doesn’t tell us anything in relation to the size of the network. 5000 daily transactions can mean vastly different things depending on the number of users involved. Below is a chart of six popular cryptocurrencies and their active addresses, transactions, and what I’ll simply call for now their “usage rates” (for June 5, 2018):

Usage Rate Photo

The “usage rate” is very simply the number of daily transactions over the number of daily active addresses. While the term “active addresses” can vary between different reporting sites, on BitInfoCharts it refers to the number of unique (from or to) addresses utilized recently. As we can see from the chart above for example, while king Bitcoin has the most number of active addresses, its number of daily transactions are much lower than Ethereum. And thus, Bitcoin’s “usage rate” is more than three times lower than Ethereum’s. Understanding how cryptocurrencies and utility tokens are used on a day-to-day basis is going to be one of the most important considerations going forward not only for valuing cryptocurrencies but for the future of blockchain as a whole.

Disclaimer: I am not a financial advisor, this is not financial advice. These are merely my observations and insights about a market trend.