Total Output chart and Transactions Per-Day

[Stephen Gornick]

Total Output - 60 days, 7-day average
 - http://blockchain.info/charts/output-volume?showDataPoints=false&timespan=60days&show_header=true&daysAverageString=7&scale=0




Number of Transactions - 180 days, 7-day average
 - http://blockchain.info/charts/n-transactions?timespan=180days&showDataPoints=false&daysAverageString=7&show_header=true&scale=0

While these numbers can be fabricated, these look authentic and look like what they should look like as Bitcoin gains traction, particularly when they aren't accompanied by selloffs or rallies (where the bitcoin flows spike up significantly as all the transfers to and from the exchanges are what results).

The big variable though right now will be the impact of the Dwolla actions.  If all of Mt. Gox's customers who use Dwolla now must go through their new hoops that could choke off some of the funding flows, --- enough to affect the exchange rate.  Mt. Gox recently shared the amount of volume they have with Dwolla.  I can't remember the number and no longer have a link to it, it was in the tens of millions since Dwolla and Mt. Gox started working together.

The Dwolla issue will likely have some negative effect, though whether or not that is more than offset by Bitcoin use growing in other areas is not yet known.

[Technomage]

Indeed, Bitcoin long term growth is at very healthy levels right now. It's possible that we will reach tx count levels of June peak before the end of 2012. I wouldn't be surprised if that happened, not at all. Network tx counts are still very low, all things considered.

There is some confusion over this because some people still use indicators such as the node count, which is getting more and more irrelevant as time goes on. Lite nodes are becoming more common all the time which makes that indicator entirely useless.

Of course tx count isn't the perfect indicator either and I wouldn't trust it entirely. But it's certainly one of the best indicators for seeing how much the network is actually being used.

[cunicula]

Total Output - 60 days, 7-day average
 - http://blockchain.info/charts/output-volume?showDataPoints=false&timespan=60days&show_header=true&daysAverageString=7&scale=0




Number of Transactions - 180 days, 7-day average
 - http://blockchain.info/charts/n-transactions?timespan=180days&showDataPoints=false&daysAverageString=7&show_header=true&scale=0

While these numbers can be fabricated, these look authentic and look like what they should look like as Bitcoin gains traction, particularly when they aren't accompanied by selloffs or rallies (where the bitcoin flows spike up significantly as all the transfers to and from the exchanges are what results).

The big variable though right now will be the impact of the Dwolla actions.  If all of Mt. Gox's customers who use Dwolla now must go through their new hoops that could choke off some of the funding flows, --- enough to affect the exchange rate.  Mt. Gox recently shared the amount of volume they have with Dwolla.  I can't remember the number and no longer have a link to it, it was in the tens of millions since Dwolla and Mt. Gox started working together.

The Dwolla issue will likely have some negative effect, though whether or not that is more than offset by Bitcoin use growing in other areas is not yet known.

With regard to total output volume, you might consider the extreme level of variance shown in longer time series before drawing hasty conclusions. I agree that there is significant growth in txns per day. This is a much more reliable metric.

[N12]

While these numbers can be fabricated, these look authentic

I will never trust the transaction data. It’s completely meaningless because it can and will be manipulated.

[Technomage]

I will never trust the transaction data. It’s completely meaningless because it can and will be manipulated.

We know you don't trust it. That's old news. I can't see the motivation for manipulating that data because everyone knows it can be manipulated and that it is not really trustworthy. It's also possible to make a deeper analysis on tx counts, which goes through all the transactions and checks how many micro transactions were done and how many small, medium, large transactions etc. If manipulation did occur, this type of analysis should show some weird stuff going on.

As far as I know, this type of analysis hasn't revealed anything suspicious, at least recently (I know a guy who occasionally does this analysis). It's of course possible that someone is constantly manipulating those numbers, but it just doesn't make sense and is more paranoid thinking than anything else.

It's not like increased tx counts lead to buying frenzies at the market so this manipulation doesn't have the motivation factor supporting it. I will worry about this once I have some proof that it is being manipulated, otherwise I see it as one of the most reliable indicators of actual Bitcoin usage.

[Technomage]

Manipulating those numbers is also more difficult when they are counter-intuitive to real life events. It would be suspicious and some of us would be analysing the transactions in-depth to see if there is something fishy going on. Right now it's intuitive to me that the numbers are up because we just had massive press a few weeks ago. It makes perfect sense and I believe that in this case the simplest answer is the right one.

[N12]

So basically, as long as you like what you see, it just has to be right. Gotcha!

I will never understand how one can even use it. It can be easily manipulated. Worthless data. Period.

The nodes are infinitely more reliable than that, because despite light clients taking hold, there should probably not be a DECREASE in the long-term as we see it now. Some of the alternative client devs have published numbers, and they are ridiculously low: https://bitcointalk.org/index.php?topic=76528.msg849506#msg849506

[Seal]

Decent analysis. I'd like to see this as a standardised indicator going forward although you'd have to be weary of those who want to manipulate the data. At the minute I doubt it would be manipulated as there is little incentive to do something like that right now...

[Technomage]

That thread doesn't give you a complete picture, BitcoinSpinner is most likely the least used thin client because it's only on Android and completely unknown outside the core Bitcoin community. To get a complete picture you would need to have the stats of Blockchain.info, Strongcoin, Electrum, Multibit etc. as well.

The active node count is not a completely useless statistic but for it to be useful one has to consider everything. One has to take into account the fact that Bitcoin nodes don't have to be run all the time. I consider myself an active Bitcoin user and I'm running a node perhaps once a week at most, often once every two weeks. And I have the wallet open on average for perhaps an hour. That means 1-2 hours of active node time in a 2 week period, this is what is currently expected from an active user in my opinion. There is simply no more possibilities for Bitcoin usage at this point even if I would like to pay more using Bitcoin.

To understand the declining node counts one has to take into account the fact that we have had significant decline in Bitcoin usage from the June hype peak, which is also visible in tx counts. While the node count might still be declining, one has to take into account 1) the fact that added thin client usage is significantly delaying the time it takes for this decline to hit the bottom and 2) more and more Bitcoin usage, since the peak, has most likely been between exchanges and payment processors.

This argument is supported by the fact that we've had increased depth in the Bitcoin currency market and the tx counts have been increasing. It simply means that Bitcoin usage as a payment method hasn't increased much but its usage as an investment vehicle and a trading commodity has increased. Not since the peak of course, but overall. It's very important to understand that exchanges and payment processors are individual nodes which means that Bitcoin could have a billion users and node count could be 2, if all the transactions go through Mt. Gox and some other meganode.

Personally I've actually used Bitcoin a lot more after the summer than I did during the summer, which I basically spent just mining coins. However even my usage is still very tiny. In conclusion I'd say that it makes sense to me that the usage of Bitcoin as a payment method is still taking its baby steps but usage overall, taking into account investing/trading, has been increasing. This makes sense when looking at tx counts, node counts and market depth. It also makes sense when looking at the price, which should be the ultimate indicator.

[cypherdoc]

how is the active node count calculated?  is it a snapshot done everyday at the exact same time?  or does it measure only nodes open for a particular period of time?

[DeathAndTaxes]

The nodes are infinitely more reliable than that, because despite light clients taking hold, there should probably not be a DECREASE in the long-term as we see it now.

Why?  For some casual users an ewallet or exchange accounts works.  The default client is large and clunky.  I expect the number of nodes to continually decline for some time as other options fragment the user base. 

If an ewallet/exchange account/lite client works better (totally subjective and up to the user) most users aren't going to also keep running a node they don't use.

[cypherdoc]

Technomage makes some excellent points.  it's always helpful to define the outer bound extremes and his example of just 2 nodes and a corresponding healthy Bitcoin market is helpful.

i've made the corresponding argument many times but have couched it differently using the Comex and gold analogy to Bitcoin.  i think we're moving towards that model where mtgox/Bitcoinica could end up acting like a Comex where billions of tx's/fiat is moving thru those exchanges but only for trading/investment purposes.  you certainly don't see gold acting as a currency to any degree worldwide.

whether you like it or not, most ppl are hoarding Bitcoin right now as a store of value.  but that doesn't mean it can't act like a currency one day as it has all the right properties to become so even more than gold.

[Technomage]

whether you like it or not, most ppl are hoarding Bitcoin right now as a store of value.  but that doesn't mean it can't act like a currency one day as it has all the right properties to become so even more than gold.

+1

[evoorhees]

Regarding the node count decline, I think that can be almost completely justified by the creation and use of thin clients and ewallets. A year ago, to use Bitcoin one needed to use the client (or MyBitcoin (!)). Today, thankfully, there are all sorts of really good alternatives. The core nodes should be expected to decline as this happens.

Let's also remember that the entire software industry is moving away from client software to cloud-based software. Bitcoin needs to be understood in that context.

[Stephen Gornick]

-

It's not like increased tx counts lead to buying frenzies at the market so this manipulation doesn't have the motivation factor supporting it.

While it may not appear as a "buying frenzy", there is no doubt there are buying and selling decisions being made where this this metric is considered.  As Blitz mentioned above though, since this can be manipulated it should not be trusted as an indicator when making investment decisions.

If the cost of the manipulation is less than the resultant rise in the exchange rate, expect manipulation to occur.   Right now daily transaction output volume could be doubled simply by spending 0.01 BTC from a single BTC address with 10,000 BTC one time each block.  That's easily detected though.  When spot checking I don't see these large transactions repeating in this manner.  Eyeballing is not sufficient analysis though.  Especially if the activity causing these increases comes from laundering (which would have this characteristic of bitcoins used in a single transaction resulting in a lots of transactions and multiples of that number of bitcoins showing up as output volume on the blockchain).

So the takeaway should be, if you do want to look at these metrics for investment decisions, you'll want to do analysis that is a lot more sophisticated than to just make a summary of the raw data

As far as I know, this type of analysis hasn't revealed anything suspicious, at least recently (I know a guy who occasionally does this analysis). It's of course possible that someone is constantly manipulating those numbers, but it just doesn't make sense and is more paranoid thinking than anything else.

Well, with transaction counts up nearly 10% per month and the exchange rate holding steady at just under $5 then if someone is swishing bitcoins around to fabricate the totals they aren't getting the result they hoped for then.

What I'm trying to ascertain is if this is indicative of real, non-fabricated transactions, ... then what's the underlying reason?

Are there one or two uses of bitcoins that are taking off accounting for the growth, or is it just the bitcoin economy as a whole gaining traction, and includes everything from micro tips with BTCTip.com to those using bitcoins for paying their rent:
 - http://bitcointalk.org/index.php?topic=76633.msg850690#msg850690

[Serge]

how does one count nodes if the default value in latest client update 0.6 is -irc=0 ?

[DeathAndTaxes]

how does one count nodes if the default value in latest client update 0.6 is -irc=0 ?

Connect to every single node you can and count em.  Obviously the node count is just an estimate.

[Seal]

Technomage makes some excellent points.  it's always helpful to define the outer bound extremes and his example of just 2 nodes and a corresponding healthy Bitcoin market is helpful.

...

whether you like it or not, most ppl are hoarding Bitcoin right now as a store of value.  but that doesn't mean it can't act like a currency one day as it has all the right properties to become so even more than gold.

+1.

I used to use my wallet client often in the early days. Now I never use it as my bitcoin is kept at various brokers and transferred between them without the client. One thing that has definitely increased over time is the number of transactions I make, this is regardless of my wallet usage.