A joint report from ARK Invest and Coinbase estimates that more than 10 million people around the world hold a material amount of bitcoin. The estimated number of bitcoin users worldwide is based on Coinbase user activity when applied to the overall Bitcoin community.

In addition to the estimate on bitcoin holders, the report, which was co-authored by Coinbase Vice President of Business Development and Product Manager Adam White and ARK Invest Blockchain Products Lead Chris Burniske, also touched on the use of bitcoin as both of store of value and a medium of exchange. Although the majority of Coinbase users are mainly holding bitcoin as a store of value, there was an uptick in the use of bitcoin as a medium of exchange in 2016—at least from Coinbase’s perspective.

White has provided further details on the research that went into the report to CoinJournal.

How Many People Use Bitcoin?

The main claim from the report that will grab the attention of anyone interested in bitcoin is the estimated 10 million people around the world holding a material amount of the digital bearer asset. These sorts of estimates are hard to come by and for good reason.

“It’s notoriously difficult to determine how many bitcoin users there are by looking at the number of public addresses on [the] blockchain,” White told CoinJournal. “For example, all addresses (with or without a bitcoin balance) aren’t a good proxy since addresses can be programmatically created with services like blockchain.info. Attempting to use only addresses that have a bitcoin balance isn’t a good proxy either since one address with a large sum of bitcoin may actually represent tens of thousands of users (e.g. Coinbase’s cold storage wallet addresses).”

Due to the difficulties associated with getting useful, identifiable user data from the blockchain, White and Burniske turned to Coinbase user data for their research. In terms of the ten million bitcoin holders number, Burniske and White divided bitcoin’s total market cap by the average bitcoin balance held by Coinbase users.

“We created the subjective definition that a user must hold a material amount of bitcoin to count a user in the average balance calculation,” explained White. “That prevents Coinbase users only holding a few satoshis in their account from pulling down the average balance figure for all other users. Once we calculated the average bitcoin balance of a Coinbase user, we divided the market cap of bitcoin with that figure to extrapolate how many bitcoin users worldwide there may be.”

“This is a rough estimate as we recognize there are a number of assumptions and subjective decisions made in this methodology,” White clarified.

Most Coinbase Users are Just Holding

In addition to estimating the number of bitcoin holders around the world, another interesting aspect of the recently updated research report from ARK Invest and Coinbase was the data regarding the use of bitcoin as a store of value and medium of exchange.

More than half of Coinbase users have used bitcoin strictly as an investment or store of value since 2013. Much like the ten million bitcoin holders number, this data point is based on rough estimates.

“When a Coinbase user sends bitcoin from a Coinbase account to a bitcoin address, we do not have insight to the reason behind that send,” explained White. “In fact, many times it may be a customer sending bitcoin they purchased from Coinbase to their own user controlled wallet (arguably still an ‘investment’ type of user). Since we can’t determine the reason behind the send we consider all sends ‘transactional usage’ since it does employ value transfer via the Bitcoin network.”

One might say those who are using bitcoin as a store of value will be underrepresented in these numbers, but the opposite argument could be made as well. For example, many people who prefer to use Bitcoin as nothing more than a mechanism for censorship-resistant payments, such as purchases on darknet markets, may try to avoid the Know Your Customer regulations followed by Coinbase.

Moving Towards a Medium of Exchange?

Although the majority of Coinbase users still view bitcoin strictly as an investment, user data also showed an increase in use as a medium of exchange in 2016. “From 2012 to 2015, users on Coinbase’s wallet and retail conversion service were increasingly using bitcoin strictly as an investment, or long-term store of value,” notes the report. “In 2016, that trend softened, perhaps because new use cases and decreasing volatility have increased the utility of bitcoin as a means of exchange.”

Again, tracking this sort of data is not easy, but Coinbase does have one data point they can use to track this sort of activity: merchant payments.

“Since Coinbase does bitcoin payment processing for around 43,000 merchants, we looked to see if merchant processing activity is up or down since it is one example of a transactional application,” said White. “We were pleased to find that merchant processing figures were [more than two times the numbers] from the same time one year ago – both in dollar terms of processing volume as well as event terms of orders processed. I think this is a good sign that the Bitcoin network is continuing to grow and find actual real word use.”

“In short, both gross number of investors and transactors increased in 2016, but by percentage terms, transactors grew at a faster rate than investors,” White added.

For what it’s worth, the Bitcoin network recently had an all-time high for on-chain transactions confirmed in a single day: 346,405 Bitcoin transactions were confirmed on January 5th.