How Big is Bitcoin?

Recently Bitcoin.com reported on the release of a comprehensive cryptocurrency study by the University of Cambridge. One area discussed in this report is the number of users of cryptocurrencies and wallets. This article explores how the study derives the number of active Bitcoin users and holders.

Also read: Lots of Data in Cambridge University’s First ‘Global Cryptocurrency Benchmarking Study’

Total Number of Cryptocurrency Wallets

Twenty-six wallet providers participated in the survey, including Airbitz, Armory, Bitgo, Blockchain, Coinbase, Greenaddress, Ledger, Jaxx, Mycelium, Samourai, and Xapo. The study defines a wallet provider as “any volunteer project or company that provides a standalone wallet that anyone can use.”

First, the total number of wallets is estimated using data collected from study participants, in addition to “the number of software downloads of major wallet providers and Bitcoin’s reference implementation.” The estimate represents all cryptocurrency wallets, not just Bitcoin.

While citing “a potentially infinite number of wallets could be created from a single software download,” the study uses a conservative assumption that one software download equals one wallet created. Some numbers are unavailable and therefore omitted such as the number of downloads for some open-source wallets, resulting in a “lower bound” estimate. Overall, the report’s authors wrote:

It is estimated that the total number of wallets has increased more than 4x from 8.2 million in 2013 to nearly 35 million in 2016.

Number of Active Cryptocurrency Wallets

Second, the number of active cryptocurrency wallets is calculated from the total number of wallets. The report notes that estimating the number of active wallets poses a challenge, since publicly reported wallet numbers do not reflect whether or not they are active. In addition, the definition of “active” varies for different wallet providers.

The study, therefore, uses data obtained from survey participants to estimate the number of active wallets instead. This data “suggests that the number of active wallets ranges from 7.5% to 30.9% of the total number of wallets,” the report reveals, adding that:

The number of active wallets is thus estimated to have increased from between 0.6 million and 2.6 million in 2013 to currently between 5.8 million and 11.5 million in 2017.

Number of Unique Users of Cryptocurrency Wallets

Third, the study conservatively derives the number of cryptocurrency wallet users from the number of active wallets, using the assumption that a user holds two wallets on average. Some types of wallet users are also unaccounted for in the study, such as those using exchange accounts as their de facto wallet, or those using payment service providers or platforms that can store cryptocurrencies.

“The total number of active cryptocurrency users is likely considerably higher than our estimate of unique active wallet users,” the report’s authors wrote, noting that:

We estimate that currently there are between 2.9 million and 5.8 million unique users actively using a cryptocurrency wallet.

Number of Bitcoin Holders

Finally, the researchers attempt to find the number of cryptocurrency users and holders. However, they admit that “estimating both the number of cryptocurrency holders and users is a difficult endeavor as individuals can use multiple wallets from several providers at the same time.” In addition, the authors explain how one user may also use different wallets for different cryptocurrencies and be counted multiple times. “Many individuals are using centralised wallet, exchange or payment platforms that pool funds together into a limited number of large wallets or addresses, which further complicates the picture,” they further detail. “It is impossible to know precisely how many people use cryptocurrency.”

Without deriving their own numbers, the authors reference external estimates. The first, but a rather outdated one, is by the Boston Federal Reserve in a 2016 report. It states that 0.87% of U.S. consumers had adopted cryptocurrencies in 2015, which “amounts to around 2.8 million people in the US alone,” the Cambridge authors relay.

A more recent estimate mentioned is an independent research by Coinbase and ARK Invest Research, which covers only bitcoin instead of all cryptocurrencies. In their January report, they wrote:

More than ten million people around the world hold a material amount of bitcoin.

What do you think of these estimates? Let us know in the comments section below.

Images courtesy of Shutterstock and University of Cambridge

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