Illegal Trades are less than 3% of Total Bitcoin Transactions
A new report has revealed that only 3% of the total volume of Bitcoin transactions pertain to scams, illegal transactions and gambling, whereas 80% of Bitcoin blockchain volume is contributed by trading desks and exchanges. A study titled ‘Blockchain Analysis of the Bitcoin Market’ has discovered these numbers. The National Bureau of Economic Research (NBER) released the report and in their analysis, the authors successfully debunked the widespread assertion that Bitcoin’s trading volumes are dominated by illegal transactions. Hailing from the London School of Economics, Igor Makarov, and MIT Sloan School of Management’s Antoinette Schoar, are the authors of the report.
The two elaborated how the studies conducted earlier had possibly been overstating the economic value of the trades conducted illegally. The two authors supported their argument by highlighting a study conducted in 2019 that had concluded that almost 40% of bitcoin transactions were illegal in nature. The authors stated that Foley et al. (2019) had dropped all volumes related to exchanges from their calculations, as they were only interested in focusing on payments for goods and services. They said that their study has concluded that trading is the primary activity on the Bitcoin blockchain and this changes the entire scenario.
Furthermore, the authors went on to say that the Foley study had estimated the volume based on a network of illegal clusters, and a cluster is considered illegal if most of its transactions are done with clusters that have previously been identified as illegal. Even though the two authors admitted that there was an appeal to this method, they said that it didn’t distinguish between short-lived clusters trying to obfuscate tracing and real users. As opposed to the approach used in the study in 2019, Schoar and Makarov have incorporated over-the-counter (OTC) desks, exchanges, or trading desk data for calculating non-spurious Bitcoin volumes.
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Hence, the two authors have concluded in their analysis that trading desk and exchange-related volumes are about 80% of the total Bitcoin blockchain volume, whereas other entities were only responsible for a small part of the total volume as of 2020. In their report, the two authors had acknowledged that they were in agreement with the concern people had about the pseudonymous nature of BTC transactions. However, Makarov and Schoar insisted that it was essential to get the magnitudes right about the transaction activities in order to understand what truly drives up the value of bitcoin.
After all, it is because of this pseudonymous nature of Bitcoin that a lot of people are critical about it and have gone as far as saying that it will not survive. Yet, Bitcoin continues to rise in popularity as has its value. So far, the pioneer cryptocurrency has managed to last over a decade and has experienced a significant increase in its value, reaching new all-time high values this year and expected to reach more in the coming years. It has also spawned an entire industry, with many other cryptocurrencies joining the mix over the years and flourishing as well.
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