Illegal trading accounts for less than 3% of total Bitcoin transactions – Blockchain

According to a new report, illegal transactions, fraud and gambling together account for less than 3% of the volume of the Bitcoin blockchain, while exchanges and trading desks account for around 80% of the volume.

Exchanges dominate Bitcoin volume

A new one learn called “BLockchain analysis of the Bitcoin market”has found that illegal transactions, fraud and gambling together account for just 3% of total on-chain Bitcoin trading volume. On the other hand, the study claims that stock market and trading-related volume - which is mostly speculative - accounts for about 80% of the total volume.

In their analysis, the authors of a report published by the National Bureau of Economic Research (NBER) appear to refute the claim that illegal transactions dominate Bitcoin ( BTC ) trading volume. In particular, authors Igor Makarov of the London School of Economics and Antoinette Schoar of the MIT Sloan School of Management explain how previous studies have likely overstated the economic value of illicit trade.

To support their argument, the two authors point to a 2019 study that concluded that more than 46% of BTC Transactions are due to illegal transactions. The authors stated:

First, Foley et al. (2019) deliberately exclude all exchange-related volumes from their calculations because they only want to focus on payments for goods and services. Since we showed above that trading is the main activity on the blockchain, this choice changes the denominator a lot.

Additionally, the authors said the volume estimate in the Foley study is based on an imputed network of illegal clusters, where each cluster is recursively deemed illegal if the majority of its transactions occur with previously identified illegal clusters.

Drivers of Bitcoin Volume and Value

Although the two authors agree that this method is attractive, they still argue that it “does not distinguish between real users and short-lived pass-through clusters that exist only to obscure traceability.”

Unlike the method used in the 2019 study, Makarov and Schoar include exchanges, over-the-counter (OTC) desks or trading desk data in calculating the non-false BTC Volumes. Consequently, the two authors conclude in their analysis that exchange and trading-related volume accounts for approximately 80% of the total volume, while other known entities are only responsible for a small portion of the total volume as of the end of 2020.

While Makarov and Schoar noted in their report that they agreed with the general concern about the pseudonymous nature of Bitcoin transactions, they insisted that it is “important to properly determine the scale of transaction activity in order to understand what the ultimate drivers of Bitcoin are.” Value."

Do you agree with this study’s conclusion about the extent of illegal transactions on the Bitcoin blockchain? Tell us what you think in the comments below.

Terence Zimwara

Terence Zimwara is an award-winning journalist, author and author in Zimbabwe. He has written extensively about the economic woes of some African countries and how digital currencies can provide an escape route for Africans.

Photo credits: Shutterstock, Pixabay, Wiki Commons