Worldwide: 10 August 2021 - Bitcoin (CRYPTO: $BTC), the world’s leading decentralized store of
value blockchain, reported financial results for its second quarter ended 30 June 2021.
Key Indicators
Total transaction fees increased over 750% YOY.
Also known as network revenue (the fees paid to miners), transaction fees
increased 757%
to US$416.6 million
in Q2 2021,
compared to US$48.5 million in Q2 2020.
Total transaction volume on the Bitcoin blockchain increased over 330% YOY:
$527.1bn in Q2 2021, compared to $120.2bn in Q2 2020.
Median transaction fees increased over 1,000% YOY.
To $14.64 in Q2 2021,compared to $1.24 in Q2 2020.
Median daily active addresses get close to 1M.
A proxy for daily active users, active address increased 11.5% to 982k for Q2
2021,
compared to 880k for Q2 2020.
Results Table
Q2 2020
Q2 2021
Y/Y
Transaction volume ($b)
120.2
527.1
338%
Transaction fees ($m)
48.5
416.6
757%
Median transaction fee ($)
1.24
14.64
1,080%
Daily active adresses (k)
880
892
11,50%
BTC supply (m)
18.418
18.745
1.78%
Bitcoin Quarter Review: Q2, 2021
Adoption has grown significantly, both on institutional balance sheets, in place of cash
treasuries, in
government pension funds and more broadly in payments and beyond, and while some
countries
continue to adopt a cautious or outright hostile stance to the world’s first and largest
cryptoasset, others like El Salvador have made historic strides to integrate bitcoin
into their
national currency models.
During this quarter Bitcoin reached an all-time high of over $63,000 in mid-April,
before losing
half its value to end the quarter at $35,069.
One reason for the fall in price has been he continuing negativity toward crypto from
the
Chinese Government. An outcome from this is the beginning of a mass migration of
cryptomining
power. Mining pools in regions outside of China — like Foundry USA — are expected to be
among
the biggest winners of this shift, and access to renewable sources of energy are
expected to
quickly take precedence over coal and fossil fuels.
As adoption has grown, Bitcoin has rightly faced criticism of its proof of work
consensus
algorithm for that mechanism’s contribution to outsize energy use and, by extension,
climate
change.
Leading a response to environmental concerns, ETC Group was the first crypto provider to
announce a carbon neutral policy for its Bitcoin security.
Companies benefiting from cryptocurrencies like bitcoin are right to take meaningful
steps
to address climate concerns. We are pleased to see that bitcoin miners are
increasingly
sourcing renewable electricity, but we at ETC Group feel it is important to do more
and act
now. That’s why we have launched our initiative to calculate our bitcoin product’s
carbon
footprint and offset it with high quality projects curated and monitored by some of
the
world’s most respected climate action companies.
Bradley Duke, CEO,
ETC Group
Key Bitcoin Events
On April 14, Coinbase (NADSAQ:COIN) went
public on NASDAQ via direct listing. The listing is by far the biggest
yet of a
cryptocurrency company, with the
San Francisco-based firm saying last month that private market transactions had
valued
the company at around $68 billion
this year, versus $5.8 billion in September.
Venmo, currently ranked the second most popular financial app
in the
US, started allowing its 52
million+ users
to store, buy, and sell Bitcoin on
its platform on April 20. Like PayPal, Venmo will support four popular
cryptocurrencies:
Bitcoin, Ethereum, Litecoin and
Bitcoin Cash.
El Salvador became the first country in the world to make
Bitcoin legal
tender, becoming a dual-currency model alongside
the US dollar. President Nayib Bukele announced the news on 5 June 2021 in a
pre-recorded video played on stage at the
Miami Bitcoin 2021
conference.
The law will come
into
effect in September 2021, Bukele later said, with all 6 million citizens
eligible for a $30 airdrop of free
Bitcoin if they download the official Chivo crypto wallet
2.3 million UK adults now
own
cryptoassets including bitcoin, said the FCA, the UK’s market regulator, in a 17
June
2021 consumer survey. 78% of UK
adults said they have heard of cryptocurrency, up from 73% in a year, but
overall
understanding of cryptocurrency has
declined.
ETC Group led the charge to be first to list cryptocurrency
exchange-traded products (ETPs) on UK’s
Aquis exchange, Euronext Paris and Euronext Amsterdam. Listed
companies, trusts and ETPs now control
7% of the bitcoin supply, according to industry research.
Additionally, institutionally-focused products like ETC Group’s Bitcoin ETP (BTCE)
have
announced plans to offset the carbon emissions associated with that investment product’s
mining
and transaction activities. The creation of a Crypto
Climate Accord has attracted the sector’s biggest names in a bid to green the
industry
and promote more transparent reporting of energy use.
Bitcoin Technical Update
Bitcoin Core 0.21.1 was released on 1 May
2021,
with activation code for the Taproot soft fork (Bitcoin
Improvement
Proposal 341), Schnorr signatures (BIP340)
and
tapscript (BIP342).
Version 0.21.1 is the first minor update to the 21st major release of Bitcoin Core, the
original
Bitcoin software client launched by Satoshi Nakamoto in 2009.
Taproot will come into force in November 2021 and sets the stage for several important
functionality upgrades on the Bitcoin network, including efficiencies relevant for
creating
smart contracts on the base layer and higher layers, for example its payment channel,
the
Lightning Network.
Taproot is a backwards-compatible soft fork of the Bitcoin network that is essentially a
collection of many long-awaited upgrades. In total, it is designed to improve
wide-ranging
scripting capabilities and generate improved privacy on the Lightning Network. Taproot
enables
Merkelized Abstract Syntax Trees (MAST), which allow for smaller transaction sizes, and
larger
smart contracts by only revealing the relevant parts of a smart contract when spending
occurs.
Secondly, BIP340 enacts Schnorr signatures: provably secure cryptographic digital
signatures.
They come with advantages over Bitcoin’s current ECDSA (Elliptic Curve Digital Signature
Algorithm) algorithm, including much-simplified signing and verification. They are
linear, which
allow developers to add a host of additional features to Bitcoin, the result of which
could be
anything from cross-chain atomic swaps to sidechain channel creation and scriptless
scripts — a
way to execute smart contracts off-chain.
Schnorr signatures are also useful in multi-signature transactions where multiple
parties
are involved. With the Schnorr signature setup, multiple signers can jointly create
a public
key and then sign together as one, which again improves scalability and privacy
compared to
each public and private key [needing] their own individual signatures.
Multi-signature transactions will be shown on-chain just like a transaction with one
signature...the aggregated signatures make for smaller transaction sizes, which
saves space
and improves scalability.
BRD Blog
When implemented on the Bitcoin network, Schnorr signatures are widely expected to
improve
scalability and privacy on the core protocol.
The net result of these upgrades will be to inject some much needed momentum into
Bitcoin’s
technical prowess.
Bitcoin Outlook
Bitcoin’s has been on a rollercoaster ride in Q2 2021 with some huge adoption and
institutional
investment news, married with significant price volatility. But has the crypto ecosystem
outgrown its founding member?
A relatively small increase in the number of daily active addresses — just 11% year on
year —
could support this assertion, as interest and excitement about moving value on-chain
shifts
elsewhere. This could be attributed to a larger proportion of accounts simply holding
Bitcoin
and waiting for its value to rise, however.
Bitcoin is old technology and has largely been superseded by more recent blockchain
innovations,
so the prevailing narrative goes. Today, it is perhaps seen as more of a static store of
value
and kind of digital gold, than a thriving ecosystem capable of supporting some of the
more
exciting and useful functionality prevalent on other networks like Ethereum or Solana.
However, the recent technical upgrades noted above repudiate that narrative and experts
in the
Bitcoin space are beginning to push back on this theme with more force.
Indeed, the introduction of better smart contract functionality, the use of the
Lightning
Network inside a sovereign state money system and the possibility of attracting greater
numbers
of developers to build out its app ecosystem — which could include Bitcoin DeFi — rivals
anything to come on Ethereum and there is clearly potential here for reconfiguration of
the
story behind Bitcoin to develop as we progress deeper into the 2020s.
One key point to note is that global financial and political institutions are not
behaving as
though Bitcoin could be regulated out of existence, as they have in the past. Rather
they are
coming up with solutions to ensure that the structurally-important cryptoasset lives on
in
perpetuity.
Another innovation that we may see widely adopted in companies paying employees in
Bitcoin:
By offering to pay employees in cryptocurrencies, companies may attract workers
looking for
a forward-thinking employer by distinguishing themselves as early tech adopters that
offer
compelling benefits and compensation. Companies with remote or international
contractors or
employees might also appreciate the ease of making cross-border payments in
cryptocurrency.
Who needs to pick among international currencies and worry about exchange rates when
anyone
can send and receive Bitcoin in minutes with nothing more than a cell phone?
Hassan Aburish, Nicholas
Hulse
and Erica Wilson, Fisher & Phillips LLP
Credits: Article layout originally inspired by
James
Wang
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