Bitcoin is Processing Fewer Payments Per Month Than It Was in 2016
Although many venture capitalists in Silicon Valley were promoting the use of Bitcoin for payments more than anything else in the early days of the network, it has become clear that the store of value use case is the main aspect of the technology gaining consumer adoption right now.
A decent number of merchants have decided to remove the option to pay via Bitcoin since the small bubble in merchant adoption back in 2014, and evidence of the lack of growth in retail payments these days can be seen directly on the Bitcoin blockchain.
How are Payments Defined?
If you only look at Bitcoin transactions at the surface level, it appears there has been plenty of growth since the bursting of the crypto asset bubble in late 2017. According to OXT, transactions per month have grown from 5.3 million in February 2018 to 9.2 million in January 2019.
However, you have to look beyond this simplistic calculation of transactions to find meaningful data.
In addition to transactions, OXT also tracks estimated payments per month, which is based on the number of outputs involved in transactions. Additionally, OP_RETURN transactions are ignored for this statistic. The intention is to ignore change outputs and non-payment use cases of blockchain interactions.
Looking at the Data
For the most part, Bitcoin payments per month experienced tremendous growth up to the bursting of the crypto market bubble in December 2017. The only real deviation from the general trend was July 2015 when the number of payments doubled from the previous month, but that month’s numbers were skewed by a stress test on the Bitcoin network.
The drop from 19.1 million payments in December 2017 to 9.5 million payments in February 2018 is quite remarkable, but it makes sense with the bursting of the crypto asset bubble in mind. Based on raw data from Coin Metrics and reports from blockchain analytics firm Chainalysis, it’s clear many Bitcoin “payments” are related to price speculation on exchanges.
In terms of growth in the area of the base transactions per month metric, that can be attributed to non-payment use cases like Veriblock, which currently accounts for roughly twenty percent of daily Bitcoin transactions.
There aren’t many signs of growth in Bitcoin payments on the horizon, as the current month of February is on pace to have fewer payments than February 2016.
Update: A Twitter user pointed out that on-chain payments will become a less useful data point as layer-two protocols like the Lightning Network and sidechains become more prevalent. We also pointed this out in a recent article. For now, this data is likely still valuable as Lightning Network and sidechain activity is still a drop in the bucket compared to traditional on-chain payments.