According to CoinMetrics: Few Bitcoin payments are used to buy goods and services.
As global investors turn to cryptocurrencies as an investment vehicle, the use of digital currencies for their intended purposes has been questioned. New research suggests that only one third of the transaction activity that occurs in the Bitcoin network is related to the purchase of goods or services. That is, there are few Bitcoin transactions that are used to buy goods and services
The network value of cryptocurrencies
One of the main criticisms around cryptocurrencies is that they do not really operate as currencies, and the data surrounding Bitcoin transactional information seems to confirm this. According to the data provided by CoinMetrics, the majority of Bitcoin transactional activity can be attributed to factors such as the distribution of mining groups, false orders and manipulation.
CoinMetrics uses a formula that calculates a Network Value Rate for Transactions (NVT) to compare the dollar value of the virtual currency with the value of the network. This measurement system allows investors to better understand how certain cryptocurrencies are used.
According to CoinMetrics, “a low market for transaction value (NVT) denotes an asset that is cheaper valued per unit volume of transactions in the chain”.
This value varies significantly between different cryptocurrencies and gives a good idea of which virtual currency is overvalued based on its average transaction volume. For example, Cardano’s chain of transactions volume (ADA) is actually higher than its Network Value, which gives it a low NVT of 0.78 compared to Bitcoin, which has an NVT of 30.78.
Although the Transaction Network Value Rate shows a general picture of how cryptocurrencies are used, it does not give a reliable idea of how many of the chain transactions have economic value.
Although Cardano has a significantly higher volume of transactions in chain than Bitcoin, additional research carried out by Elementus Inc. suggests that only 2% of the economic transactions that occur in the Cardano network have an economic value.
Although the Bitcoin NVT is significantly higher than that of Cardano, many of its chain transactions have an economic value, approximately 33%.
The use of cryptocurrencies as payment methods has increased significantly in recent years, but is still not close to being adopted by the masses. New services, such as Coinbase Merchant and Square payment systems, have made it much easier for companies to accept cryptocurrencies as a form of payment, and these are still relatively new services.
Overstock.com was one of the first major online retailers to accept cryptocurrencies, and they have had tremendous success in their virtual currency payment program. According to one of the board members of the company, Jonathan Johnson, Overstock is generating a significant amount of money through payments with cryptocurrencies.
“We have between US $ 68,000 and US $ 120,000 a week in cryptocurrency revenues; people who buy sheets and toasters using Bitcoin or Ethereum, or other currencies, “Johnson said in a talk with the Heritage Foundation.
Johnson also explained the benefits that Overstock sees in the use of cryptocurrencies instead of fiduciary currency, saying:
“We pay a processing fee for credit cards, and we employ about 40 people in our fraud department. That is a cost of doing business with credit cards. When we take cryptocurrencies, we have a very small transaction fee with Coinbase, much lower than our credit card processing fee, and we do not have a fraud prevention department. It’s like a cash transaction. For us, that’s a much cheaper way to do business. “
As companies become more and more open to accepting cryptocurrencies due to tax benefits, the amount of economic transactions that occur in cryptocurrency networks will increase significantly. This will be reflected in the price of commonly used cryptocurrencies, since their NVT ratio will increase considerably.
Disclaimer: InfoCoin is not affiliated with any of the companies mentioned in this article and is not responsible for their products and / or services. This press release is for informational purposes information does not constitute investment advice or an offer to invest.