Galley on Nostr: I’m reading through _Checkmatey_'s and David Puell’s Cointime Economics paper and ...

I’m reading through _Checkmatey_ (npub1qh5…eh9r)'s and David Puell’s Cointime Economics paper and wanted to make three observations about chapters 1 -3.

1. The concept: the authors propose to analyze a new aggregate variable of value and time. They call this a “coinblock”, and you can also think of it as a precise measure of BTC∙time (i.e. 1 BTC held for 10 years is equivalent to 10 BTC held for one year). The authors offer this approach as an alternative to the clustering of UTXOs into groupings like STHs and LTHs because that technique relies on proprietary data science; by contrast, this approach uses a universal and simple variable, and the findings of the authors are therefore instantly verifiable and replicable. The paper seeks to establish a new standard unit of measuring on-chain activity.

2. This chart (page 12) really struck me as the first bit of explanatory power of the model. It looks at coinblocks created and therefore its shape looks a lot like the supply curve–this is because the number of coinblocks created on any given day is tied to the supply in existence. For instance, you can see that today’s value is somewhere around 3B coinblocks created per day, which makes sense since we have 19.4m BTC in supply today that is confirmed roughly 144 times per day, thus 19.4 x 144 = 2793.6 or 2.79 billion coinblocks per day.



What struck me about the chart is the China mining ban, visible in between the two peaks of the 2021 cycle top. The coinblocks created takes a plunge and appears to be at values as low as back in 2013 briefly. This makes sense when you consider that if blocks come in slower than expected, coindays created will slow meaningfully since they will not get their 144 confirmations per day. The spike down on this chart, and the clockwork return to trend are beautiful indicators of the effect this ban had on the network, and also the resilience in recovery and return to normal.

3. The authors establish measures of Liveliness (the ratio of the sum of blocks destroyed to the sum of blocks created) and Vaultedness (the ratio of the sum of blocks stored to the sum of blocks created) to tell the story of Bitcoin since its inception.

https://cdn.nostr.build/i/2b5d5e9dd5054b0793f3be6c7e9d28bdcde9d7e58ad80d218d952eaa960d08b1

This chart from page 20 shows that Liveliness and Vaultedness (which always sum to 1.0) have gone through several phases as Bitcoin is monetizing. Satoshi’s dormant coins and the lack of exchange price dominated the network until the first blow-off mania, at which point network activity picked up significantly and started destroying coinblocks at a much faster rate. This repeated in subsequent cycles to a lesser extent to the point of today, where the authors argue the plateau of ~60% liveliness and ~40% vaultedness represents stability, maturity, and the development of external markets (derivatives, for example) as BTC settles into its primary use case–and you can observe on the chart how little these metrics have changed despite the fluctuations in price since 2018.

I find this report fascinating and will be back with more after I’ve read the next part!