ARK Invest And Glassnode Have Come Up With A Way To…
In a recent development, blockchain analytics firm Glassnode and asset manager ARK Invest have collaborated to develop “Cointime Economics,” a new on-chain framework that determines the Bitcoin value.
What Is Cointime Economics For Bitcoin Value?
According to the whitepaper, this economic model is meant to be a new way of representing Bitcoin’s tokenomics based on the tokens in circulation. It is expected that the Cointime Economics will complement the traditional Unspent Transaction Output (UXTO) model.
The UXTO model provides data on the amount of Bitcoin remaining in each address after any transaction. However, unlike the UXTO model, which “may be prone to inaccuracies,” Glassnode and Ark Invest note that Cointime Economics provides a “highly consistent” framework that better highlights the economic state of Bitcoin.
Therefore, they are proposing “Coinblocks” as a new measure. It is proposed based on the belief that Coinblocks captures the “real economic weight” of each token on the network and helps investors better understand Bitcoin’s fundamentals.
The reason for measuring the weight of each token is because the Cointime Economics posits that the each Bitcoin value should vary based on the last time it was transacted. So the whitepaper states that a Bitcoin that hasn’t been moved in 10 years should gain more attention than one that has just been dormant for a week.
The proposers of this model note that the reason for this assertion is that coins held for a longer period can be used to identify those who are most bullish on the token. These whales are known to be the ones that control the market.
Additionally, lost tokens (maybe due to one losing their private keys or sending them to the wrong address) aren’t part of the “outstanding supply or market cost basis” under this new model.
BTC value falls below $26,000 | Source: BTCUSD on Tradingview.com
How Coinblocks Work
Coinblocks are calculated by multiplying the number of Bitcoin and the number of blocks produced when those tokens remain unmoved. Blocks refer to where transactions are stored, and it takes about 10 minutes for each block to be created on the Bitcoin blockchain.
So, instead of gauging Bitcoin’s economy solely based on the outstanding supply, Coinblocks are used. Each Bitcoin token generates one coinblock, and “because the Bitcoin network produces a block every 10 minutes on average, one coin generates approximately 144 coinblocks per day; 6 blocks produced per hour multiplied by 24 hours.”
Furthermore, Coinblocks can also be destroyed. Coinblocks Destroyed (CBD) measures the number of Bitcoin held in a given period and how long it was held before being transacted. This implies that BTCs that have been static longer will have more Coinblocks destroyed when they are eventually moved.
Once a token is moved, it destroys the Coinblocks it has accumulated and resets to zero. As such, Cointime Economics assigns weight to each Bitcoin token based on the Coinblocks created (CBC) and Coinblocks destroyed (CBD), unlike the UXTO models, which weigh each token equally irrespective of their transaction activity.
Featured image from iStock, chart from Tradingview.com