Why Blockchain.com’s Daily Bitcoin Transaction Share Has Declined 50% Over 3 YearsBy Kyle Torpey
For much of Bitcoin’s history, Blockchain has provided the most widely-used non-custodial wallet. In fact, Blockchain was responsible for broadcasting more than half of all daily Bitcoin transactions (via a combination of their wallet and API services) for a few months in 2015.
However, Blockchain’s share of the transactions on the Bitcoin network has collapsed to around 20% since those glory days.
Blockchain’s History by the Numbers
Blockchain.com originally launched as a block explorer known as Blockchain.info in August 2011. Their Bitcoin wallet was not launched until 2012, but it quickly became one of the most popular options on the market, accounting for nearly 20% of daily Bitcoin transactions by January 2013.
By the first quarter of 2014, Blockchain’s wallet and API users accounted for 40% of daily Bitcoin transactions. The wallet provider’s share of transactions on the network continued to climb until its peak was reached in May 2015 at 53.28%.
Early Blockchain wallet users were also able to use an implementation of CoinJoin to gain better privacy when transacting on the Bitcoin network. Blockchain’s CoinJoin integration led to increased use of this privacy-protecting technique before it was eventually removed from the platform.
Blockchain’s share of Bitcoin network transactions fell off a cliff in 2016, going from 48.62% in January to 24.94% by July. The specific cause behind this decline is not exactly clear.
It’s possible that issues related to the Blockchain wallet’s inability to handle the early development of Bitcoin’s fee market in late 2015 and early 2016 led to a decline in confirmed transactions for its users during this time. Blockchain implemented a dynamic fee estimation feature for its users in March 2016.
In the past, there have also been theories around “spam attacks” on the Bitcoin network that were allegedly used to drum up support for various hard-forking increases to the block size limit. Notably, the heavy drop in Blockchain’s share of daily Bitcoin transactions from 48.62% in January 2016 to 32.60% in March 2016 coincided with an announcement that some Bitcoin Core contributors would work on code related to a hard-forking increase to the block size limit (thus negating the need for spamming the network).
Blockchain’s share of daily Bitcoin transactions then rose again in July 2016 when it became clear that a hard-forking increase to the block size limit was not going to make it into Bitcoin Core. It would be rather easy for someone to create a large number of spam transactions anonymously via Blockchain’s API.
Additionally, starting in July 2016, an inverse correlation between Blockchain’s share of Bitcoin transactions and bitcoin exchange volume from Coin Metrics can be observed. Blockchain’s lowest two months in terms of its percentage of Bitcoin network activity were 17.52% in December 2017 and 15.44% in January 2018, when bitcoin was coming off of its all-time high and the crypto asset market more generally was in complete hysteria mode.
As more people entered the market for speculative purposes, the vast majority of activity took place on exchanges rather than traditional Bitcoin wallets. A January 2018 report from blockchain analytics firm Chainalysis discussed the decline in the use of Bitcoin as a medium of exchange for darknet markets relative to the entire network, and the increased financialization of Bitcoin was mentioned as one of the contributing factors to this trend.
Blockchain accounted for 20-25% of the activity on the Bitcoin network for most of 2017, and they added the ability to buy and sell bitcoin on their platform in July of that year.
The decline of Blockchain’s share of Bitcoin network activity in late 2018 lines up with the launch of the VeriBlock testnet, which accounted for roughly 20% of the transactions on the Bitcoin network by early 2019.
The fact that more than 20% of Bitcoin transactions are still coming from a single web wallet provider and a large percentage of the rest of the network’s daily transactions are likely made by exchanges on behalf of their customers means that many Bitcoin users are not checking the authenticity of transactions and making sure they’re actually operating on the Bitcoin network. However, some would argue the most important part of Bitcoin’s decentralization is the ability to run a full node when it’s needed, not necessarily at all times.