Since the inception of the first website in 1991, the Internet has revolutionized human life. There are inevitably parallels between cryptocurrencies and the Internet (including a comparison with Netscape), and I wanted to analyze these comparisons and find out as precisely as possible what stage of development we are now at. I will also analyze the growth of the cryptocurrency market, compare it with the early stages of Internet development and see what conclusions can be drawn from this.
Parallels are inevitably drawn between cryptocurrencies and the Internet (including comparisons with Netscape); I wanted to analyze these comparisons and find out at what stage of development we are now.
Also, I will analyze the growth of the cryptocurrency market and the development of the Internet at an early stage in order to draw any conclusions as a result.
What makes such a comparison difficult?
It is impossible to determine exactly how many people and how often they use cryptocurrencies. This is due to the fact that:
- Users can have several wallets for different cryptocurrencies.
- Users often store their cryptocurrencies on the stock exchange, where they can have several wallet addresses. In addition, exchanges typically create a new wallet address for each transaction.
Therefore, the only way to determine the number of users is to calculate the average.
Growth in the number of cryptocurrency users
I used several methods to analyze the growth in the number of cryptocurrency users:
- the increase in the number of Bitcoin wallets and Ethereum;
- the increase in the number of active addresses in Bitcoin and Ethereum networks (average user activity per day);
- increase in the number of users on cryptobirds;
- total volume of cryptocurrency trading for a certain period of time.
There are currently approximately 24 million Bitcoin wallet addresses. This does not mean that there are also 24 million users, since one user can have several addresses, and in general there are recommendations to create a new address for each new transaction.
I will assume that 24 million is the maximum possible number of Bitcoin users in the world.
Besides the number of wallets, we can also analyze the number of active addresses per day. To smooth this graph somewhat, I presented the average monthly active addresses on a logarithmic scale:
The maximum value of active addresses per day was 1,1 million - this is the approximate number of active Bitcoin users per day. However, if we consider Bitcoin solely as a means of preserving value, then, compared to a regular website or mobile application, this is not a high indicator.
We can conduct a similar analysis for Ethereum. Below are graphs of the growth of the total number of addresses and active addresses per day for Ethereum (on a logarithmic scale):
There are a total of 31 million Ethereum addresses, during peak periods the number of active addresses per day reaches 1,1 million.
Ethereum differs from Bitcoin in that in Ethereum smart contracts have their own addresses. Ethereum is not just a cost saving tool, but also a platform for smart contracts, so the number of active addresses in the Ethereum network should be higher.
Ethereum users can be Bitcoin users at the same time, so I assume that there should be a strong correlation between the two cryptocurrencies.
Another method of calculating the average number of users of cryptocurrencies is the analysis of data from the Kritobirzh.
Only a few exchanges publish statistics regarding the total number of users and the growth of their number. Here is what I managed to find:
If we analyze the available data of all stock exchanges, we get the following diagram with the market share of each of them:
Moreover, if we analyze stock exchanges with a known number of users and a known trading volume, then we can calculate the average trading volume per user. Based on this value, we can divide into it the cumulative trading volume of all cryptobirds to output an estimated total number of users of cryptocurrency: 20,2 million users.
I will take this figure for the minimum possible number of cryptocurrency users based on the number of people who trade and buy cryptocurrencies on different cryptobirds.
Further, we can analyze the trading volume of cryptocurrencies for the period from 2014 to 2018 a year. The graph below is also presented on a logarithmic scale and is based on monthly average indicators for a more visual representation of the overall trend.
All these calculations are very approximate, and I would say that around the world there are about 20 – 30 millions of users of cryptocurrencies.
Comparison of the growth of users of cryptocurrency and Internet users
Now that we have derived an estimated number of cryptocurrency users around the world, we can compare the obtained values with historical data on the development of the Internet in order to understand where we are.
The increase in the number of Internet users:
Compare the graphs of the number of Internet users in 1990 – 1995 and the users of cryptocurrencies in 2013 – 2108:
We see that these two growth curves are quite similar. If we assume that cryptocurrencies will follow the trajectory of the Internet, now cryptocurrencies are somewhere around 1994 year.
We can also make a similar comparison for the number of websites in the early stages of the development of the Internet and the number of crypto projects. For this, I will use the total number of cryptocurrencies and tokens + of all DApps (decentralized applications). The graph below shows the growth trajectory of the number of websites:
Let's compare the number of websites in the period from 1991 to 1995 a year and the growth of crypto-assets (received funding for tokens + decentralized applications) in 2014 – 2017 years:
In this comparison, we are also at about the level of 1994 of the year.
And last but not least, we will analyze the total number of Internet companies that received funding from 2014 to 2017 a year and compare it with the number of startups that received funding from 1991 to 1995 a year.
* The amounts are adjusted for inflation and include funds aimed at financing only Internet companies and software manufacturers.
My findings
- Despite the fact that we are seeing an intensive growth in the number of users of cryptocurrencies, tokens and DApps, if we draw an analogy with the development of the Internet, we are still at the level of 1994 of the year.
- However, depending on your vision of the basic functions of the blockchain and cryptocurrency and their long-term prospects, the analogy with the Internet can be either pertinent or devoid of any meaning:
- If for you cryptocurrencies mainly mean a new asset class, then you should not expect cryptocurrencies to follow the same development trajectory as the Internet - in terms of user growth and asset growth (equivalent to websites on the Internet);
- if you see in cryptocurrencies primarily platforms for decentralized applications (DApps) - that is, a kind of decentralized Internet - then the expected growth of users and DApps can be comparable to the growth in the number of Internet users and websites.
My biggest gripe with distributed applications and their prospects is that the DApp usage rate doesn't match the number of DApps being created. At the moment, the main use cases for cryptocurrencies are speculation, preservation of value, assets, means of payment, etc.
The data tells us that using cryptocurrency as an asset class has much more evidence and measurable acceptance from users. The future of decentralized applications will be very interesting to follow, but it is still too early to say something definite about it.