Cryptocurrency Exchanges Are the Top Consumers in the Bitcoin Block Space
According to online chain analytics firm Glassnode, crypto exchanges are currently the biggest consumers of Bitcoin (BTC) block space, with related transactions taking up about 40% of the space.
Cryptocurrency exchanges are the top consumers in the Bitcoin block space
The percentage of block space used by crypto exchanges is showing a “general uptrend,” the analysts said, further corroborating the narrative of “Bitcoin’s Pivot to Asset Finance.”
Importantly, only a small number of exchanges use most of the block space.
“Transactions in which funds are sent or received by exchanges, as well as exchange internal transactions, account for about 40% of the Bitcoin block space.” according to Glassnode.
Binance and Coinbase are the exchanges with the largest trades, although there is a big difference in Segwit’s adoption rate
The analysts also found that major crypto exchanges Binance and Coinbase are “by far” the biggest consumers of block space. Transactions to and from Binance make up around 15% of the total block space, while Coinbase-related transactions make up around 10%.
Glassnode decided to explore ways to measure adoption of SegWit-related Bitcoin innovations, choosing to put the “focus” on the exchange and introducing a new metric to measure that adoption, dubbed SegWit usage. SegWit (separate witness) is a 2017 upgrade to the Bitcoin network that aims to improve scalability.
While Coinbase has fully adopted SegWit, Binance’s SegWit adoption rate remains low, hovering around 10% by the end of 2021. Although the “inappropriate” SegWit adoption metric puts the adoption rate at 50% for 2020-2021, “overestimates SegWit usage in Binance transactions by a factor of five,” the SegWit Usage Index shows that only about 1/10 of inputs are through transactions be issued. The translation created by Binance effectively uses the SegWit format, according to analysts.
Even that 50% figure “doesn’t seem like enough” considering how much block space the exchange occupies, Glassnode commented.
SegWit (Segregated Witness) is a proposed update to the Bitcoin software. The goal of Segwit is to increase the processing capacity for Bitcoin while patching critical bugs in the previous version. Actually, SegWit is not a specific technique for expanding the blockchain, but a collection of many updates.
To expand the blockchain, we basically have two directions:
- Reduces the time it takes to place another transaction in the block.
- Reduce the time to reach consensus.
Through the method of using SegWit, Glassnode discovered that out of the 18 exchanges studied, 6 had fully adopted SegWit, 6 were “struggling” with the adoption, and 6 were “trying to get very little strength” to adopt it.
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