Most people measure Bitcoin’s fortunes by the violent swings in price. While that captures the headlines, it masks a vibrant economy that lurks beneath. Back in 2010, the Bitcoin network saw one million dollars change hands. That first touched a billion in 2013 and a trillion in 2018.
Admittedly, we haven’t yet seen a trillion dollar GDP calendar year for Bitcoin, but we have seen the year between July 2017 and June 2018, when the network was particularly active. You can see that on the chart.
While price has risen and fallen with the waves of speculation, notice how the underlying network has kept on growing with only modest setbacks. In fact on this basis, Bitcoin has grown every single year.
The simplest way to calculate GDP for Bitcoin is to sum the daily changes in unspent transactions (UTXO)over the course of a year, and multiply them by the dollar value at the time. The sum is equivalent to the amount of dollar value spent across the blockchain over a year.
Going for the trillion
It’s actually not that difficult for the Bitcoin network to pass a trillion and never look back. You can see from the table that Bitcoin GDP, measured in Bitcoin, is relatively stable. The network generally sees 100 million Bitcoins change hands each year. Given there are 17.8 million Bitcoins in existence, that’s a velocity of around six times each year.
Knowing that 100 million Bitcoins changing hands is the norm, that implies that an average price of $10,000 for the year would see a trillion dollars of GDP. If velocity was a little better, at say the 140 million, last seen in 2017, then the average price would need to be $7,200, which is below the current price. The point is that a trillion dollar GDP in 2019 is entirely possible if the animal spirits return.
And if you are wondering what a trillion dollar economy looks like, it’s a little less than Indonesia. But it’s a little more than the Netherlands.