Unique Bitcoin Addresses – Why You Can’t Trust The Data

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  • Unique Bitcoin addresses used to be useful in showing the adoption of the cryptocurrency among users, but not any more
  • Very few Bitcoin users use just one address, with heavy users burning through dozens in a short space of time
  • Such data is good for viewing overall trends, but Unique Bitcoin address numbers are now meaningless

Bitcoin address growth is often held up as an example of just how much the Bitcoin bug is spreading, with the assumption being that each new address represents a new user. This may have been true in the past but these days the number of unique Bitcoin addresses is a misleading metric that should not be used as an example of Bitcoin growth, for a very good reason.

You Get an Address, You Get an Address…

Data from Blockchain.com shows that the number of unique Bitcoin addresses has risen sharply over time, echoing the size of the cryptocurrency market cap:

Unique Bitcoin addresses

While this chart does undoubtedly show a fluctuation in users over time, the actual numbers involved are fairly meaningless. In years gone by it used to be the case that a user would set up a new wallet, generate an address, and use that address over and over again. However, times (and security measures) have changed since then, and as a result it is now recommended never to use the same Bitcoin address twice.

Unique Bitcoin Addresses Now Meaningless

Luckily this is easy to do. Private wallets will often churn up a bunch of random Bitcoin addresses for you to choose from when you first create them, allowing you to cycle between them or just create more, while some exchanges automatically create a new Bitcoin address each time you want to deposit funds.

It doesn’t take a genius to see how this could be problematic. Whereas in years gone by you had perhaps two or three addresses at most associated with each user, now there is no way of knowing how many addresses are associated with an individual.

While this good security practice, it makes the numbers associated with unique Bitcoin addresses redundant, leaving charts that plot related data good for viewing trends over time but useless when it comes to getting useful, quantifiable information.