Thousands of Hoarded Bitcoins Flood the Block Chain in Mystery Transaction

The bitcoin block chain threw out an interesting statistic yesterday: there were 134,084,960 'Bitcoin Days Destroyed'.

It's the highest number in bitcoin's history so far, beating the previous four record spikes which reached around 52,000,000 Bitcoin Days Destroyed respectively.

The Blockchain.info chart below emphasises how dramatic that looks. If you filter this data for coins that are at least one year old, it still looks like this (130,990,276).

This means that a lot of older bitcoins moved yesterday – a lot. Who could it be this time? Again, fingers were pointed at the typical large-volume bitcoin holders: old-time miners, large exchanges, the Winklevii, or "something to do with Silk Road”.

The reality is, we can't know for sure unless there's some other hint.

It's important to note that this figure does not mean 130m bitcoins changed hands. One "Bitcoin Day" is added to every coin for every day it doesn't move to another address.

1 BTC, unmoved for a year, will have a score of 365 Bitcoin Days. Spend it, and that 365 score will be wiped, or 'destroyed'.

Bitcoin itself has existed for 4.9 years. A single coin from one of the first blocks, unspent, would have a score of around 1,788 Bitcoin Days.

The fairly obscure and tricky-to-grasp "Bitcoin Days Destroyed" metric is essentially one way to tell how much 'actual' activity is happening in the bitcoin economy.

The longer a bitcoin sits around without being used, the number of 'days' it accumulates: 1 coin + 1 day = 1 Bitcoin Day. When the coin is sent somewhere, that accumulated total is said to be 'destroyed'.

This reddit discussion

offers some useful insights on the subject.

Hoarder metrics

For another example: 5 BTC held for one day then spent is 5 days destroyed. That same 5 BTC held for a week (7 days) then spent is 5 x 7 = 35 days destroyed.

If you held them for a whole year, they would have accumulated 1,825 Bitcoin Days. Spend them after that long, and ... bingo! 1,825 Bitcoin Days destroyed (or the accumulated number is 'reset').

A low number of days destroyed means more bitcoins are being hoarded. A high number - especially one as high as 130 million - means a lot of coins just got un-hoarded.

It may not have been 130 million, but that figure divided by even 3 years of Bitcoin Days equals over 118,000 BTC - quite a lot to move all at once.

In the long-term

To measure activity we could simply count the number of transactions, but that tells us nothing about the amount of bitcoins being kept in long-term storage, or bitcoins lost forever due to lost keys, hardware, and other regretful blunders. Seeing old coins come back into circulation is good news, as it means they're not lost.

Counting simple transactions could also allow an individual or small group to manipulate the statistics by moving the same coins round and round.

But back to yesterday's statistic: who was it?

The answer is, we can only speculate. It's probably not from the oldest blocks, which haven't moved at all. It's also important to remember that, just because bitcoins have changed addresses, it doesn't mean that they changed hands, or were exchanged for anything.

Top Secret image via Shutterstock