Topic: Word of the Day: Bitcoin Days Destroyed (Read 152 times)

Activity on the bitcoin network is normally measured by the total number of transactions
With higher transactions over time, you may conclude that there is a steady gain in momentum in bitcoin transactions.However, because Bitcoin transactions are affordable and easy to execute, folks may potentially be shuffling coins between different wallets that would end up inflating the number of transactions in the network.

As such Bitcoin Days Destroyed (https://en.bitcoin.it/wiki/Bitcoin_Days_Destroyed) was proposed
The premise is that counting the number of transactions per day does not truly reflect the Bitcoin economy.
Bitcoin Days Destroyed is often used as an alternative view to bitcoin transaction volume.
This metric is a measurement of transactions with an emphasis on bitcoins which have not been spent in a while.

To illustrate that

Alice has 10 bitcoins which she received 100 days ago. Today she decided to spend it all in a transaction.
Bitcoin Days Destroyed = 10 BTC x 100 days = 1000

Bob has 10 bitcoins which he received yesterday. Today he decided to move them into an exchange in a transaction.
Bitcoin Days Destroyed = 10 BTC x 1 day = 10

The longer that the bitcoins have not been spent, the higher the Bitcoin Days Destroyed will be when it gets spend.

The idea of this metric is that by looking at the Bitcoin Days Destroyed, you would be able to weed out transactions where fresh set of bitcoins are merely bouncing around different wallets.