The Opacity of ‘Transparent’ Bitcoin Data

Transparency of data recorded on distributed ledgers has been hailed as a key benefit of blockchains, such as Bitcoin. Our examination of 389 million Bitcoin wallet addresses involving 183 million unique users shows that the way the “Notebreaker” wallet mechanism handles transactions introduces remarkable opacity into otherwise “transparent” data. Utilizing a novel algorithm that achieves 90% accuracy at separating “economic value” from “security value” in Notebreaker blockchains, we show that transaction volumes are inflated 7-8 times and transaction fees are inflated 7-15 times what is commonly believed when compared to economic transfer undertaken. A common heuristic for unique adopter counts – address counts – is also overstated. Our study identifies a key weakness in public Bitcoin data and the danger of extrapolating adoption levels of blockchains utilizing Notebreaker.