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Coin Reviews

Bitcoin Research Report | 2019

By January 29, 2019 No Comments

Bitcoin Research Report

This Bitcoin research report is an analysis of various components, stakeholders, and economics of the Bitcoin network and its associated cryptocurrency. It has been prepared by Blockchain Management Solutions Consulting, a division of the company that owns Cryptocurrency Australia.

Throughout the Bitcoin research report, key topics covered should satisfy those interested in learning about bitcoin that are from a variety of backgrounds. Potential entities interested in this report might include academia, investors, financial institutions, analysts, researchers and media.

Included here is the first 3 sections of the report, with part of section 4, released for free. The remaining full-report will be available for purchase in our online store in due course. To express interest in being notified of its availability, you can register here to receive a special discount when its released.

This report does provide not financial advice, recommendations to trade or future price predictions. Its use is reserved for educational purposes only.


  1. Network
  2. Coin Economics
  3. Price Mechanism
  4. Stakeholders
  5. Markets
  6. Network Effects
  7. Software Development
  8. Regulatory Environment
  9. Financialization
  10. Future Upgrades
  11. Risk Analysis
  12. Issue Analysis
  13. Conclusion


Bitcoin is a global, peer-2-peer payments network that operates as a trustless settlement layer. Its features include a public distributed ledger, a voluntary system for operating an honest or mining node, and a secure mechanism for monetary sovereignty of assets.

1. Network

Consensus Type

The Bitcoin network uses the Hashcash [1] Proof-of-work system for its consensus mechanism. Proof-of-work requires computational resources be expended in order to solve a one way hash. On Bitcoin, this hash is produced by the SHA256 hashing algorithm, originally developed and patented by the NSA and released publicly under a royalty free license [2].


Bitcoins peer-2-peer network performs validation of transactions using voluntary full-nodes [3]. Nodes are computers that have installed and run the Bitcoin Core client, an open-source software package maintained by Bitcoin Core developers.

Validation is performed by nodes who check incoming blocks that include a valid proof-of-work from a bitcoin miner. Blocks that contain information that agree with Bitcoins consensus rules, and have a valid proof-of-work, will be validated and added to the Bitcoin blockchain by these nodes. If the block information disagrees with Bitcoins consensus rules, or does not contain a valid proof of work, it will be rejected.

Transaction type

Each transaction that occurs on Bitcoin is carried out as an ‘Unspent Transaction Output’, or UTXO. This method records both spent and unspent transactions on the Bitcoin ledger. It operates by sending the full amount in a wallet from the sender to recipient, then returning the difference between the amount sent and the what was in the wallet. The amount sent is labelled as a ‘spent’ transaction, and the amount return is labelled as ‘unspent’.

Chain Distribution

Bitcoins blockchain is a public ledger that is distributed to computers and miners who are running a full-node. The size of the Bitcoin blockchain is currently 235 gigabytes [4], and is growing at an average rate of approximately 43 gigabytes per year.

By the year 2024, the size of the blockchain will reach approximately 450 gigabytes.

Bitcoin blockchain size over time for bitcoin research report

Figure 1 – Bitcoin Blockchain size overtime. Data sourced from Blockchain.com.

Network Incidents

The network has been live and operational for 10 years. Since inception, the Bitcoin network has not ever been compromised. However, on August 15th 2010, an issue with the coin emission rate was identified and quickly rectified, subsequently being called the ‘Value overflow incident’ [5].


Like other proof-of-work blockchains, Bitcoin can technically suffer a 51% attack. However, strength of the bitcoin network comes from its substantial mining hash power, which is currently 42.8 EHash per second [6], or 428,000,000,000,000,000,000 H/s.

Bitcoin hashrate for bitcoin research report

Figure 2 – Bitcoins hashrate growth in 2019

Using Bitcoins most popular mining hardware, we can deduce the number mining units needed to perform a 51% attack. In addition, we can calculate relative costs based on current rates for these pieces of hardware. Note; these costs do not include power costs, storage, rent, staff, or ancillary costs.



Cost (USD)Units requiredTotal Cost
Bitmain Antminer S9i14$4991559143$778,012,286
Halong Mining DragonMint T116$2,7291364250$3,723,038,250
Bitcoin Antminer T912.5$5001746240$873,120,000
Pangolin Whatsminer M3X12.5$1,0221746240$1,784,657,280
Bitmain Antminer R48.7$2,9992508966$7,524,387,586
Bitmain Antminer S74.73$2004614799$922,959,831


Nodes on Bitcoins network are designed such that participation is entirely voluntary. Nodes may come and leave as they please, and are not demographically constrained. This also includes miners, as Bitcoins difficulty adjust algorithm compensates for changes in hash rate every 2016 blocks [7].

In countries with poor or limited internet access, Bitcoins network can be accessed using one of four satellites geosynchronous satellites relaying the bitcoin blockchain. Access can be used to run a node, or perform mining operations [8].

Malicious Interference

Attacks on bitcoin outside the aforementioned 51% attack can include;

  • Spamming transactions [9]
  • Exchange security exploits [10]
  • Phishing of exchange account passwords [11]
  • Third-party wallet security exploits [12]
  • Denial of Service (DDoS) attacks [13]
  • Sybil attacks [14]
  • Government interference and censorship [15]

Attacks of these kind are common, and often lead to significant financial losses to those involved. However, none of these attacks compromise or hinder the operation of bitcoin in any way. Rather, it is the third-parties who have interacted or developed services on top of the bitcoin network that are attacked.

2. Coin Economics

Intended use

The Bitcoin currency is designed to act as a peer-2-peer money and currency, able to be transacted as a unit of account without the need for a trusted third-party intermediary. This includes;

  • Medium of exchange
  • Unit of account
  • Store of value

Counterparty risk is virtually non-existent, as the Bitcoin network takes care of validation, send/receive functions, settlement, recording on the ledger, and various other functions. It is important to note, the Bitcoin network can and does function with other use-cases outside of just being a trustless settlement layer.

The bitcoin currency enters circulation through the mining process, in the form of block rewards and transaction fees. Miners then sell the bitcoin to fund operations, thus injecting new bitcoin into the circulating supply.


Under the early but evolving definitions of various crypto assets, bitcoin falls under the definition of being a cryptocurrency.


The usability of bitcoin as money and currency is currently very good. Average transaction fees are $0.27 US cents [16], regardless of the total value of the bitcoin sent in the transaction. For the past 3 months, the average confirmation time for a transaction has ranged between 14.3 to 9.29 minutes [17]. Note, this is for 1 block confirmation. Many exchanges, wallets and financial services might require 2 or more confirmations, significantly increasing security but also increasing transaction times.

Bitcoin can be stored on dozens of mobile wallet, desktop wallets, and hardware wallets. Its accessibility and ease-of-use is arguably the best it has ever been. In addition, there are many online merchants now accepting bitcoin as payment [18].


The distribution of bitcoin can be tracked by examining wallet addresses on the public ledger. However, the vast majority of addresses are pseudonymous, and in addition, some holders may have multiple addresses. With this aside, we can still make some assumptions using the available data [19] to outline some interesting statistics.

BalanceAddressesAverage BTC per address% Coins (Total)
0 – 0.001111272880.0000.01% (100%)
0.001 – 0.0151835370.0040.12% (99.99%)
0.01 – 0.140662650.0330.76% (99.87%)
0.1 – 118511370.3163.34% (99.11%)
1 – 105634032.6338.47% (95.77%)
10 – 10013338932.93725.1% (87.29%)
100 – 1,00014691252.0721.16% (62.19%)
1,000 – 10,00017402,546.7725.32% (41.04%)
10,000 – 100,0009422,965.7312.33% (15.72%)
100,000 – 1,000,0005118,616.203.39% (3.39%)

As the table above indicates, 87% of all bitcoins currently in circulation are distributed across 149,919 wallet addresses. The average BTC per address ranges from 118,616 BTC down to 32.9 BTC.

Wallet addresses belonging to exchanges account for 4.25% of the total circulating supply, and of the top 10 most-wealthy addresses, these exchanges make up for a significant portion of holdings.


3. Price Mechanism


Bitcoins supply rate is currently fixed at 12.5 coins per block reward, which is an inflation of 3.8%, and will halve in approximately 480 days [20]. Halving events are programmed to occur at block height intervals of 210,000 blocks, which cannot be altered or tampered with. Supply of bitcoin has no relation to the demand, i.e, it will not increase or decrease if demand rises or falls.

The supply rate of bitcoin follows a predictable asymptotic curve, which concludes around the year 2140 when the last bitcoin will be mined.

Bitcoin supply for bitcoin research report

Figure 2 – Bitcoins supply curve over time [21]


Demand for bitcoin comes from a number of sources, most notably investors, but not all. In geographical locations where inflation or hyperinflation is prevalent, bitcoin has seen a rise in demand. Citizens wishing to allocate wealth into a sound money alternative that is outside the bounds of government interference is the logical explanation for this rise in demand [22].

When the demand for bitcoin rises, the supply rate of bitcoin does not change. Therefore, bitcoin could be said to be inelastic in relation to its price elasticity of supply [23].

4. Stakeholders


Miners are those who contribute hashpower into the mining pool in an attempt to solve proof-of-work hashing algorithms. They are incentivised for their work through mining rewards and transactions fees, which they are rewarded with, should they successfully solve a hash.

Due to the computational resource requirements for miners, profitability margins are subject to operational costs. Typically, miners are concentrating in regions with low operating costs, with the most significant being the price of electricity. China, given its cheaper electricity, has become popular with miners. Other populars geographical locations include Iceland and Norway due to the availability of low-cost geothermal power and cooler operating environment.

Bitcoin distribution for bitcoin research report

Figure 3 – Blockchain.com infographic of hashpower distribution between mining pools


Although miners technically are also nodes, ‘honest nodes’ are those stakeholders running the Bitcoin Core client to validate transactions and support the Bitcoin network.

Honest nodes play a critical role in the security of the bitcoin network in the event miners collude to perform a 51% attack. So long as enough honest nodes remain active, they will reject any attempt of re-doing the proof of work and the signalling to a new chain.

Honest nodes do not perform hashing functions or consume any significant amount of computational power. They communicate with one another to validate blocks and the transactions in it, and add it to the longest chain when it has been validated. Incentives to run a node are many, such as confirming your own transactions, supporting the network, and enhancing privacy.

Hardware Manufacturers

Companies producing physical hardware that interacts with the bitcoin network in some way fall into this category. This can include;

  • Suppliers building ASIC [24] (application specific integrated circuit) hardware, such as Bitmain, Halong Mining,
  • Wallet providers manufacturing hardware wallets, such as Trezor, Ledger, Keepkey
  • Manufacturers of hardware node solutions, such as Casa.


Cryptocurrency exchanges are arguably the most significant stakeholders for Bitcoin. By facilitating trades between buyer and seller, exchanges act as a trusted third-party intermediary, both in terms of order matching, and custodianship of assets.

Exchanges and OTC desks profit from order matching by taking a small percentage of the total trade amount, and in many cases, by taking a small portion of the transaction fee when a user requests funds be sent to their own wallet.

Of the top 100 address by bitcoin holdings, exchanges make up 4.25% of the total supply, with the remaining addresses in the top 100 list making up a cumulative 10.76%.

Bitcoin holdings for bitcoin research report

Figure 4 – Breakdown of top 100 bitcoin addresses


To register interest in obtaining the paid full report when its released, you can register here to be notified first and receive a special discount. For further inquiries about research reports and analytics, please use the contact form on our consulting website.


[1] https://en.bitcoin.it/wiki/Hashcash

[2] https://datatracker.ietf.org/ipr/858/

[3] https://bitcoin.org/en/bitcoin-core/features/validation

[4] https://bitinfocharts.com/bitcoin/

[5] https://en.bitcoin.it/wiki/Value_overflow_incident

[6] https://bitinfocharts.com/comparison/bitcoin-hashrate.html

[7] https://en.bitcoin.it/wiki/Difficulty

[8] https://cryptocurrencyaus.com/future-of-bitcoin-is-satellites-sidechains-and-smart-contracts/

[9] https://en.bitcoin.it/wiki/Spam_transactions

[10] https://blog.saturn.network/list-of-documented-exchange-hacks/

[11] https://bitcoin.org/en/scams#phishing-websites

[12] https://en.bitcoin.it/wiki/Weaknesses#Wallet_Vulnerable_To_Theft

[13] https://en.bitcoin.it/wiki/Weaknesses#Denial_of_Service_.28DoS.29_attacks

[14] https://en.bitcoin.it/wiki/Weaknesses#Sybil_attack

[15] https://en.wikipedia.org/wiki/Legality_of_bitcoin_by_country_or_territory

[16] https://bitinfocharts.com/comparison/bitcoin-transactionfees.html

[17] https://www.statista.com/statistics/793539/bitcoin-transaction-confirmation-time/

[18] https://99bitcoins.com/who-accepts-bitcoins-payment-companies-stores-take-bitcoins/

[19] https://bitinfocharts.com/top-100-richest-bitcoin-addresses.html

[20] https://www.bitcoinblockhalf.com/

[21] https://en.bitcoin.it/w/images/en/4/42/Controlled_supply-supply_over_block_height.png

[22] https://ambcrypto.com/bitcoin-btc-trading-volume-increases-exponentially-in-columbia-venezuela-and-peru/

[23] https://en.wikipedia.org/wiki/Price_elasticity_of_supply

[24] https://en.wikipedia.org/wiki/Application-specific_integrated_circuit

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