Glassnode, in collaboration with Ark Invest, has unveiled a pioneering economic model named “Cointime Economics,” crafted to decipher Bitcoin’s onchain metrics. This model stands as an alternative to the conventional measurement, rooted in unspent transaction outputs (UTXOs), focusing on “coinblocks” to assess Bitcoin’s economic activities and its intrinsic value.
Coinblocks, as detailed in the Cointime Economics white paper, is a formula which multiplies the number of stagnant bitcoins by the number of blocks they remain immobile. An example: ten bitcoins stationary for ten blocks would generate 100 coinblocks. The essence of this method is to gauge the genuine economic gravitas of each bitcoin based on its duration of dormancy. The idea is simple: the longer a bitcoin stays static, the more significant its cointime and consequential economic weight.
The framework delves into metrics like coinblocks that are crafted, demolished, or stored to map out Bitcoin’s fiscal trajectory. It further presents ratios such as “liveliness” and “vaultedness,” each indicating network activity and inactivity respectively. This model sharpens the distinction between active and vaulted supplies of bitcoin, offering insights into genuine inflation and associated metrics.
The scholars posit that Cointime Economics could refine established valuation frameworks like the MVRV ratio. By replacing standard metrics with coinblocks, models like the Active Value to Investor Value (AVIV) ratio could better pinpoint when Bitcoin is over or undervalued. The Cointime Price metric, introduced in the white paper, brings to the table a value that accounts for transaction volume and the duration of ownership. As of May 7, 2023, this Cointime Price stood at $17,568, noticeably below Bitcoin’s market rate.
Conclusively, the researchers advocate for the Cointime Economics model, emphasizing its precision in quantifying Bitcoin’s economic resonance, factoring in the length of coin storage. This coinblock- and cointime-centric approach may very well outdo conventional models that lean solely on UTXOs and blockchain information.
The minds behind this innovation, James Check of Glassnode and David Puell from Ark Invest, highlight their intention to equip analysts with a potent toolset to dissect Bitcoin’s onchain essentials more effectively.