Originally published on CoinSpice on July 2, 2019.
Bitcoin Cash (BCH) just skyrocketed to a new threshold. It’s now the 2nd most valuable blockchain in the entire cryptocurrency industry. This has nothing to do with speculative market caps or exchanges. This is about the blockchain. Units moving on a blockchain inherently indicate the user’s trust in that blockchain to secure the value of those units. Major growth in on-chain transaction volume has resulted in BCH breaking from the pack.
Exploring Bitcoin Cash Network Activity
Network activity concerns all actions we can measure within the internal blockchain of a given cryptocurrency. Some cryptocurrencies have different measures than others but they all generally share a notable few: active addresses, transaction counts, and transaction volume.
Transaction volume is defined by the total amount of value transacted through the blockchain. Since most blockchains have open data at the aggregate level, we can have an approximate measure on a given day, month, or year.
Transaction volume also reveals the trust users place in the blockchain. Anybody transacting within a network is entrusting their value to move to their destination unscathed. The larger the amount of value, the more trust that network is gaining.
Picture yourself walking down the street with a $20 bill in your pocket. How do you feel? Pretty normal I’m betting. Now imagine you have a transparent suitcase containing $1 million. How do you feel now? I know, …vulnerable and nervous. Now extrapolate those emotions to all the users of blockchains. The more value users move on blockchains the more they trust those blockchains.
Bitcoin Cash Breaks From the Pack
While Bitcoin Cash might be 5th by market cap, its transaction volume is now 2nd. Around mid-May, that volume started to really take-off and exceeded $2 billion per day. Other notable cryptocurrencies like ETH, LTC, and XRP are well below these new milestones.
Over the past 6 months, we can compare Bitcoin Core (BTC) to Bitcoin Cash (BCH). The start of the year was a downtick for each coin but April shows positive growth again and from there we observe BCH outpacing BTC in growth drastically.
In May, BCH saw 185% month-over-month growth in transaction volume while BTC only grew by 56%. BCH came close to a third of the volume of BTC in May only to settle in July at about a quarter.
There were even moments where BCH flipped BTC in volume, most notably May 27 of this year. BTC might have more volume but BCH’s is growing more aggressively.
Why Did It Grow?
It appears that usage of the Bitcoin Cash blockchain is increasing but it’s hard to pinpoint a particular cause and effect. One explanation is that tokens on BCH have picked up steam and their growth mirrors the curve of volume.
Simple Ledger Protocol (SLP) tokens allow for unique units with custom behavior to be grafted onto the BCH blockchain. Every SLP token transaction is within a regular BCH transaction.
The peak in SLP activity happened in May which corresponds with the major jump seen in volume during that same period. The activity shows engagement but the total value transacted might have been smaller than sufficient to create the volume bump all by itself.
The token activity is significant. However, the general crypto market rally could have also aided this increase. With investors eyeing crypto’s comeback, some might have concluded BCH was a worthwhile investment and piled in.
This is backed up by the speculative exchange volume data too. BCH went from $500 million in March to $1 billion in April, to $4 billion by May. If investors were buying large amounts of BCH, it’s likely that large amounts would also move on-chain in parallel.
As cryptocurrency investors have traditionally responded to price action and market capitalization metrics, there just might be a better way to evaluate a project’s future. If users begin to prioritize utility over simple speculation, blockchains such as BCH are poised to break out in ever-new ways.