On “bitcoin days destroyed,” Grinners asks,
“Bitcoin days destroyed is calculated by taking… the number of bitcoins multiplied by the
number of days since those coins were last spent.”‘ “What is the significance of this?
What does this actually tell us?” It gives us an idea of the maturity of coins,
how often coins are moved and in what amounts. You can look at it this way: somebody
moving one bitcoin after a hundred days, is equivalent to someone moving
one hundred bitcoins after just a day. That is, the amount of bitcoin multiplied by the
number of days it has been sitting in the same UTXO. It gives [a measure of economic] velocity in the network, the volume of money circulating in the
economy within some period of time. For example, let’s say that I leave this place,
take a taxi, and give the taxi driver $20. They stop at the gas station
and [use that $20 to buy gas]. Then somebody buys a cup of coffee, [along with some
other goods], and they get that $20 back in change. Then they go to buy a muffin, pay
with the $20, and get some change. At the end of the day, the [muffin bakery] pays
its employees; one of them gets my $20 note. That $20 has now moved [five] times in a day. While it is one $20 note, it has participated in [$100]
worth of economic activity overall, by changing hands. In order to get an appreciation for velocity in the Bitcoin
economy, we used the metric “bitcoin days destroyed.” It tells us [what sums of money are
moving and within what period of time]. The product of those two numbers is the metric.
I hope that helps to explain [what it means]. I have only really seen one place
track that, which is Blockchain.com. They had that chart running since the very early days, one of the first charts that they offered which
nobody else [did], in terms of blockchain analysis. I still think it is one of the few places
where you see that metric. I find it fascinating. Every now and then, you will see a news article or
someone tweeting [about] a lot of money on the move. They will use bitcoin days destroyed to give people
an idea of the magnitude and maturity of that money. A very interesting point by Camile, that velocity
of money means nothing for Austrian economics. Velocity of money, as a concept that underlies
economic value, is definitely a Keynesian [metric]. But I’m not doing the economic analysis on this one.
I’m just explaining what it means. Thank you for jumping in and making that
observation, Camile. That’s very interesting.