The blockchain analytics company Glassnode and the asset manager ARK Invest have recently worked together to establish "Cointime Economics," a new on-chain framework that decides the value of Bitcoin. This is a very recent development.
WHAT IS BITCOIN VALUE COINTIME ECONOMICS?
This economic model is intended to be a new way of portraying Bitcoin's tokenomics based on the total number of currently circulating tokens, as stated in the whitepaper. The conventional Unspent Transaction Output (UXTO) model is anticipated to complement the Cointime Economics model.
The UXTO model supplies information regarding the number of bitcoins in each address following any transaction. On the other hand, in contrast to the UXTO model, which "may be prone to inaccuracies," Glassnode and Ark Invest point out that Cointime Economics offers a framework that is "highly consistent" and better illuminates the economic state of Bitcoin.
As a result, they have suggested using "Coinblocks" as the new unit of measurement. It is proposed based on the notion that Coinblocks helps investors better grasp the fundamentals of Bitcoin and captures the "real economic weight" of each token on the network.
The theory of Cointime Economics states that the value of each Bitcoin should change depending on the timing of the most recent transaction involving that Bitcoin, which is why it is necessary to measure the weight of each token. According to the whitepaper, a Bitcoin that has yet to be transacted with for a decade should be given more attention than one that hasn't been active for more than a week.
The proponents of this model explain that the reason behind this assumption is that coins that have been held for a longer period can be utilized to determine which individuals are the most bullish on the token. There is a common perception that these whales are the ones who control the market.
In addition, under this new model, tokens that have been lost (perhaps due to the owner misplacing their private keys or transferring them to the incorrect address) are not considered a part of the "outstanding supply or market cost basis."
COIN BLOCKS IN ACTION
Multiplying the number of bitcoins by the number of blocks generated due to the tokens' continued inactivity results in the calculation of coinblocks. Creating a new block on the Bitcoin blockchain takes approximately ten minutes on average. Blocks are the locations on the blockchain where transactions are saved.
Therefore, instead of basing an estimate of Bitcoin's economy purely on the total supply in circulation, Coinblocks are utilized. Each Bitcoin token contributes to creating one coinblock, and "because the Bitcoin network produces a block every 10 minutes on average, one coin contributes to the creation of approximately 144 coinblocks per day." This figure is calculated by multiplying the number of blocks created in an hour by the number of hours in a day.
Additionally, Coinblocks can be broken down into their constituent parts. Coinblocks Destroyed (CBD) is a metric that determines the amount of Bitcoin kept within a specific period and the amount of time that Bitcoin was held before being traded. This suggests that Bitcoins that have stayed stationary for longer will destroy more Coinblocks when moved.
When a token is relocated, any Coinblocks it has acquired are lost, and the total amount of Coinblocks is reset to zero. As a result, Cointime Economics allocates a weight to each Bitcoin token depending on the number of Coinblocks made (CBC) and Coinblocks destroyed (CBD). This is in contrast to the UXTO models, which give identical weight to each token regardless of the transaction activity they are associated with.
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