Bitcoin is known as purely digital programmable money and its rise and acceptance grows every day, giving rise to new expressions and languages that refer to this cryptocurrency. In this article we want to delve into an almost contemporary concept with Bitcoin and whose function is very important within the ecosystem. Is about Bitcoin Days Destroyed, or also known by its abbreviation BDD. Let's see what this is about.
What is Bitcoin Days Destroyed?
To get an idea of the economic movement of Bitcoin it is necessary to study the volume of daily transactions. And this is precisely what it does Bitcoin Days Destroyed or BDD. This is an almost exact unit of measurement that expresses the total volume of transactions made per day. Not including the daily transactions that are made only to inflate this value, sending them to their own addresses over and over again.
This idea was born in 2011. And it was proposed by a group of users of Bitcointalk.org, as a result of the need to have a more accurate measurement of the real volume of operations carried out daily.
Objective of its creation
The purpose of BDD creation is to identify how many bitcoins are actually being used on a daily basis. A low number of "days destroyed" means that more bitcoins are being saved / lost. While a high number means that many coins are in use. Contributing, the latter, a real volume to the network.
This measure can be determined by multiplying each transaction by the number of days since those coins were last spent, that is, since those coins are unused. As you can see, it is a fairly simple calculation formula.
So, for example, if we have 1 bitcoin that has not been spent in 100 days. We only need to multiply 1 bitcoin * 100 days, which will give us a result of 100 BDD. Because you can think of these Bitcoin Days or "Bitcoin days" accumulate over time until a transaction occurs, the actual measure is called Bitcoin Days Destroyed or "Bitcoin days destroyed." So 100 days of bitcoins will have been destroyed.
However, this does not imply that bitcoins are truly or literally destroyed. Rather, the term "destroyed" is used to refer to the fact that the bitcoin coins involved in the transaction no longer count. Because when used, its number of stored days returns to zero. That is, the days have been "destroyed".
What does Bitcoin Days Destroyed allow us to do?
Bitcoin Days Destroyed allows us to filter and remove from the statistics those bitcoins that simply “bounce” without actually going anywhere. Or those bitcoins that are used by a person to experiment and learn about the system. Sending them from one proper address to another multiple times. With which the price can be manipulated because an artificial volume is created in the network.
Then, BDD eliminates this possibility, being an indicator that shows with greater precision the real volume of the transactions carried out. So the BDD chart of total bitcoin days destroyed is believed to show a more genuine level of activity in the Bitcoin economy. Where it is reflected that it increases continuously.
Bitcoin Days Destroyed Is it reliable?
No indicator is perfect, and BDD is no exception. This measure was proposed as a more accurate value and closer to the true economic activity of the Bitcoin network. But it only uses the storage days of the bitcoins involved in a transaction. And it does not consider those transactions where coins are used with no storage day. Since they are considered that these would increase the volume of operations in a fictitious way.
Therefore, Bitcoin Days Destroyed is far from being a perfect metric. It may be the case that some companies participate in the Bitcoin network by sending a large number of daily transactions. Which would represent a real economic move, and still get a low BDD. Conversely, the case may occur where a holder moves their cryptocurrencies sporadically between their same addresses. And still manage to obtain a high BDD indicator, without this representing real economic activity as such for the network.