ARK Invest and Glassnode have released a white paper describing a proposed framework for analyzing metrics on Bitcoin’s chain. The new approach is called Cointime Economics and introduces a new metric – coinblock – to represent the state of the Bitcoin (BTC) network.

Cointime Economics can be used to represent the economics of Bitcoin rather than the outstanding supply. ARK Invest authors David Puell and Glassnode’s James Check said the use of the new system could improve valuation metrics and provide a new analytical tool to measure bitcoin activity.them explain:

“The importance of an individual bitcoin should vary depending on when it was last moved. For example, after a transfer, a bitcoin that hasn’t moved for 10 years has more informational value than a bitcoin that hasn’t moved for 1 week.”

The reasoning behind this assumption can be found in the footnotes:

“Long-term coin holdings indicate the market group with the longest investment horizon and most profitable cost basis. As such, they demonstrate the market behavior of the largest capitalized and savviest market participants in Bitcoin’s history.”

Therefore, when long-dormant bitcoins are moved, it is likely the actions of hoarders and whales, and therefore more important than the actions of newly mined bitcoins. Lost bitcoins don’t count at all.

A block is the basic unit used for computation. It is determined by multiplying the number of bitcoins by the number of blocks (the basic unit of mining) produced while the bitcoins are not moving. “Since the Bitcoin network produces a block every 10 minutes on average, a coin produces roughly 144 coin blocks per day: 6 blocks per hour times 24 hours,” the authors wrote.

Coinblocks are “burned” based on how long the bitcoins have been held: “For example, if two bitcoins are not moved into seven blocks and then transacted, 14 Coinblocks are burned.” Longer holding time of bitcoins generate a large number of burned blocks, indicating higher holder activity. Blocks Burned is a variation of Days Burned, a metric that Glassnode already employs.

All bitcoin coin blocks.Source: Ark Investment Management

In contrast, the traditional unspent transaction output (UTXO) model, which is central to many settlement systems, gives all bitcoins equal weight. Because of this difference, the total amount of active and inactive Bitcoin is represented differently in the two models, giving different views of the market.

Related: Prepare for Bitcoin Price Volatility?Bitcoin ‘Coin Days Burned’ Metric Jumps to Two-Month High

Under UTXO, inactive bitcoins are bitcoins that have not yet been spent by miners. In Cointime Economics, they are what is known as the “arching supply”, which is the total number of blocks created divided by the total number of blocks that are not destroyed (i.e. “stored”).

The white paper provides three use cases to demonstrate the utility of Cointime Economics.A more advanced version of the paper is also provided for blockchain experts usable From Glassnode, and a suite of Cointime Economics indicators.

ARK Invest is an investment management firm founded by Cathie Wood. Glassnode is a market intelligence service based in Switzerland.

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