<blockquote>
<p>Are Bitcoin Days Destroyed a measure of hoarding?</p>
</blockquote>
<p>Sometimes. But just because bitcoins changed addresses doesn't mean they changed hands.</p>
<blockquote>
<p>Is it also possible to derive velocity of bitcoin (money) from bitcoin days destroyed?</p>
</blockquote>
<p>Not directly. Although <a href="http://en.wikipedia.org/wiki/Velocity_of_money" rel="nofollow noreferrer">velocity of money</a> and BDD are related, they are not entirely the same. velocity of money is based on a legal definition, whereas BDD is based on a technical definition. Also, BDD weighs the movement of old, rarely used coins as more important than frequently traded ones.</p>
<p>Two differences:</p>
<h3>First</h3>
<p>BDD is based on transactions in the bitcoin network, whereas velocity of money is based on money changing ownership. A transaction doesn't mean that money changed hands. Examples:</p>
<ul>
<li>Change. I send you 10 BTC, 5 BTC comes back to my address as change. The bitcoin network sees 15 BTC move, but only 10 BTC really changed ownership.</li>
<li>Laundering. The best example. Lots of bitcoins move around, but at the end, you still have the same amount.</li>
<li>I move my bitcoins from Mt Gox to blockchain.info. Again, there was a transaction, but no money changed hands.</li>
</ul>
<p>Because of this, a velocity of money estimate based on total transaction volume will be wildly inaccurate.</p>
<p>Also, even if no bitcoin transaction has happened, money can still change hands. Lots of e-wallets support the ability to instantly transfer money between accounts.</p>
<h3>Second</h3>
<p>Because total transaction volume is such a bad measure of how quickly bitcoins change ownership, BDD was created. It's different from velocity of money in that <a href="http://www.smbc-comics.com/?id=2855" rel="nofollow noreferrer">you can't game it by sending money back and forth</a> because it is much more significant to spend 100 BTC that last moved a week ago than it is to spend 1 BTC a thousand times.</p>

CC BY-SA 3.0
2013-02-06T10:56:07.073Z
Also not present in BDD are Account-To-Account transactions that are handled internally, such as BTC transfers from one Mt. Gox account to another.  Those never hit the blockchain, unless the "Open Transaction" feature is marked during withdrawal through Mt. Gox, for instance.
Stephen Gornick
CC BY-SA 3.0
2013-02-06T16:09:39.130Z
@StephenGornick True, but I feel that this is a very small percentage of total transactions
Nick ODell
CC BY-SA 3.0
2013-03-23T18:34:08.700Z
Velocity of money is [calculated w.r.t. to GDP](http://bitcoin.stackexchange.com/questions/6025/what-research-papers-cover-bitcoins-impact-on-central-banks-velocity-of-money/8634#8634), thus it can't be gamed (except by the government's official statistics office). There is no way to calculate the goods & services sold in an anonymous P2P currency, so don't conflate the speed or volume rate of transactions with velocity of money.
Shelby Moore III
CC BY-SA 3.0
2013-03-23T19:18:48.110Z
@ShelbyMooreIII [GDP can be gamed](http://www.smbc-comics.com/?id=2855), so I don't know what your point is.
Nick ODell
CC BY-SA 3.0
2013-03-23T19:49:23.143Z
@NickODell I said the official stats agency can game it, but no one else individually who is actually doing the transactions in the economy can alter the entire stat (they do collectively in cohoots with the reporting agency in China bcz told to from top-down). Your link does not refute my factual statement. The relevance of my fact is that there is no central authority in Bitcoin, thus there is no parallel to gaming the GDP centrally.
Shelby Moore III
CC BY-SA 3.0
2013-03-23T20:46:49.953Z
@ShelbyMooreIII "but no one else individually who is actually doing the transactions in the economy can alter the entire state" If I make 20 LLCs and make them buy things from one another, it still increases GDP despite that nothing has been made, so I'm not sure what your point is.
Nick ODell
CC BY-SA 3.0
2013-03-23T20:50:11.163Z
@NickODell you are conflating individual power with centralizing levels of capital, debt and other subsidies which distort the GDP. The fact is that as an individual, you have no power to distort the GDP. Your 20 LLCs have no measurable effect at all unless you have a centralizing level of capital. Whereas, in P2P anonymity currencies, the individual can easily distort the transaction volume because there is no cost or sending to self as many times as necessary. A minimal required transaction fee can alter this, which is one reason it is in my design. My point of distinction remains correct.
Shelby Moore III
CC BY-SA 3.0
2013-02-06T07:59:00.567Z
2013-02-06T16:24:28.397Z
2020-06-16T11:10:03.350Z
Nick ODell
<h2>Hoarding</h2>

<p>Bitcoin Days Destroyed can tell us the <a href="https://bitcoin.stackexchange.com/questions/6025/what-research-papers-cover-bitcoins-impact-on-central-banks-velocity-of-money/8634#8634">percent of total coins are trading over any period of time</a>, to the granularity (resolution) of a day. So for example, we can ask what percent of total coins have traded within the past day, or a specific day, week, month, year, or any period in the past.</p>

<p>So it can give us an indication of <strong>lower-bound</strong> percent of hoarding and duration of hoarding, but it will <strong>always understate</strong> the actual hoarding and duration, because due the anonymity there is no way to know if a Bitcoin transaction was a transfer to self.</p>

<h2>Velocity of Money</h2>

<p>Velocity of money is calculated w.r.t. to a measure of total goods and services transacted (e.g. GDP), and due to anonymity there is no way to know in a P2P currency <a href="https://bitcoin.stackexchange.com/questions/1163/how-can-determine-the-fundamental-theoretical-value-of-the-bitcoin-based-on-stea/8641#8641">which transactions were for goods and services</a>. Thus Days Destroyed is an <strong>upper-bound</strong> on the velocity of money, and will <strong>always overstate</strong> the actual economic activity.</p>

CC BY-SA 3.0
2013-03-23T18:55:02.677Z
2013-03-23T19:17:21.457Z
2017-04-13T12:47:32.940Z
Shelby Moore III
<p>Is Bitcoin Days Destroyed a measure of hoarding? Also, is it possible to derive  velocity of money (i.e. bitcoin) from Bitcoin Days Destroyed?</p>

<economic-theory><bitcoin-days-destroyed>
Is Bitcoin Days Destroyed a measure of hoarding?
vi.su.
# Is Bitcoin Days Destroyed a measure of hoarding?

(Asked by: username_0 on 2013-02-06)

Is Bitcoin Days Destroyed a measure of hoarding? Also, is it possible to derive velocity of money (i.e. bitcoin) from Bitcoin Days Destroyed?

**Tags:** economic-theory, bitcoin-days-destroyed


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## 2 answers

### Answer by username_1 on 2013-02-06. Score: 8

> Are Bitcoin Days Destroyed a measure of hoarding?

Sometimes. But just because bitcoins changed addresses doesn't mean they changed hands.

> Is it also possible to derive velocity of bitcoin (money) from bitcoin days destroyed?

Not directly. Although [velocity of money](http://en.wikipedia.org/wiki/Velocity_of_money) and BDD are related, they are not entirely the same. velocity of money is based on a legal definition, whereas BDD is based on a technical definition. Also, BDD weighs the movement of old, rarely used coins as more important than frequently traded ones.

Two differences:

### First

BDD is based on transactions in the bitcoin network, whereas velocity of money is based on money changing ownership. A transaction doesn't mean that money changed hands. Examples:

* Change. I send you 10 BTC, 5 BTC comes back to my address as change. The bitcoin network sees 15 BTC move, but only 10 BTC really changed ownership.
* Laundering. The best example. Lots of bitcoins move around, but at the end, you still have the same amount.
* I move my bitcoins from Mt Gox to blockchain.info. Again, there was a transaction, but no money changed hands.

Because of this, a velocity of money estimate based on total transaction volume will be wildly inaccurate.

Also, even if no bitcoin transaction has happened, money can still change hands. Lots of e-wallets support the ability to instantly transfer money between accounts.

### Second

Because total transaction volume is such a bad measure of how quickly bitcoins change ownership, BDD was created. It's different from velocity of money in that [you can't game it by sending money back and forth](http://www.smbc-comics.com/?id=2855) because it is much more significant to spend 100 BTC that last moved a week ago than it is to spend 1 BTC a thousand times.

> **Comments:**
> **username_2**: Also not present in BDD are Account-To-Account transactions that are handled internally, such as BTC transfers from one Mt. Gox account to another.  Those never hit the blockchain, unless the "Open Transaction" feature is marked during withdrawal through Mt. Gox, for instance.  
> **username_1**: @username_2 True, but I feel that this is a very small percentage of total transactions  
> **username_3**: Velocity of money is [calculated w.r.t. to GDP](http://bitcoin.stackexchange.com/questions/6025/what-research-papers-cover-bitcoins-impact-on-central-banks-velocity-of-money/8634#8634), thus it can't be gamed (except by the government's official statistics office). There is no way to calculate the goods & services sold in an anonymous P2P currency, so don't conflate the speed or volume rate of transactions with velocity of money.  
> **username_1**: @username_3 [GDP can be gamed](http://www.smbc-comics.com/?id=2855), so I don't know what your point is.  
> **username_3**: @username_1 I said the official stats agency can game it, but no one else individually who is actually doing the transactions in the economy can alter the entire stat (they do collectively in cohoots with the reporting agency in China bcz told to from top-down). Your link does not refute my factual statement. The relevance of my fact is that there is no central authority in Bitcoin, thus there is no parallel to gaming the GDP centrally.  
> **username_1**: @username_3 "but no one else individually who is actually doing the transactions in the economy can alter the entire state" If I make 20 LLCs and make them buy things from one another, it still increases GDP despite that nothing has been made, so I'm not sure what your point is.  
> **username_3**: @username_1 you are conflating individual power with centralizing levels of capital, debt and other subsidies which distort the GDP. The fact is that as an individual, you have no power to distort the GDP. Your 20 LLCs have no measurable effect at all unless you have a centralizing level of capital. Whereas, in P2P anonymity currencies, the individual can easily distort the transaction volume because there is no cost or sending to self as many times as necessary. A minimal required transaction fee can alter this, which is one reason it is in my design. My point of distinction remains correct.  

---

### Answer by username_3 on 2013-03-23. Score: 1

## Hoarding

Bitcoin Days Destroyed can tell us the [percent of total coins are trading over any period of time](https://bitcoin.stackexchange.com/questions/6025/what-research-papers-cover-bitcoins-impact-on-central-banks-velocity-of-money/8634#8634), to the granularity (resolution) of a day. So for example, we can ask what percent of total coins have traded within the past day, or a specific day, week, month, year, or any period in the past.

So it can give us an indication of **lower-bound** percent of hoarding and duration of hoarding, but it will **always understate** the actual hoarding and duration, because due the anonymity there is no way to know if a Bitcoin transaction was a transfer to self.

## Velocity of Money

Velocity of money is calculated w.r.t. to a measure of total goods and services transacted (e.g. GDP), and due to anonymity there is no way to know in a P2P currency [which transactions were for goods and services](https://bitcoin.stackexchange.com/questions/1163/how-can-determine-the-fundamental-theoretical-value-of-the-bitcoin-based-on-stea/8641#8641). Thus Days Destroyed is an **upper-bound** on the velocity of money, and will **always overstate** the actual economic activity.


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