ANALYSIS OF CERTAIN ASPECTS OF CRYPTOCURRENCY USAGE

EXECUTIVE SUMMARY:

CPA.com is considering the launch of a software service designed to calculate basis,

and annual capital gains and losses for “average” cryptocurrency users. They desire to

determine certain parameter limits in order to achieve an approximate 90% coverage of

users. The three major questions to consider when determining this goal are:

1. How many cryptocurrencies should be included and what are they?

• Bitcoin.
• Ethereum
• Litecoin
2. How many wallets should this software support and what are they?
• Coinbase
• Blockchain.info
• CashApp
3. How many transactions should this software support?
• Range limits of 10 to 2,000 transactions.

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Question #1: How many cryptocurrencies should be included and what are they?
Due to the nature of cryptocurrency, people often analyze and predict what the
“best” and “worst” types of cryptocurrency are. Here, we are simply looking to determine
which digital currencies are most commonly used and most popular within the crypto
market. Hence, we don’t emphasize marketcaps, yet we still consider this as a factor in
determining cryptocurrency popularity.
In an article written by Parableen Bajpai for Investopedia in June of 2019, he
states that Bitcoin continues to lead cryptocurrencies in terms of market capitalization,
user base, and popularity. However, in their list of “The 10 Most Important
Cryptocurrencies other than Bitcoin,” they rank Litecoin, Ethereum, Zcash and Ripple as
top contenders as far as users and popularity base goes. These have a marketcap
ranging from Zcash’s $291.25 million to Ripple’s $12.69 billion.
Similar to the Investopedia article, a writer for BitDegree, the world’s first blockchain-
powered online education platform, created a list of what they believe to be the most
popular cryptocurrencies being used today. Unsurprisingly, Bitcoin ranked in as #1.
Following Bitcoin is Ethereum and Ripple, and then Bitcoin Cash and EOS.
While these examples are based on community popularity and wide-based
opinion, we also consider some empirical research. In a December 2018 study done for
Coinmonks (within a Medium Corporation), a publication embracing decentralized
technologies, Aat de Kwaasteniet concluded that earlier research was not producing a
useful list of cryptocurrency rankings. He says that research ranking cryptocurrencies in
importance with marketcap as the criterion only produced a list that said something
about the marketing effort and how much the circulating supply is manipulated of the
relevant coin. Since crypto is decentralized, there is no specific number of users listed
on any single coin website. Therefore, Kwaasteniet created a control with the use of the
block explorer Gulden Dactual. Kwaasteniet found that among 35,040 consumers, +/-
100,000 Dutch households owned Gulden (just in Dutch territory alone). Taking all data
into account, Kwaasteniet said that the current number of Gulden users is about
100,000 and that corresponds to the number of Gulden addresses 100,000:131,000. He
could say that the number of users is therefore +/-75% of the number of Gulden
addresses with content. With this research, if the number of addresses is multiplied by

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.75 in order to filter out the multiple-address accounts and exchange addresses, we can
arrive at the number of users, roughly.

. The table above illustrates the study’s top 20 rankings. Unfortunately, not all
coins could be assessed because not all explorers were able to find the number of
users. This study remains in alignment with most other opinions of Bitcoin being the
most used, and Ethereum and Litecoin being among the top 10. One important thing to
note about this study, though, is that it accounts for all users of each coin, not just users
based in the U.S.
Next, we look at a CoinMarketcap-based study for the most popular
cryptocurrencies in America. A writer for the AgileCraft blog of the company Jira Align
wanted to assess the crypto landscape across the country and find out the most popular
cryptocurrencies in top cities and each state. To do this, they analyzed the top 50
cryptocurrencies with the highest marketcaps featured on Coinmarketcap. Here are the
results:
Top 5 Most Popular Cryptocurrencies by City
1. Ethereum Classic in 8 cities (Boston, Charlotte, Las Vegas, Miami, Minneapolis,
Philadelphia, San Antonio, Tampa)
2. Litecoin in 6 cities (Chicago, New York, Raleigh, Richmond, San Francisco, St.
Louis)

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 3. TRON in 6 cities (Cleveland, Grand Rapids, Houston, Los Angeles, Orlando,
Sacramento)
4. Dash in 4 cities (Austin, Birmingham, Dallas, Salt Lake City)
5. Siacoin in 3 cities (Cincinnati, Columbus, Kansas City)
Top 5 Most Popular Cryptocurrencies by State
1. Ethereum Classic in 4 states (Kansas, Maine, New Hampshire, Tennessee)
2. Lisk in 4 states (Connecticut, Missouri, North Carolina, Nebraska)
3. Monero in 3 states (Illinois, California, Wyoming)
4. Dogecoin in 3 states (Mississippi, Pennsylvania, Wisconsin)
5. Stellar in 3 states (Alabama, South Dakota, Washington)
Based on this study, Ethereum Classic ranks in as number 1 overall in terms of
popularity in cities and states from a CoinMarketcap standpoint.
Now we’ll examine a different perspective from JP Thor, a writer for A Medium
Corporation, who derived a new metric for analyzing cryptocurrency market dominance.
Rather than examining market cap, which Thor says can be easily manipulated by
things such as low volume, pre-mines and circulating supply malfeasance, he takes on
a different approach. He sought out to test whether or not if market share was some
form of Pareto-distribution (skewed distribution with heavy, or “slowly decaying” tails),
considering that cryptocurrency trading is practically a free market (unrestricted
competition). After conducting his research, he found that volume (liquidity) had to be
weighted as a metric in
determining market
dominance. He found that
Bitcoin actually captures over
85% of the market, thus it is a
Pareto distribution. Ethereum
(which is included in ‘others’)
also takes up a large
percentage of the market.

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 Thor’s volume-weighted theory above vs.
the market cap theory below
Additionally, we examined some basic
network data charts through
CoinMetrics. Another metric that could
be used to find most commonly used
forms of cryptocurrency is the number
of active addresses. For this, I
examined a chart generated via
CoinMetrics detailing the top 5 most
“popular” cryptocurrencies and compared their year-to-date active address count.
Bitcoin ranks in as number one with most active addresses, with Ethereum being
number two. While it may look like Ethereum Classic has an overall higher amount of
active addresses, Litecoin seems to have a much more constant usage and therefore is
a more reliable representation of the active addresses. I summary, the most popular
cryptocurrencies appear to be 1) Bitcoin. Among the information I found Bitcoin
constantly comes out as the most common form of cryptocurrency. This is unsurprising
due to it being the first cryptocurrency on the market; 2) Ethereum. In every piece of
research and information that I found, Ethereum came out as one of the top 5 most
used and traded virtual currencies and continues to grow; and 3) Litecoin. While
Litecoin is like Bitcoin, it has faster transaction times, almost zero transaction fees and
quicker mining. For these reasons it has gained significant popularity and is often seen
as one of the most widely used cryptocurrencies on the market.

How many cryptocurrencies should be included and what are they?

a. Bitcoin.
b. Ethereum
c. Litecoin

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Question #2: How many wallets should this software support and what are they?
This question is difficult in that most research is not conducted regarding how
many people actually use a specific wallet, but rather regarding how well each wallet
works, and which ones claim to be the new and upcoming “best” wallets for the crypto
community.
According to a 2017 Forbes article written by Laura Shin, she notes that
Blockchain.info wallet is one of the “oldest and most popular user-controlled Bitcoin
wallets.” At the time of this article, the only cryptocurrency that the Blockchain wallet
supported was Bitcoin and they had just added Ethereum. Blockchain said they were
slower to add Ether due to its customer base being 80% outside of the U.S. Most of
their customers at the time had not even heard of Ether. However, adding Ethereum 2
years ago has made the wallet grow immensely in the U.S. in terms of usage.
Additionally, as of July 2019, Blockchain wallet now supports Bitcoin Cash, Stellar, and
USD PAX as well. Today, Blockchain has over 41 million wallets in use, $200B
transacted, and some of the lowest fees in the industry. They claim to be “the most
trusted cryptocurrency wallet.” Another wallet mentioned in Shin’s article in 2017 is
Coinbase. She notes that this is one of the top crypto wallets of the time for the U.S.,
with most of the customer base residing in North America and Europe.
Coinbase is arguably one of the most commonly used crypto wallets in the U.S.
Not only does Coinbase act as an exchange (one of the most popular crypto
exchanges, in fact), but users can now use Coinbase wallets to store their
cryptocurrency themselves rather than having it be done by Coinbase. It supports
Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic and Litecoin. It is among the easiest
and convenient ways to send and receive crypto to other wallet users (however, this can
also be a downfall in the crypto world due to specific user distinction). Coinbase holds
30M+ users and has traded $150B+ (Coinbase.com, 2019).
Another extremely popular and commonly used wallet in the U.S. is Square’s
Cash App. In article written for the Motley Fool in March of 2019, the writer notes that
Cash App reached 15 million monthly active accounts in 2018, which is more than
double the 7 million accounts Cash App ended 2017 with. At the start of 2018, Square
opened Bitcoin trading to nearly all Cash App users. They generated $166.5 million in

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Bitcoin revenue in 2018 and profited $1.7 million. Additionally, former CFO Sarah Friar
said that she thinks Cash App could replace a bank account for many users. Cash App
continues to grow throughout 2019 and gain more user activity through Bitcoin tradin
Coinbase. It is obvious that Coinbase is one of the most commonly used
cryptocurrency exchanges in the U.S. Because of this, the use of their wallet has
grown immensely. Users are more confident that they have more control over their
crypto through the Coinbase wallet.
Blockchain.info. With the number of Blockchain wallets in use today and the
common use of software wallets, Blockchain.info is an important wallet to include. Its
ease of use promise of security and types of supported crypto assets make it a
popular wallet for crypto users.
Cash App. Cash App has seen continual growth throughout the past few years and
has doubled its number of users in the past year. Its convenience and user-based
app make it a popular Bitcoin wallet and exchange.

Conclusion: How many wallets should the software support and what are they?
1. Coinbase.
2. Blockchain.info.
3. Cash App.

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Question #3 How many transactions should the software support?
We know that there is a large percentage of users of cryptocurrency, especially
Bitcoin, who buy out of simple curiosity and don’t regularly buy and sell. We want to rule
these users out of our market. We also want to rule out users out that buy and sell at
extremely high volumes. Overall, we are looking for the “normal” number of transactions
of a crypto user on an annual basis. To do this, we must determine the optinmal bottom
and top limits to produce in the largest appropriate TAM.
The difficult part in researching this is that there is little to no data on number of
transactions per user. This is understandable since to create this data we would have to
track each individual private key. Even this is difficult because one single user can
choose to have a private key for each transaction. On Blockchain, for Bitcoin, Ethereum
and Bitcoin Cash you can view the latest blocks added to the chain and the amount of
transactions in that block. However, this doesn’t give us the information we’re looking
for. If we look at Coinmetrics, there is some data that may give insight as to what we are
trying to find.
The chart below details two metrics against each other for Bitcoin, Litecoin and
Ethereum for this year to date. The solid line indicates the number of transactions per
day. The dotted line indicates the number of active addresses per day for Bitcoin and
the altcoins. The months are indicated on the X axis. The left Y axis indicates the
number marks for the number of transactions and the right Y axis indicates the number
marks for the number of active addresses.
Bitcoin

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Ethereum

Litecoin

Conclusion: How many transactions should the software support?

Range limits of 10 to 2,000 transactions are recommended.

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 Works Cited

Agile Craft. (2019). The most popular cryptocurrencies in America. Retrieved from

https://blog.agilecraft.com/blog/most-popular-cryptocurrencies-america/

A Medium Corporation. (2019). Bitcoin’s true market dominance. Retrieved from

https://medium.com/taipei-ethereum-meetup/pros-cons-of-the-top-10-

cryptocurrencies-in-market-cap-you-need-to-know-i-a0ccc68388fe

BitDegree. (2019). Top 10 cryptocurrencies 2019: What’s the most popular

cryptocurrency today? Retrieved from https://www.bitdegree.org/tutorials/top-10-

cryptocurrencies/

Buy Bitcoin Worldwide. (2019). Best bitcoin & cryptocurrency wallets. Retrieved from

https://www.buybitcoinworldwide.com/wallets/

Coinmetrics Network Data Charts. (2019). Addresses, active, count. Retrieved from

https://coinmetrics.io/charts/#assets=btc,ltc,eth,etc,bch_left=AdrActCnt_zoom=15

46300800000,1564444800000

Coinmetrics Network Data Charts. (2019). Transactions, count. Retrieved from

https://coinmetrics.io/charts/#assets=btc_left=TxCnt_right=AdrActCnt_zoom=154

6300800000,1565136000000

Coinmonks, A Medium Corporation. (2018). Crypto ranked by numbers of users.

Retrieved from https://medium.com/coinmonks/crypto-ranked-by-numbers-of-

users-c736d1543d8c

Forbes. (2017). You can now hold Ether in Blockchain, one of the world’s most popular

cryptocurrency wallets. Retrieved from

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 http://search.ebscohost.com.exproxy.usd.edu/login.aspx?direct=true&db=buh&A

N=124666664&site=bsi-live&scope=site

Investopedia. (2019). The 10 most important cryptocurrencies other than Bitcoin.

Retrieved from https://www.investopedia.com/tech/most-important-

cryptocurrencies-other-than-bitcoin/

The Motley Fool. (2019). Square’s Cash App doubled its user base in 2018. Retrieved

from https://www.fool.com/investing/2019/03/03/squares-cash-app-doubled-its-

user-base-in-2018.aspx

University of Cambridge. (2017). Global cryptocurrency benchmarking study. Retrieved

from

https://www.jbs.cam.ac.uk/fileadmin/user_upload/research/centres/alternative-

finance/downloads/2017-global-cryptocurrency-benchmarking-study.pdf

Cassie Schoenhard
University of South Dakota
Cassie.Schoenhard@coyotes.usd.edu
605-595-4312
Beacom School of Business | Marketing
Marketing Intern | University of South Dakota
Events Director | Kappa Alpha Theta
Public Relations Director | Panhellenic Council

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