{"id":22301,"date":"2023-09-13T07:30:48","date_gmt":"2023-09-13T07:30:48","guid":{"rendered":"https:\/\/nftandcrypto-news.com\/crypto\/blockchain-active-users-can-be-misleading-metric-crypto-data-scientist\/"},"modified":"2023-09-13T07:30:51","modified_gmt":"2023-09-13T07:30:51","slug":"blockchain-active-users-can-be-misleading-metric-crypto-data-scientist","status":"publish","type":"post","link":"https:\/\/nftandcrypto-news.com\/crypto\/blockchain-active-users-can-be-misleading-metric-crypto-data-scientist\/","title":{"rendered":"Blockchain active users can be misleading metric: Crypto data scientist"},"content":{"rendered":"
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Active user count can be a misleading metric for measuring the state of a crypto ecosystem as a small group of users can generate a significant portion of activity across multiple wallets, argues the co-founder of a blockchain analytics provider.<\/p>\n

0xScope\u2019s co-founder and chief data scientist, Philip Torres, told Cointelegraph amid the Bitget EmpowerX Summit that between monopolistic founding entities, bots, exploiters and airdrop hunters \u2014 as much as 80% of blockchain activity can be generated by just a small number of entities \u2014 despite looking healthy on the outside. <\/p>\n

\u201cThese projects make a claim such as \u2018we have 10,000 active users\u2019 \u2014 well, we find out using the entity model that you have about 10 to 20 different users that are controlling 10,000 different addresses,\u201d he added. <\/p>\n

Top 25 projects based on active users (daily). Source: Token Terminal<\/figcaption><\/figure>\n

\u201cThe way they operate on-chain is that one single person can have 10,000 addresses or more, and then it would seem to the outside observer as if those were 10,000 different people,\u201d Torres explained.<\/p>\n

The phenomenon isn\u2019t only present in small-scale ecosystems, Torres claimed \u2014 essentially all blockchain ecosystems see varying levels of the activity.<\/p>\n

He found the average Ethereum user possesses at least 10 addresses, adding that \u201ceverything that happens on-chain is not what it seems.\u201d<\/p>\n

Ethereum Cumulative Unique Addresses. Source: YCharts<\/figcaption><\/figure>\n

Torres noted there are legitimate reasons why a user would have multiple wallet addresses.<\/p>\n

\u201cOne of them can be explained easily as \u2018privacy concerns.\u2019 People like to have different addresses just to not leave a big enough footprint out there,\u201d he explained. <\/p>\n

It could also be due to automated traders deploying multiple strategies on-chain. <\/p>\n

\u201cSo when we see automatic trading on-chain, usually each address is very focused on a different protocol or different swap, or trading different coins or trading different coins using different strategies.\u201d<\/p><\/blockquote>\n

However, it has also been used for malicious purposes such as inflating a project\u2019s active user numbers to mislead potential investors, creating a Sybil attack also known as a 51% attack or users trying to game an upcoming token airdrop. <\/p>\n

One example came from the anticipated Arbitrum (ARB) airdrop on March 23 which saw two wallets amass 2.7 million ARB from 1,496 wallets in a strategy known as \u201cairdrop farming.\u201d In contrast, the median airdrop size was only expected to be 1,250 ARB tokens, according to CoinMarketCap. <\/p>\n

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We found 2 super airdrop hunters of $ARB<\/a>.<\/p>\n

0xe1e2 received 1.4M $ARB<\/a>($1.92M) via 866 addresses and added all 1.4M $ARB<\/a> to #Uniswap<\/a> to provide liquidity.https:\/\/t.co\/sncsZTHrP2<\/p>\n

0xbd4e received 933,375 $ARB<\/a>($1.28M) via 630 addresses.https:\/\/t.co\/p5vbqXMYxD pic.twitter.com\/yK3LzbeC8t<\/a><\/p>\n

\u2014 Lookonchain (@lookonchain) March 24, 2023<\/a><\/p><\/blockquote>\n

\u201cOn blockchain, it’s very easy to control multiple public addresses,\u201d Torres noted.\u00a0<\/p>\n

Related: <\/em><\/strong>Shibarium hits 1M wallets amid meteoric growth, SHIB yet to catch up<\/em><\/strong><\/p>\n

Torres explained unlike email addresses, creating and controlling multiple crypto wallets isn\u2019t too complicated if you know what you\u2019re doing. <\/p>\n

Some use what is known as HD wallets \u2014 hierarchical deterministic wallets \u2014 which generate a new key pair from a master key pair. Simply put, it’s a way to generate multiple public addresses via a master set of mnemonic words. <\/p>\n

\u201cIt’s very easy for one person to control multiple wallet addresses compared to [how], usually, people do not have more than a few emails,\u201d he added. <\/p>\n

Magazine: <\/em><\/strong>Big Questions: What\u2019s with all the crypto deaths?\u00a0<\/em><\/strong><\/p>\n<\/div>\n