In the Bitcoin Dominance, Bitcoin Ecosystem is a blockchain on which the miners who earn the coins stay at the top of the chain. In this blockchain, traders stay in the second step and strive to make a profit from the Bitcoin-fiat cycle. However, In the final link or the last step of this ecosystem, consumers stay who spend coins to buy goods and make a profit by exchanging bitcoin for cash. An authentic bitcoin ecosystem is where different agents and parties interact and make transactions and trade with bitcoin.
Factors of the Bitcoin Ecosystem:
Bitcoin Ecosystem build-up is based on three factors- distribution, ownership, and concentration. Here is the description of the three basic components.
Transaction volume and network structure:
Most of the transaction in the bitcoin blockchain is not relevant to economic activities. 90% of the transactions were of these kinds, according to a study. These transactions were the priorities of many participants of anonymity, and they were not just blueprints of the bitcoin design. About 75% of bitcoin volumes consisted of OTC desks, online wallets, and major traders.
As there is a rise in the volume of exchange numbers, the current market structure results in cross-exchange flows. The strong interconnectedness of exchanges has a significant outcome for transaction transparency and traceability. When you are implanting this, knowing all the customs regulations are always important and needed.
Composition of Bitcoin Miners:
The regional compositions of miners enable the Bitcoin transaction process and its verification. The increasing demand and the rising price of digital cryptocurrencies decrease the concentration of mining capability. According to the report, the capacity of Bitcoin mining has been very concentrated in the last five years. Based on the analysis, we have seen that the top 10% of miners roughly control 90% of the mining.
As Bitcoin has become a widely used digital cryptocurrency, people have become highly interested in the owners of crypto and how much of the respected cryptos they have kept in their holding. There is a trusted website that reported the list of most notable crypto communities. As per the report, the exchange wallets and cold wallets are mostly in use. The report also stated that 8.5 million bitcoins have been in the holding of individual investors and around 1000 top investors have around 3 million of the crypto in their savings.
Members of Bitcoin Ecosystem:
Before understanding the bitcoin ecosystem, you have to know about the price patterns’ variables.
Miners are the primary converters of energy into bitcoin. They are the analog of photosynthetic life and the most important link in this ecosystem. Without miners, transactions into blocks are not possible.
Miners are also the primary consumers of goods paid for with Bitcoin. The miners spend Bitcoin on government-issued money, which leads us to the traders, the second big entity group in the ecosystem.
when you try to gain profit from the price, Traders help in the regulation process between Bitcoin and fiat money. There are also Merchants and hoarders in the traders’ link. A big Merchant needs traders to get lots of fiat to survive by selling lots of bitcoins. Thus the increasing supply of tradable bitcoins lowers the market price of bitcoins.
Another relevant sub-entity of the ecosystem is the hoarders. Hoarders keep bitcoin when it is going to be worth a million; they sell bitcoins at a high price rate and gain huge profit with their small square of coins. When hoarders spend their bitcoins, it is not predictable.
Consumers spend bitcoins to buy goods, and trading and mining bitcoins is another business. Cryptocurrency adoption is increasing because consumers use cryptocurrencies like bitcoin for quick payments, anonymity, investments, or to circumvent banks’ transaction fees. The transaction through cryptocurrencies is secure, easy, and faster than mobile phones and other virtual banking tools.
According to the above analysis, we have seen the main components of the bitcoin ecosystem. Before understanding the bitcoin ecosystem, weshould learn about the links involved in the Bitcoin ecosystem cycle. The entire Bitcoin ecosystem cycle is dependent on the variables that enable the increasing demands of bitcoins and the market price rate of bitcoins.