Bitcoin 2024 Annual Review

From lopp blog by Jameson Lopp

I’ve always been fascinated with the raw numbers relating to the operational status and growth of Bitcoin, especially as we ride the rollercoaster of the adoption life cycle. This interest spurred me to create  Statoshi.info  in 2014 to track bitcoin metrics from the perspective of a full node.

To that same end, I’ve compiled statistical measurements of Bitcoin’s growth in 2024 from a variety of sources. It can be difficult to see all of the moving pieces since the data is so distributed, but the picture becomes clearer when you bring them all together.

The one theme that I've taken away from all of these metrics is that 2024 is that the bull market is underway, but a lot of folks have yet to catch on - we're far from peak hype and FOMO.

Bitcoin is at the forefront of an increasingly complex ecosystem that continues to grow in a variety of ways. And for the 16th straight year, it stubbornly refused to die! Not only that, but it appears that the critics have given up on publicly pronouncing its death.

I've noticed new coping narratives spread amongst the haters that "even Madoff's scheme lasted 16 years" and "the market can remain irrational longer than you can remain solvent." I suspect a lot of these folks will continue hating Bitcoin until it outlasts even them.

General Interest

The new entrant this year for relative search interest is... Switzerland! Not only does Switzerland have the Plan B initiative in Lugano, several large Swiss banks support Bitcoin and there's a decent amount of advertising for it all over the country.

General interest in educational resources remained low. This makes sense, as we tend not to see many new entrants until the FOMO phase of peak bull market hits.

X was chatter up a fair amount, mostly around the major events like price action, the halving, and the US election.

The bitcoin subreddit saw more significant growth.

I myself abandoned BitcoinTalk many years ago because I felt it was hard to find signal through the noise. It looks like user growth on that site decelerated even more in 2024.

Academic Interest

Academic interest seems to be reaching a saturation point - 30,000 references per year is quite a lot!

The hardcore cryptographers have lost more interest.

Funding and Forking

VC investment fell off a cliff in 2022 as the bear market and credit crises hit full stride. As I predicted in last year's report, venture capital is starting to return along with the bull market.

Interestingly, this bull market seems to be a bit different in terms of market cap dominance. I suspect a few things are going on:

On the other hand, the "fast, cheap payments" narrative has not played out well for Bitcoin forks like Cash and Satoshi Vision. This is a highly competitive arena in which dozens if not hundreds of altcoins can claim to be "the best." And of course, Bitcoin itself continues to compete in this space via Lightning Network, which we'll cover later.

Going down even further down the forking rabbit hole, BSV has been battered all year long as Craig Wright lost court case after court case, finally suffering a humiliating defeat against COPA that forced him to publicly proclaim he is not Satoshi Nakamoto.

On-Chain Transactions

While development of Lightning Network made more progress in 2024, due to its stronger privacy features we’ll always have more accurate statistics of on-chain activity.

A more controversial aspect of the changing nature of bitcoin is the transaction fees. Rising fees caused significant frustration for users trying to transact in smaller amounts of value during late 2017 and early 2018, but fees were nearly 0 for the following 2 years due to a variety of factors. Lower transaction demand, improved fee estimation algorithms, adoption of segregated witness, transaction batching, and lightning network resulted in more efficient use of block space and less contention for this scarce resource.

2024 was interesting regarding mining fees because we set new overall highs in terms of USD, but not in terms of BTC. There were several spikes in demand for block space throughout the year that led to this outcome, because demand was otherwise close to 0.

In short, we're still a ways away from having a sustainable thermodynamic security budget.

Despite the bear market for block space, Bitcoin miners are doing well due to the rise in the exchange rate.

UTXO set growth usually rises, though it seems to have plateaued in the latter half of the year. It's possible that cheap block space has encouraged more UTXO consolidations. The rise in Runes may have also contributed here, because they use OP_RETURN outputs that don't create UTXOs.

Bitcoin Data Anchoring

While you may think of bitcoin as being a cryptocurrency, some users think of it as a  trust anchor . By embedding data into Bitcoin’s blockchain, other systems can gain new properties such as tamper evidence and immutability.

The amount of outputs that embedded data into the blockchain increased at an unprecedented rate in 2019, mostly due to Veriblock's "proof of proof" mining coming online that eventually died out due to being economically unsustainable. Use of OP_RETURN was on the decline for 4 years until the launch of Runes.

But OP_RETURN isn’t the only way to anchor other systems onto Bitcoin’s blockchain. Sidechains use pegging mechanisms to cryptographically lock BTC on the main chain and then allow users to unlock a proportional amount of tokens on a sidechain. This allows for experimentation with other features that are unlikely to be added to the Bitcoin protocol. For many years the only two production sidechains were RSK and Liquid. As of today there are over a dozen networks that may claim to be sidechains, though I'm skeptical of their security properties. The landscape of Bitcoin Layer 2 projects has become much more diverse over the past year and it's hard to keep up!

I'm told that the realtime stats site isn't particularly accurate and Rootstock is merge mined by more like 55% of the total hashrate.

Blockstream's Liquid sidechain also saw negligible growth in 2024.

Lightning Network

The observable network remained fairly flat in 2024. It seems like we saw some liquidity consolidation as plenty of channels were closed, but major operators seem to be reporting that they are able to achieve better results with less liquidity now.

This seems to support the idea that many of the channels that were closed were those with smaller liquidity capacity. I'm told that there are several major players that operate high capacity private channels with each other but we have no way of verifying this rumor.

DeFi

While many like to point out that there is "more bitcoin on Ethereum than Lightning Network" these figures are hardly comparable because the security models are completely different. There has been some drama in WBTC land as Justin Sun came in and took over ownership of the project, which seems to have led to Coinbase delisting it from their platform.

Up until this year my understanding is that the underlying BTC for WBTC were custodied by BitGo, but along with Justin Sun's acquisition of the project they appear to have transitioned to a multi-jurisdictional custody arrangement. Nonetheless, I still think of the WBTC supply as more akin to a "balances on exchanges" metric.

Network Security and Health

The number of Bitcoin nodes started inching back up this year. While relatively few BTC investors run nodes, this is a good indication of more hardcore enthusiasts and more enterprises adopting Bitcoin.

The number of unreachable nodes (behind routers without port forwarding) shot up in Q4. However, this rise doesn't look particularly organic...

A variety of improvements in block propagation have been implemented by Bitcoin Core over the years; network propagation performance has been fairly consistent since 2019.

Next we have a relatively new metric. This is relevant due to issues I've seen while syncing, caused by nodes that have extremely low bandwidth.

As we can see, the average reachable Bitcoin node has pretty limited upstream bandwidth. Why is this the case? Because most nodes are run at home, on residential ISPs that tend to significantly throttle upstream speeds.

Moving on to thermodynamic security: the network hashrate has continued its upward trajectory to all-time highs.

Despite the massive increases in hashrate, blocks keep coming in at a regular pace!

The proof-of-work equivalent days is an interesting metric though it should not be construed as a reasonable attack that we should be worried about. Theoretically an attacker could have 1,000% of the total network hashrate or more and perform various block reorganization and double spending attacks. Practically, of course, there are physical limitations to acquiring that level of hardware and electricity.

The growth in global hashrate has been not merely increasing, but has been accelerating since genesis.

Pictured yearly:

In terms of general ecosystem security, 2024 was a pretty good year. Major hacks cause loss in confidence in the system and can serve as major setbacks even though they have nothing to do with the protocol or network security.

This metric of loss due to hacks is really showing a dividing line between "bitcoin" and "crypto" - as there were hundreds of hacks worth nearly $2B during 2024. Though the total amount stolen did drop by 24% - likely due to North Korea dramatically decreasing their attacks after June when they got more involved in the Russia-Ukraine war.

It looks like around $400M of those thefts were of BTC and $300M was from a single hack of a centralized exchange (DMM.) If not for the DMM hack we would have maintained last year's metric that only ~5% of the hacks in this space result in BTC loss, which is quite amazing given that BTC comprises over 50% of the market value of the entire ecosystem. What's the explanation for this? I think it's pretty straightforward: high value hacks tend to exploit weaknesses in complex smart contracts, bridges, and apps that haven't been thoroughly vetted. Bitcoin's relative simplicity makes it more secure, so attackers move on to softer targets.

Physical attacks tend to be correlated with the exchange rate; as expected, rising values have resulted in more wrench attacks.

Unfortunately I expect this metric to continue to rise. In fact, we already saw the first physical attack occur on New Year's day!

Cost of Node Operation

Anyone who has been following the Bitcoin space for long is likely aware of the scaling debate that resulted in a variety of both software forks and blockchain forks.

In terms of total storage required, the annual blockchain growth rate decreased to 17%, back to the regular trend after doing a reversal in 2023 due to inscriptions. And of course you can always run a pruned node (though it will still have to download all of the data during the initial sync) that only needs 10 GB or so.

Although I haven't done my annual node syncing tests yet, I do expect they will show that node syncing is not slowing down significantly, because a decent amount of block space is being consumed by meta protocols like Runes that take up block space without consuming much CPU resources for validation.

We also got a new feature in Bitcoin Core this year that allows you to significantly speed up a node's initial sync time. You can find my deep dive into UTXO snapshots here:

Bitcoin Economics

As usual, many of Bitcoin's economic metrics were correlated to the exchange rate. Volatility was up, but surprisingly not by much.

It appears that the decreasing popularity of incriptions has resulted in less downward pressure on the median transaction value.

We did hit an all-time high in terms of value transferred on chain!

From a relative historical standpoint, the overall delta in exchange rate was typical for an early bull market year.

To calculate the above, use the formula:

Jan 1 exchange rate * (x³⁶⁵)=Dec 31 exchange rate

For context, and a fun little hypothetical scenario, if BTC achieves a daily value change of +0.3% in 2025 then the exchange rate at the end of the year would be $280,000. A daily change of +0.5% would mean an ending price of $580,000.

Microstrategy keeps buying bitcoin and now there are several other public companies implementing BTC treasury strategies.

Whole coin balances dipped a bit, possibly due to UTXO consolidation as seen earlier.

Bitcoin Trading

Last year ATM deployment declined for the first time in the history of Bitcoin. We haven't fully recovered from that loss but it looks like 2025 will bring new all-time highs.

Exchange balances didn't change much in 2024; everybody was HODLing. I suspect that in hindsight we'll discover this drop didn't actually happen.

I do have some commentary on "entity" based on-chain metrics such as balances held on exchanges. These heuristics are imperfect in their sense that they tend to become more accurate with more hindsight. That is, if an exchange sends a bunch of funds to a never-before-seen cold storage address, it can't be attributed to them until at some point in the future when they spend the funds. As such, when I went back and checked my previous year's reporting on this metric, the numbers have changed! Last year I reported a closing balance of 2.3M BTC on exchanges:

I checked the balance Glassnode reported on Jan 1 2024 vs what they report today as the Jan 1 2024 balance. It was adjusted upwards by 30%! Thus the 8% decrease reported for 2024 seems within the margin of error; it may be close to 0.

Open interest in various Bitcoin contracts was up significantly.

Inscriptions Ordinals

Inscriptions certainly had an impact on the Bitcoin ecosystem this year, though not as much as in 2023. They caused spikes in block space usage, created high demand and thus transaction fees, accelerated growth of the UTXO set, and of course kicked off another round of debates over what should constitute "spam."

The Runes launch at the halving resulted in historically high fees, though it's certainly an open question as to if this meta protocol will have longevity.

What do I think will happen regarding ordinals in the coming years?

Technical Development

At a protocol level, there was a decent amount of research done in 2024. If you want a deep dive into low level developments I recommend reading  Bitcoin Optech's year-in-review . I have been delighted to see renewed interest and discussion toward activating various soft fork proposals that will further improve the security and scalability of the protocol.

It's worth noting that the Bitcoin mailing list migrated from Linux Foundation to Google Groups at the start of 2024 and they didn't migrate over the subscribers, so the subscriber count likely dropped dramatically.

Delving Bitcoin is a fairly new forum for technical discussion - it gained adoption throughout the year.

The Bitcoin Core project continues to improve.

Source: calculated from the default development git branch:

git shortlog --after 2024-01-01 --summary --numbered --no-merges

The total amount of code changed in Bitcoin Core was fairly in line with the past decade of activity:

Predictions

I expect that 2025 will achieve an all-time high... in physical "wrench" attacks against bitcoin owners and their families. We'll probably hear about a new one nearly weekly.

Just for fun, but I'd rate this as "fairly likely"

Of course, this is all but guaranteed:

Conclusion

Most people are only familiar with the exchange rate of Bitcoin, if that. But exchange rate is just one of many metrics we can use to observe the evolution of this ecosystem. While any given metric can be gamed or may be taken from sources that aren’t 100% reliable, by using a diversity of metrics and sources we can get a rough idea of the trends in this space.

2024 was very much a year of "we are so back." We won a number of important battles in the legal and political arenas and it looks like 2025 will be much smoother sailing for the industry.

The Powers that Be fought us for years and lost.