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 0xScope co-founder Philip Torres says it doesn’t take much effort to spin up thousands of blockchain wallet addresses and pump up user metrics. 
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 Active user count can be a <a rel="noopener noreferrer nofollow" title="mislead" href="https://thebittimes.com/tag/mislead.html">mislead</a>ing <a rel="noopener noreferrer nofollow" title="metric" href="https://thebittimes.com/tag/metric.html">metric</a> for measuring the state of a crypto ecosystem as a small group of <a rel="noopener noreferrer nofollow" title="users" href="https://thebittimes.com/tag/users.html">users</a> can generate a significant portion of activity across multiple wallets, argues the co-founder of a blockchain analytics provider. 
 0xScope’s co-founder and chief data <a rel="noopener noreferrer nofollow" title="scientist" href="https://thebittimes.com/tag/scientist.html">scientist</a>, Philip Torres, told Cointelegraph amid the Bitget EmpowerX Summit that between monopolistic founding entities, bots, exploiters and airdrop hunters — as much as 80% of blockchain activity can be generated by just a small number of entities — despite looking healthy on the outside. 
 “These projects make a claim such as ‘we have 10,000 <a rel="noopener noreferrer nofollow" title="active" href="https://thebittimes.com/tag/active.html">active</a> <a rel="noopener noreferrer nofollow" title="users" href="https://thebittimes.com/tag/users.html">users</a>’ — well, we find out using the entity model that you have about 10 to 20 different <a rel="noopener noreferrer nofollow" title="users" href="https://thebittimes.com/tag/users.html">users</a> that are controlling 10,000 different addresses,” he added. 
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 Top 25 projects based on active users (daily). Source: Token Terminal 
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 “The 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,” Torres explained. 
 The phenomenon isn’t only present in small-scale ecosystems, Torres claimed — essentially all blockchain ecosystems see varying levels of the activity. 
 He found the average Ethereum user possesses at least 10 addresses, adding that “everything that happens on-chain is not what it seems.” 
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 <img src="https://cdn.thebittimes.com/images/2023/09/13/f373883b5b81ab5acffc1d706e2bdea2.webp"> 
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 Ethereum Cumulative Unique Addresses. Source: YCharts 
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 Torres noted there are legitimate reasons why a user would have multiple wallet addresses. 
 “One of them can be explained easily as ‘privacy concerns.’ People like to have different addresses just to not leave a big enough footprint out there,” he explained. 
 It could also be due to automated traders deploying multiple strategies on-chain. 
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 “So 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.” 
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 However, it has also been used for malicious purposes such as inflating a project’s 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. 
 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 “airdrop farming.” In contrast, the median airdrop size was only expected to be 1,250 ARB tokens, according to CoinMarketCap. 
 <blockquote class="twitter-tweet"> 
 We found 2 super airdrop hunters of $ARB. 0xe1e2 received 1.4M $ARB($1.92M) via 866 addresses and added all 1.4M $ARB to #Uniswap to provide liquidity.https://t.co/sncsZTHrP2 0xbd4e received 933,375 $ARB($1.28M) via 630 addresses.https://t.co/p5vbqXMYxD pic.twitter.com/yK3LzbeC8t— Lookonchain (@lookonchain) March 24, 2023 
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 “On blockchain, it's very easy to control multiple public addresses,” Torres noted.&nbsp; 
 Related: Shibarium hits 1M wallets amid meteoric growth, SHIB yet to catch up 
 Torres explained unlike email addresses, creating and controlling multiple crypto wallets isn’t too complicated if you know what you’re doing. 
 Some use what is known as HD wallets — hierarchical deterministic wallets — 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. 
 “It's very easy for one person to control multiple wallet addresses compared to [how], usually, people do not have more than a few emails,” he added. 
 Magazine: Big Questions: What’s with all the crypto deaths?&nbsp; 
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Source: <a rel="noopener noreferrer nofollow" target="_blank" href="https://thebittimes.com/blockchain-active-users-can-be-misleading-metric-crypto-data-scientist-tbt62520.html">https://thebittimes.com/blockchain-active-users-can-be-misleading-metric-crypto-data-scientist-tbt62520.html</a>

Blockchain active users can be misleading metric: Crypto data scientist

TheBitTimes

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