In the realm of blockchain technology, any metrics can be skewed – even the seemingly transparent ones like active user counts. Based on insights from 0xScope co-founder Philip Torres, it’s become evident that active user count may not accurately reflect a crypto ecosystem. Surprisingly, a small group of users can easily manipulate activity across multiple wallets, implying that the number of active users might not always reflect actual user diversity.
Off the cuff remarks about a project having ‘10,000 active users’ can easily be dispelled upon closer investigation. A lot of the time, usually around 10 to 20 key players are in control of countless addresses corresponding to these supposed active users. The nature of the blockchain permits this, as the decentralised web allows a single person to have multiple addresses associated with their account, creating the illusion of an expanse of different users.
Interestingly, this isn’t a fringe occurrence, applicable only to smaller blockchain projects. A typical Ethereum user, for instance, is likely to carry more than 10 addresses; the reality of on-chain happenings not lining up with what they seem to suggest. Multiple wallet addresses can be attributed to various legitimate reasons, including privacy concerns. Without leaving a traceable footprint, users can deploy automated strategies or simply operate multiple wallets simultaneously.
Unfortunately, the same system can be manipulated for deceitful purposes such as inflating a project’s active user numbers to mislead potential investors. Such measures can create illusions of robust activity where there might be none, misleading potential investors.
Creating these phantom wallets isn’t hard, especially when one has sufficient understanding of how crypto wallets operate. Hanson Directions (HD) wallets, for instance, can be utilised to make multiple public addresses from a master set of mnemonic words. It’s a simple way for one person to control multiple wallets.
While this revelation may sound alarming to enthusiastic crypto followers, it’s important to acknowledge these complexities inherent in the system. Blockchain, at its core, is a promising technology pushing boundaries in numerous sectors. Still, it’s important not to rush head-first into its enchanting world without understanding its nuanced realities, both good and bad.
Source: Cointelegraph
