The addresses of 10,000 top investors hold a third of the total wealth of Bitcoin. The concentration is even higher in mining, which could be a security risk for the network.
The controversial discussion about the centralization of the total wealth of Bitcoin is still blowing its war horn. As various studies have already highlighted in the past, a recent report suggests that the supply of bitcoins remains concentrated in a few hands.
An investigation led by the National Bureau of Economic Research (NBER) found that the top 10,000 individual Bitcoin investors hold about a third of the total coins in circulation.
The study, reported by Bloomberg in the first instance, shows that this group owns at least 5.5 million bitcoins. This amount represents almost a third of the 18 million mined coins so far.
Bitcoin has a limited supply of 21 million tokens, of which 18.8 million have been mined and represent the circulating supply of the first cryptocurrency, according to current data from CoinMarketCap.
10,000 Individual Wallets Possess 1/3 of the Total BTC
The matter of Bitcoin concentration has been a controversial discussion among the digital currency community.
Even after Bitcoin has been branded by advocates as a decentralized financial mechanism accessible to all without prejudice of gender, race, nationality, etc. The discussions had shown clear reflections on the subjects behind the addresses with Bitcoins and how to manage them.
However, it has been a very sneaky topic to tackle because many of the massive addresses do not typically represent individual investors but rather exchanges or entities that own Bitcoin on behalf of third parties. Likewise, it is also problematic to separate the addresses belonging to the same individual or entity.
Using a method to differentiate the addresses of individual investors and exchanges, NBER researchers found that, by the end of 2020, personal wallets controlled around 8.5 million bitcoins while entities accounted for 5.5 million coins.
The study also found that the top 1,000 individual investors controlled about 3 million bitcoins out of the 8.5 million at the top 10,000 investors. The concentration among individual investors could be even higher than the results in the data analysis.
On the other hand, the researchers highlighted that the concentration on Bitcoin mining, the process of mining new coins, is too deep.
Bitcoin Mining Concentration is Even Higher
According to NBER, only 10% of the top cryptocurrency miners are responsible for 90% of Bitcoin’s mining capacity. Meanwhile, the data indicates that only 0.1% (around 50 miners) control 50% of the mining capacity.
The curious thing about the study is that it found that this concentration might vary according to the prices of the cryptocurrency, tending to reach high peaks with increases and to decrease when a solid price falls.
These figures are alarming for the security of the Bitcoin network. A high concentration of the network’s mining power could make the blockchain vulnerable to a 51% attack.
By: Jenson Nuñez
