• Around a third of all the current total is owned by 10,000 investors.
• Despite its boost in popularity this year, the world’s most valuable cryptocurrency remains concentrated in only a few hands.

According to the United States National Office of Economic Research, (NBER), approximately 1 thief of all Bitcoins in circulation was controlled by 10 000 major investors.

The identities of the biggest holders of cryptocurrency are not known, but there is some information about the exchanges that manage BTC for individuals and companies.

The real names of many of the investors who have accumulated the token dubbed “digital gold” are unknown, but the study used a specialised data collection method to differentiate between addresses belonging to individuals as opposed to the intermediaries.

NBER researchers have found that as of 2020, an estimated 5.55 million bitcoins were controlled by intermediaries. They hold approximately 8.8 million coins of the cryptocurrency.

Further digging revealed that approximately 3,000,000 BTC was owned by the 1,000 largest individual investors. It is possible that this concentration may be even higher.

“This concentration measure may be an underestimation, because we cannot rule out some of the larger directions being controlled by the same entity.”
Igor Makarov & Antoinette Scoar, researchers.

However, the data analysis did not reveal who the original owners of bitcoins stored at 20,000 addresses by Satoshi Nakamoto (a single individual) were. However, the bitcoins were believed to have been held by 20,000 distinct holders.

Volume of cryptocurrencies held by miners is higher than previously thought. NBER data indicates that 90% of Bitcoin miners have control over 10% of all the mining power. Just 0.1% (or 50 miners) controls 50% of the total mining capacity.

According to researchers, Bitcoin’s vulnerability to 51% attacks is only made worse by high levels of cryptocurrency. A group of miners could agree, or just one miner would decide to take control of a substantial portion of Bitcoin network.

NBER’s findings revealed that Bitcoin prices rise and concentration tends to decrease. The probability that 51% of attacks will be made on the network increases when Bitcoin prices fall sharply.

The document published by the NBER provides “detailed analysis of the Bitcoin network and its main participants.” The researchers claim that they built “a novel database” for which “a large number of public and proprietary sources were used to link Bitcoin addresses to real entities.”

The three analyzes carried out in the study including: “the volume of transactions and the network structure of the main participants in the blockchain.” “Concentration and regional composition of the miners that are the backbone of the verification protocol” were also documented.

Finally, it ensured “the integrity of the blockchain ledger” and analyzed “the concentration of ownership of the largest Bitcoin holders.”

Flipside

• “Our results suggest that despite the significant attention that Bitcoin has received in recent years, the Bitcoin ecosystem is still dominated by large and concentrated players, whether they are large miners, Bitcoin holders or exchanges,” the researchers stated.

Why you should care

• The study determined that “this inherent concentration makes Bitcoin susceptible to systemic risk.”
• At the same time it “also implies that the majority of the gains from further adoption are likely to fall disproportionately to a small set of participants.”

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