Bitcoin remains concentrated in the hands of a few investors and miners, study indicates

Texas could raise funds through NFT and harness 'abundant' energy to mine Bitcoin

Bitcoin remains concentrated in the hands of a few investors and miners, study indicates By Hannah perez

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.

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The controversial discussion on the centralization of the total wealth of Bitcoin continues to be valid. As several studies have pointed out in the past, a recent report suggests that the supply of bitcoins it still remains concentrated in a few hands.

An investigation of the National Office for Economic Research (NBER) found that 10,000 main individual investors of Bitcoin keep about a third of total coins in circulation. The study, first reported by Bloomberg, points out that this group owns 5.5 million bitcoins, which represents almost a third of the 18 million coins that have been mined so far.

It should be noted that Bitcoin has a limited supply of 21 million tokens, of which 18.8 million have been mined – or mined – and represent the circulating supply of the main cryptocurrency, according to current data from CoinMarketCap.

10,000 individual wallets own 1/3 of the total BTC

Although it has been described by the defenders as a decentralized financial mechanism and accessible to all without prejudice of sex, race, nationality, etc., the matter about the concentration of Bitcoin It has been widely discussed by the digital currency community. For a long time it has been reflected on who are the subjects behind the addresses with the most coins.

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However, it has been a difficult subject to tackle as many of the larger directorates 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, the NBER researchers found that, by the end of 2020, the personal wallets controlled about 8.5 million bitcoins while the entities represented 5.5 million coins.

Digging into this data, the study found that the top 1,000 individual investors controlled about 3 million bitcoins of the 8.5 million controlled by the 10,000 main investors. Although The concentration among individual investors could be even higher than the data indicates, according to the study authors Igor Makarov and Antoinette Schoar.

This concentration measure is probably an underestimate, as we cannot rule out that some of the larger addresses are controlled by the same entity..

On the other hand, the researchers highlighted that the concentration in the mining of Bitcoin, the process of mining new coins, could be even more profound.

Bitcoin mining concentration is even higher

According to NBER, only 10% of the top cryptocurrency miners are responsible for 90% of the mining capacity of Bitcoin. Meanwhile, the data also indicates that only 0.1% (around 50 miners) control 50% of the mining capacity. The funny thing about the study is that it found that This concentration varies according to the prices of the cryptocurrency, tending to increase with rises and to decrease after strong price falls.

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These figures are alarming for network security Bitcoin. A high concentration of the network’s mining power could make the blockchain vulnerable to a 51% attack. For example, a mining group could agree to take control of the network; this could potentially occur during bear market times, when the network Bitcoin it is less assured.

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 investors, or exchanges.

This inherent concentration makes Bitcoin susceptible to systemic risk and also implies that the majority of the gains from increased adoption are likely to fall disproportionately on a small group of participants.The authors added.

The results of the study confirm a A previous report published in the middle of this year that indicated that more than 99% of the total supply of bitcoins it remains highly concentrated among 10% of wallets. In light of these investigations, one question remains: Who are the actual people or entities behind the richest Bitcoin addresses?


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Sources: Bloomberg, file

Hannah Estefanía Pérez’s version / DailyBitcoin

Image from Unsplash

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