Bitcoin Is Still Concentrated in a Few Hands, Study Finds

Bitcoin’s surging popularity hasn’t changed one of its original attributes. The majority of Bitcoin owners are still just a handful.

A study done by the National Bureau of Economic Research found that approximately one third of Bitcoin’s total circulation was controlled by the top 10,000 Bitcoin investors.

Since the beginning of Bitcoin’s existence, crypto enthusiasts have been wondering who the biggest owners are. It can be especially difficult to determine the concentration of ownership, as many of the largest addresses don’t often represent individuals, but exchanges and other entities that hold Bitcoin on behalf of other investors.
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NBER researchers found that the first controlled approximately 5.5 million Bitcoin, while the second controlled around 8.5 million. Additionally, about 3,000,000 was controlled by the 1,000 most prominent investors, although this concentration could rise.

“This measurement of concentration most likely is an understatement since we cannot rule out that some of the largest addresses are controlled by the same entity,” researchers Igor Makarov and Antoinette Schoar wrote.

For example, data didn’t assign ownership to the first Bitcoins in approximately 20,000 addresses (Satoshi Nakamoto), and instead gave them the status of belonging to 20,000 individuals.

Data shows that miners are concentrated in even greater numbers. NBER discovered that 90% of Bitcoin mining capacity is controlled by the top 10%, while only 0.1% (about 50 miners), controls 50%.

A high concentration of Bitcoin could render the Bitcoin network susceptible to a 51% Attack, which is when a small group of miners or a single miner can take control of most of the network. NBER found the concentration also decreases following sharp increases in the Bitcoin price, meaning the probability the network is vulnerable to a 51% attack is higher when Bitcoin’s price drops sharply.

“Our results suggest that despite the significant attention that Bitcoin has received over the last few years, the Bitcoin ecosystem is still dominated by large and concentrated players, be it large miners, Bitcoin holders or exchanges,” the researchers wrote. “This inherent concentration makes Bitcoin susceptible to systemic risk and 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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