The growing popularity of bitcoin it has not changed one of its original attributes: digital currency is still concentrated in the hands of a few investors.
The 10,000 largest individual bitcoin investors control about a third of the cryptocurrency circulation, according to a study by the National Bureau of Economic Research (NBER).
Cryptocurrency advocates have long wondered who the biggest bitcoin owners are.
Determining ownership concentration can be especially difficult, as many of the highest volume addresses generally do not represent individuals but rather exchanges and other entities that hold bitcoins on behalf of other investors.
However, using a data collection method that differentiated addresses, NBER researchers were able to identify that intermediaries controlled about 5.5 million bitcoins at the end of last year, while individuals held about 8.5 million.
In addition, the 1,000 largest individual investors controlled about 3 million, and the concentration could be even greater.
“This measure of concentration is probably an understatement, as we cannot rule out that some of the largest addresses are controlled by the same entity,” wrote researchers Igor Makarov and Antoinette Schoar.
For example, the data did not attribute ownership of the first bitcoins related to about 20,000 addresses to one person (Satoshi Nakamoto) and considered them to belong to 20,000 different individuals.
The concentration among miners is even greater, the data show. The NBER found that a 10% share of miners control 90% of the bitcoin mining capacity and just 0.1% (about 50 miners) account for 50% of the mining capacity.
Such a high concentration can make the bitcoin network vulnerable to a 51% attack, where a set of miners or a miner is able to take control of the majority of the network.
The NBER revealed that concentration also decreases after sharp increases in the price of bitcoin, which means that the probability of the network being vulnerable to a 51% attack is higher when the price of the currency falls too low.
“Our results suggest that despite the significant attention bitcoin has received in recent years, the bitcoin ecosystem is still dominated by large and concentrated players, whether large miners, bitcoin holders or exchanges,” the researchers wrote.
“This inherent concentration makes bitcoin susceptible to systemic risk and also implies that most gains from future adoption will fall disproportionately for a small set of participants.”
I am an author at Global happenings and I mostly cover automobile news. In my time working in the automotive industry, I have developed a keen interest in the latest developments and trends. My writing skills have also allowed me to share my knowledge with others through articles and blog posts.
