Bitcoin concentrated in few hands, study finds

Bitcoin’s surging popularity hasn’t changed one of its original attributes. Its ownership is still concentrated in just a few hands.

The top 10 000 individual investors in Bitcoin control about one-third of the cryptocurrency in circulation, according to a study by the National Bureau of Economic Research. Crypto enthusiasts have long pondered who the largest owners of Bitcoin are since the early days of the its existence. 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.

However, by using a data collection method that differentiated between addresses belonging to intermediaries and individuals, NBER researchers were able to find the former controlled about 5,5 million Bitcoin at the end of last year while the latter controlled about 8,5 million. Additionally, the top 1 000 individual investors controlled about 3 million, and the concentration could be even greater.

“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 instance, the data did not assign the ownership of early Bitcoins held in about 20 000 addresses to one person (Satoshi Nakamoto) and considered them as belonging to 20 000 different individuals. The concentration of miners is even more profound, data show.

NBER found that the top 10 percent of miners control 90 percent of the Bitcoin mining capacity, and just 0,1 percent (about 50 miners) control 50 percent of mining capacity.

Such a high concentration could make the Bitcoin network vulnerable to a 51 percent attack, where a colluding set of miners or one miner is able to take control of a majority of the network. — Bloomberg.