Bitcoin is concentrated in the hands of a few individuals

According to a research, Bitcoin is concentrated in the hands of a small number of people. Despite Bitcoin’s popularity, only 10,000 individual investors hold a third of the bitcoin in circulation. The National Bureau of Economic Research published this information in a research (NBER).

However, determining which persons are in the hands of this massive concentration of assets is challenging. Because the most prominent addresses do not represent people, but rather exchanges and institutions that hold digital currency on behalf of other investors, this is the case.

The NBER discovered a group that controlled 5.5 million Bitcoin in 2020 using a data collecting strategy that distinguished between intermediary and individual addresses. The figure has been revised to around 8.5 million coins this year.

Furthermore, roughly 3 million Bitcoin is controlled by the top 1,000 individual investors. The study claims that the concentration of digital currency might be considerably higher.

“This measure of accumulation is certainly an underestimate,” the researchers told Bloomberg. “We can’t rule out that some of the larger addresses are managed by the same organization.”

The Risks of Bitcoin Consolidation

The centralized nature of Bitcoin mining is much more pronounced. According to the NBER, the top 10% of miners control 90% of mining capacity, while the bottom 0.1 percent (about 50 miners) control 50% of total capacity.

As a result of the significant asset buildup, the network is exposed to 51 percent of assaults. Most bitcoin mining businesses, for example, may be taken over by a single person.
“Major actors, whether they are miners, cryptocurrency owners, or exchanges, continue to dominate this ecosystem.” This exposes the currency to systemic risk, implying that “the majority of future adoption gains will accrue disproportionately to a small group of users,” as the researchers explain.