1/3 of Bitcoins in circulation are controlled by a small number of people with serious systemic risks

Although Bitcoin is highly sought after by institutions and retail investors, research has found that most Bitcoins are still held by a few people, and some of the attributes of Bitcoin allow these major players to continue to profit from investors.

According to a study by the National Bureau of Economic Research (NBER), the 10,000 individual investors holding the most bitcoin are controlling approximately one-third of the currency in circulation.

The concentration of miners mining Bitcoin is even more obvious. NBER stated that the top 10% of miners control 90% of Bitcoin mining capacity, while 0.1% (approximately 50 miners) control 50% of mining capacity. This means that this will expose most Bitcoin investors to serious systemic risks.

As of press time, the price of Bitcoin is 62,849 US dollars per coin, which is close to a historical high and has risen by more than 50% this year.

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Miners with powerful computing power can “unlimited dolls”

For a long time, cryptocurrency investors have been thinking about who is the biggest holder of Bitcoin. In the early days, many addresses holding large amounts of bitcoins often did not represent individuals, but bitcoin exchanges and other entities held on behalf of a group of people, so it was difficult to determine the degree of concentration of bitcoin ownership.

However, NBER used a data collection method that distinguished the addresses of intermediaries and individuals and found that intermediaries controlled approximately 5.5 million bitcoins at the end of last year, while individuals controlled approximately 8.5 million bitcoins. In addition, the top 1,000 individual investors control about 3 million or more.

“This concentration measurement may still underestimate the real situation, because we cannot rule out that some addresses may be controlled by the same entity,” said NBER researchers Igor Makarov and Antoinette Schoar.

For example, a person holds early bitcoins through 20,000 addresses, but the data collection method will treat the ownership of these bitcoins as belonging to 20,000 different people.

In addition, the concentration of mining will obviously leave many investors’ Bitcoin systems vulnerable to “51% attacks.” A 51% attack means that when the computing power exceeds 51%, if a miner sells his own bitcoins, he can modify the transaction records through the computing power, so that he can withdraw his bitcoins and then continue to recycle them. NBER found that as the price of bitcoin rises sharply, the concentration of bitcoin will also decrease, which means that when the price of bitcoin falls sharply, the network is more likely to be attacked by 51%.

NBER researchers wrote: ” Our survey results show that although Bitcoin has received widespread global attention in the past few years, the Bitcoin ecosystem is still dominated by large and small players, such as large miners and Bitcoin holders. There are players and exchanges. This concentration makes Bitcoin vulnerable to systemic risks, which means that this small group of players will receive most of the benefits of Bitcoin. “

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/1-3-of-bitcoins-in-circulation-are-controlled-by-a-small-number-of-people-with-serious-systemic-risks/
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