whales of bitcoin

The whales of bitcoin: 10,000 people control a third of all the bitcoins in the world

The popularity of cryptocurrencies is growing, and although more and more people (and companies) invest in this type of virtual currencies, for years there has been talk of whales (” whales” ), those investors who own a huge amount of bitcoins.

A new study now reveals that the 10,000 largest bitcoin investors control more than a third of the cryptocurrencies in circulation. The data is disturbing, especially because of the power that these investors have to influence the value of this and other cryptocurrencies.

Concentration is (very) dangerous for the future of bitcoin

The study comes from the National Bureau of Economic Research (NBER), and according to it the concentration of bitcoins that exists in the cryptocurrency segment is clear : although there are millions of investors, the 10,000 most important have in their possession one of each three bitcoins that exist in the world.

It is certainly difficult to know whether or not the addresses of the wallets represent independent investors or companies and even trading markets. However, this study manages to differentiate those accounts, but those responsible warn that the concentration may be even higher .

Why? Those responsible indicate that ” we cannot rule out that some of the most important addresses are not controlled by the same entity .”

For example, 20,000 particularly old addresses that could belong to the same person (such as Satoshi Nakamoto) were considered to belong to 20,000 different people, when indeed many of them may be controlled by a single person or entity .

Along with the concentration problem, another appears: the NBER study also reflected how 0.1% of the world’s largest miners (50 in total) control 50% of the bitcoin mining capacity . If we go to the top 10% of the world’s miners, the capacity they control is a staggering 90% based on that data. 

 That – and not the control of more or less bitcoins, as we indicated initially – makes the danger of the so-called “51% attack” reappear , in which a group of miners controlling more than 50% of the mining rate of the network or its computing power end up intervening in the normal operation of blockchain transactions. According to this study, the network is especially vulnerable if the price of bitcoin falls sharply.

The threat is clear to all small investors – individuals or companies – who rely on bitcoin as that store of value that used to be gold. About 46 million Americans are estimated to have invested in bitcoin to some extent , and the figure is likely high in the rest of the world given the growing interest the cryptocurrency markets are generating.

[Update 10/26/2021, 4:34 PM]: We have edited the definition of “51% attack”.

[Update II – 10/26/2021, 17:38]: We have completed the topic to indicate how this attack comes from the control of the mining capacity that has also been revealed in the study. Thanks to our readers for their notes.

Samuel Edwards
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