When it comes to Bitcoin, we always like to think of this disruptive digital currency as a way to spread the wealth among the people of the world. After all, Bitcoin is based on the principle of supply and demand, without any government or financial institution being involved. But the way things stand right now, most of the Bitcoin wealth is in the hands of the “one percent”, striking many similarities with the current financial system.
The Bitcoin Wealth Distribution
In the real world, most of the world’s money is controlled by a very tightly knit group of people, which is something not too many people know or care about. But when you come to think of it, a few people determine the financial faith of billions of others, leaving roughly 99% of the population outside of this “elite club”.
When Bitcoin came around in 2009, many of our group of “99 percent” saw the light and flocked towards this new digital currency. With the blockchain acting as an open ledger for all transactions, and the network becoming stronger and stronger, this new currency has all the potential in the world to shake up the balance of power.
Fast forward until today, and you will notice there are some very interesting statistics regarding Bitcoin. The number of transactions is on the rise month after month; the transaction volume is holding steady and more wallet addresses are being actively used on a regular basis. One thing that is missing from all of this is an overview of how the Bitcoin wealth is distributed right now.
If the rumours are to be believed, Satoshi Nakamoto allegedly owns 1 million Bitcoin. Keeping in mind there will only be 21,000,000 BTC in circulation at its peak in 2140, that’s quite a percentage of the total supply. On top of that, the Winklevii recently disclosed they owned as much as 1% of all Bitcoin in circulation during 2013.
A Bitcoin wealth distribution table recently appeared on Quora, detailing how many addresses hold a certain amount of coins, on average. Although the actual numbers are not that surprising, they still give you plenty to think about, especially when you take into consideration how less than 1% of all Bitcoin addresses hold a balance of more than 1 Bitcoin.
Let me throw another number at you. Only 1.12% of all Bitcoin in circulation – as of block 350,000 – are distributed to over 99% of all Bitcoin wallet address owners. This is another example of the “one percent” controlling most of the funds while the largest group of users only hold a small amount of BTC.
Numbers Are Not Everything
Personally, I like numbers, as they represent statistics in such a way for anyone to comprehend. However, there is also a downside to looking at just numbers, as they don’t always tell the entire story of why things are the way they are. And Bitcoin wealth distribution is no exception to that. There are quite a few factors to take into consideration.
First of all, in the first year and a half, a lot of Bitcoin was sent and shared among addresses when hardly anyone knew about Bitcoin, or cared enough to get involved. Outrageous amounts, like thousands of Bitcoin belonging to one address were far more common back then, as the mining difficulty was far lower, and the block reward was still at 50 BTC per block.
Since that period, quite a few Bitcoin wallet addresses have either been hacked, owners have lost their private key or people have just lost interest in Bitcoin altogether. However, the funds stored in those wallets is still there in most cases, which also means we may never see those BTC change hands or being sold.
Plus, these numbers also discredit the rumour of Satoshi Nakamoto holding 1 million Bitcoin. The top three Bitcoin wallet addresses each hold roughly half a million BTC, which means at least two of these would have to belong to Satoshi. No one is saying that may not be the case, but it seems rather unlikely at this time.
Last but not least, Bitcoin hoarding is becoming a slight concern in the general community. While there is nothing wrong with holding a few BTC in the hopes of prices shooting up in the near future, it also creates a public image of its “lack of use cases”. However, with all other transaction-related statistics on the rise, that statement seems to lack proper research.
Images courtesy of Quora and Shutterstock