Why is the distribution of Bitcoin ownership important?
Bitcoin's founder Satoshi Nakamoto envisioned it as an egalitarian P2P payment network. No matter where anyone is, they can buy, store, and use BTC on the internet. The Bitcoin blockchain answers to no nation, bank, or corporation.
While the above features explain Bitcoin's rising value, it doesn't mean there aren't centralization risks. Large BTC holders (aka whales) have an outsized influence on the crypto market. Due to the pseudonymity of crypto wallets, Bitcoin whales can collude and manipulate the crypto’s spot price.
The more concentrated BTC's supply is, the less BTC there’ll be for the global population. Since Bitcoin has a maximum supply of 21 million coins, those with significant BTC positions have tremendous power on crypto exchanges. Some crypto advocates are also concerned about banks and governments acquiring large shares of BTC and taking over the network.
How do users receive Bitcoin?
Unlike the more recent "pre-mined" cryptocurrencies, Bitcoin didn’t give a large portion of the tokens to the protocol developers and there were no investors. From the first block in 2009, every Bitcoin has been mined into existence. Using a consensus mechanism called proof-of-work (PoW), Nakamoto required computers to solve complex algorithms on the Bitcoin blockchain. If a miner solves this problem first every 10 minutes, they can validate a new set of transactions for BTC rewards.
These regular rewards are how new bitcoins enter circulation. Every four years, BTC rewards are cut in half during a "halving" event. Since the hard cap of Bitcoin is 21 million coins, no new BTC will enter circulation once the 21 millionth coin is mined.
While it's possible to earn bitcoins with mining rigs, it's more difficult today due to large mining pools and professional mining companies. Businesses like Riot Blockchain and HIVE Blockchain Technologies control a large proportion of Bitcoin's hashpower, which gives them better odds of winning BTC block rewards.
For those outside the mining industry, the easiest way to receive Bitcoin is to buy it on an exchange. Since Bitcoin is the oldest and largest cryptocurrency, most centralized cryptocurrency exchanges (CEX) offer BTC trading.
What is the current distribution of Bitcoin?
The current distribution is based on date in time, and this article was written in February 2023. Recent studies from the National Bureau of Economic Research and the University of Limerick suggest that Bitcoin's distribution is concentrated in the hands of a few whales. According to blockchain analysts, approximately 6,952 BTC wallets control 58.21% of available bitcoins, which means about 0.01% of the total BTC holders have almost 60% of BTC's supply.
To be fair, the wallet concentration for Bitcoin has been going up in pure number terms. For instance, only 1,840 wallets held more than 50% of BTC's supply in 2012. That number went up to around 4,652 wallets in 2020.
It's also important to note that these findings don't account for lost or burned bitcoins. Researchers at crypto firms like Glassnode suggest as much as 10% of BTC's total supply could be in inaccessible wallets. For example, James Howells, a U.K. engineer, lost 8,000 BTC in a hardware device in 2013.
There are also questions over whether the roughly one million bitcoins in Nakamoto's 22,000 BTC wallets are still active. Since Nakamoto’s identity is unknown, some speculate that these bitcoins are effectively burned, and Nakamoto has not appeared in over a decade.
Lastly, when compared with competing P2P cryptocurrencies, Bitcoin's concentration of wealth isn't as centralized. For instance, researchers found that a mere 12 wallets held 51.25% of Dogecoin's supply. Only 853 Litecoin wallets hold 63.55% of LTC's supply, and 1,087 Bitcoin Cash wallets hold 48.55% of BCH.
Who owns the most Bitcoin?
(Statistical representation of Bitcoin’s distribution)
Although it’s unknown who's behind every BTC wallet, a few individuals, public and private companies, and crypto exchanges aren't hiding their large BTC holdings.
The biggest individual Bitcoin owners
- Satoshi Nakamoto: Although Nakamoto’s identity is mysterious, it's clear that they mined roughly one million bitcoins between 2009 and 2010. These are stored in 22,000 wallet addresses. Some believe Nakamoto deliberately took these bitcoins out of circulation, but it's unknown who has access to this giant stash of BTC.
- Winklevoss Twins: Tyler and Cameron Winklevoss have long supported cryptocurrencies, and they're some of the most prominent Bitcoin billionaires. After suing Facebook's Mark Zuckerberg for allegedly stealing their idea, the Winklevoss twins bet big on BTC. Recent estimates suggest the Winklevoss twins have 70,000 BTC in their wallets. Today, the Winklevoss twins run the crypto exchange Gemini, and they continue to be active players in the crypto space.
- Changpeng Zhao: Better known as CZ, Changpeng Zhao, the founder of Binance, is one of the biggest Bitcoin holders, with an estimated net worth of roughly $96 billion. While it's unknown how many bitcoins CZ holds, he reportedly sold his apartment in China to buy $1 million worth of BTC back in 2014.
Public companies with large Bitcoin holdings
- Grayscale: NY-based Grayscale remains the largest asset manager to offer shares in its crypto holdings on the U.S. stock market. Currently, Grayscale holds approximately 643,572 BTC in its portfolio, which accounts for about 3% of BTC's supply.
- Microstrategy: Michael Saylor's software company Microstrategy has become one of the largest publicly traded companies to put BTC on its balance sheet. Currently, Microstrategy holds 129,699 BTC or about 0.6% of the total Bitcoin supply.
- Tesla: Although Tesla sold a significant amount of BTC in 2022, it remains one of the most visible tech companies that purchase Bitcoin. Elon Musk's electric car company now has about 10,725 BTC.
Crypto exchanges with the most BTC
- Binance: Since Binance is the world's largest crypto exchange, it makes sense that the company's cold storage wallets have large amounts of BTC. Currently, the largest single BTC wallet with 252,597 BTC belongs to Binance. This exchange also owns two other cold storage addresses in the most prominent 10 BTC wallets, with 143,314 BTC and 125,351 BTC.
- Bitfinex: Based in the British Virgin Islands, Bitfinex is a crypto exchange that's well known for issuing the stablecoin USDT (aka Tether). Currently, Bitfinex owns the second-largest single BTC wallet with 168,010 BTC and another cold storage address with 16,379 BTC.
- Coinbase: Based out of the U.S., Coinbase is the only crypto exchange that offers stock to U.S. shareholders. Since the company has to report quarterly earnings, it's the easiest to peek at the number of bitcoins on its balance sheet. Coinbase claims to hold 9,000 BTC in its reserves, equaling 0.043% of the BTC supply.
How does Bitcoin's distribution compare to Ethereum?
Since Ethereum (ETH) is the second-largest digital currency, blockchain firms often compare ETH's distribution with BTC. In 2022, Ethereum changed its consensus algorithm from PoW to proof-of-stake (PoS) in an event called “the Merge.” Since Ethereum holders could lock their ETH on the new PoS chain, many of the largest ETH whales are validators.
Indeed, the top ETH wallet address on Etherscan is Ethereum's official Beacon Chain. Anyone could deposit 32 ETH on the Beacon Chain to become a validator. This smart contract address now holds 14,409,324 ETH.
Other major ETH wallets are associated with crypto exchanges like Binance, Kraken, and Gemini, each of which offers ETH staking services to customers. The decentralized staking pool Lido Finance also holds a significant amount of Ethereum (currently 578,583 ETH).
A potential concern surrounding Ethereum's distribution has to do with voting rights. Since validators can now vote on blockchain proposals using their staked ETH, some worry large staking pools will dictate the future direction of the Ethereum blockchain. However, Ethereum developers are hoping to introduce new features like sharding that may add extra decentralization to the blockchain.
Wrapping up
Early Bitcoin adopters may have a large percentage of BTC, but that doesn't invalidate the dream of cryptocurrency. Projects like Worldcoin are working hard to ensure everyone has equal access to the future of finance. We aim to put a share of our crypto in the hands of every individual on the planet for free. Subscribe to our YouTube channel to learn more about our mission and the cryptocurrency market.