Bitcoin Wealth Disparity: This Research Claims 2% Of Bitcoin Addresses Control 80% Of The Coin’s Total Supply
Yesterday, the founder and CEO of TruStory Preethi Kasireddy,
presented some data alluding that bitcoin is concentrated in the hands of very few individuals.
“Bitcoin wealth distribution: 2% of addresses control 80% of the wealth.”
Preethi Kasireddy, who previously worked at Coinbase and Goldman Sachs, then hosted a live debate involving Vinny Lingham, CEO of Civic, Dan Held, co-founder of Interchange and herself to demystify this bitcoin wealth distribution conundrum.
Bitcoin Is Unevenly Distributed – TruStory
Saurabh Deshpande, an analyst at TruStory published a report detailing how the firm arrived at the statistics on bitcoin’s uneven distribution. Deshpande attempted to explain this disparity using the Lorenz curve. He notes that this technique is prone to some degree of inaccuracy due to some inherent weaknesses which he tried to counter. Case in point, he introduced an error term that infers half of the identified addresses as the newly assumed addresses due to the fact that it’s nearly impossible to know all the bitcoin addresses.
He also explains that he hypothetically removed bitcoin from wallets with large holdings and transferred it to addresses holding up to 1 BTC. In addition, he claims to have done the necessary adjustments to cater to the unavailable data for addresses containing 10-100 BTC. Deshpande then came up with the following curve after making the aforementioned adjustments:
He concludes his report stating:
“The distribution is nowhere close to being ideal. I hope the scenario changes and the distribution gets better as time passes. Till then, one of the greatest threats to bitcoin is this curve.”
Back to the live debate, Vinny Lingham agrees with Saurabh’s report indicating that early miners that spent significant energy mining bitcoin and risking their capital in the process should receive some sort of reward. When asked whether he thinks the uneven distribution was fair, he implied that the bitcoin market is a free market. Dan also pointed out that as long as an individual acquired their wealth through legitimate capital investment, he was not against the idea of one individual controlling even over 97% of the entire world’s wealth.
These Analysts Support A Different School Of Thought
Ari Paul, CIO and Managing Partner of BlockTower Capital disagreed with this research saying that the “% of addresses” methodology does not paint a clear picture as someone can manipulate the data by creating multiple new addresses.
According to him:
“I don’t view “% of addresses” as meaningful. I could create 1 million new addresses with dust in each script, and drive that number down further. The problem is that the denominator is kind of a nonsense number. What does the total number of addresses mean or matter?”
“A more meaningful measure is something like # of addresses with at least 0.1 BTC. Still doesn’t tell us much, but at least here an “address” has some meaning,” Paul concluded. In addition, as per data by Coin Metrics, the number of bitcoin addresses holding 1 billionth of the coin’s total supply is now at an ATH indicating that bitcoin is gradually becoming further distributed. This was first noted by Jameson Lopp, CTO of CasaHODL on twitter yesterday. The nagging truth is that at no point in time will wealth distribution in the world become even. There will always be two groups of people: the haves and the have-nots. Therefore, this report is no cause for alarm, albeit the question of whether or not bitcoin can do anything to rectify this imbalance remains unanswered.
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