Is wealth concentration, or the presence of ‘whales’, a threat to bitcoin’s efficacy?
Bitcoin was founded by a single person, so began with a very high level of ownership concentration. From there, it has become increasingly distributed as more and more people have adopted it and either mined or purchased bitcoin. Due to the public nature of the Bitcoin blockchain, it is easy to spot large addresses and see how much bitcoin they contain. The presence of large numbers of ‘whale’ addresses has led to concerns about their ability to influence market prices. More detailed research however, reveals that most of the largest addresses belong to exchanges, containing the coins of thousands or even millions of users.
Research from Glassnode, a blockchain data research firm, shows that large holders do hold significant amounts of bitcoin compared to small holders. This is consistent with patterns of wealth distribution in most of the world. Over time however, wealth distribution in bitcoin is increasing, whereas in most other assets it is decreasing. This suggests that over time, bitcoin wealth will become more evenly distributed than most other competing monies.