The price of Bitcoin is highly correlated to the number of transactions, known as “on-chain volume.” Over time an increasing percentage has been held by the top 11000 entities accounting for 55% of on-chain volume. This concentration raises concerns about centralization and could give these large holders control over critical network functions like mining rewards which are used to secure the network.
Bitcoin is a volatile asset, and has been subject to some wild price swings just in 2018. However, despite the fluctuations bitcoin remains one of the most widely accepted cryptocurrencies around the globe. With that said it’s important to understand which entities control an ever-increasing share of Bitcoin’s on-chain volume – not only because they’re worth following but also as a good measure for stability (or lack thereof).Roughly 11,000 entities represent 55% of Bitcoin’s on-chain volume. The “bitcoin on-chain volume” is a metric that measures the number of bitcoins that have been transacted over the blockchain. It is calculated by summing up all transaction outputs and dividing it by the total possible number of outputs.
More than half of Bitcoin’s on-chain volume is accounted for by about 11,000 organizations, according to researchers.
According to a report released on Oct. 21 by the National Bureau of Economic Research (NBER), 11,043 on-chain businesses account for 55% of Bitcoin network traffic. Three-quarters of on-chain volume is anticipated to be accounted for by cryptocurrency exchanges.
The top 1,000 greatest investors own nearly 3 million BTC, or 15.9% of all circulating Bitcoin, according to the research, while the next 9,000 largest investors own around 2 million BTC, or 10.6% of all circulating Bitcoin.
Despite the influx of new investors attracted by BTC’s bull market in 2021, the report’s authors conclude that the network remains extremely centralized, stating:
“Be it massive miners, Bitcoin holders, or exchanges, the Bitcoin ecosystem is still controlled by large and concentrated entities.”
Individual Bitcoin holders, however, account for 8.5 million BTC, or 45.1 percent of supply, according to the report.
The NBER also discovered high concentration in the Bitcoin mining industry, estimating that the top 10% of miners control 90% of worldwide hashrate. According to the analysis, about 50 miners (roughly 0.1 percent of the network) control 50 percent of the total hashing power on the Bitcoin network.
While the NBER asserts that the Bitcoin network is at danger of a 51 percent assault due to its concentration of hash rate, the research does not provide a hypothetical scenario in which the world’s top miners would be encouraged to attack the network.
Read more: According to a Gallup poll, the number of investors who possess Bitcoin has quadrupled since 2018.
The worldwide distribution of hashpower has diversified dramatically since September 2019 — when China’s share peaked at 75.5 percent, according to Cambridge University’s Bitcoin Electricity Consumption Index (BECI).
While China’s fresh assault on domestic Bitcoin miners has been blamed for a recent migration of miners to North America, Central Asia, and Eastern Europe in search of cheaper energy, BECI’s data reveals that Chinese hashing power had already dropped by 40% before the April crackdown.
The “on-chain withdrawals” is a key metric that shows how many bitcoins are being withdrawn from the blockchain. It is important to note, however, that roughly 11,000 entities represent 55% of Bitcoin’s on-chain volume.
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