IntoTheBlock has investigated what percentage of certain cryptocurrency are at the richest addresses. This provides interesting insights, but does not provide a complete picture.
Talking about whales and ownership by concentration of an asset
– intotheblock (@intotheblock) November 20, 2019
It is not clear who these addresses are from
This tweet is based on on-chain research, or view the blockchain of the different currencies. That is a big advantage of cryptocurrency’s over fiat, a look at the blockchain shows who has the most coins.
But the addresses that IntoTheBlock is talking about can be from individuals, but also from exchanges or preservation services. So that doesn’t necessarily have to be whales. A whale often describes an individual who alone has enough coins to influence the market.
Belongs to young, decentralized products
In cryptoland it is not very special that concentration of large amounts of cryptocurrency occur. Go after it, the first few years of bitcoin there were only a handful of miners and users. And that is not bad at all, certainly in those first few years most users did not go into bitcoin to become very rich with it. And that is also the risk of a young and decentralized market, where some will benefit once by joining earlier.
So it is very important what so-called whales do with their coins and what their intentions are. After all, there are limits to how sustainable extreme concentrations of wealth are in a decentralized system. These are the figures for some altcoins and how concentrated they are.
- Ethereum (ETH) —151 addresses have approximately 39% of the circulating stock.
- Bitcoin Cash (BCH) —112 addresses own 29% of the offer.
- Litecoin (LTC) —131 addresses own 47% of the offer.
- Bitcoin SV (BSV) —103 addresses have 24% of the offer.
- Cardano (ADA) —41 addresses own 39% of the offer.
- Tether (USDT) —132 addresses have 63% of the offer.
Cardano, Litecoin and Tether
Based on these results, litecoin and tether seem to stand out. The percentage is many times higher than the other coins examined. Yet the concentration of wealth at Cardano is greatest. If you divide the percentage by the number of addresses, you arrive at a factor of 0.95. More than twice as high as with Tether.
The most important question: is this bad? That depends entirely on the ecosystem of the respective cryptocurrency. There are different governance models, in the absence of a better Dutch term. This governance is referred to in English. In the case of Cardano, proof-of-stake is used. That comes down to the more Cardano you have, so the greater the chance that you can add a block to the blockchain and receive the corresponding reward. A few other examples: with bitcoin, BIPs are injected by developers, and approved or rejected by nodes. Ethereum uses Carbon, where every tuner must spend a little ETH. Some are a mix of off-chain governance and on-chain systems, while others are purely on-chain systems.
But all these coins are supposed to be decentralized, and therefore the concentration of wealth must always be up for discussion.