Skeptics classify bitcoin as a pyramid or Ponzi scheme. Supporting this theory would be the fact that most bitcoins would be concentrated in the hands of a few individuals. However, although transactions on the blockchain are completely public and transparent, it is impossible to determine how many individuals hold what. In fact, the number of addresses does not corresponds to the number of individuals.

For example, exchanges as Binance or Coinbase keep huge amounts of bitcoins on a few addresses, but these belong to thousands of their customers. Asset management companies, such as Grayscale, also manage many bitcoins with only few addresses but their shares are held by many people. In addition, the large amount of bitcoins lost (an estimated 4 million) mostly belong to early adopters who did not take due precautions to store them and who held large amounts in a few addresses when bitcoin’s value was still very low.

At the same time, one person can control more than one bitcoin address. With the spread of so-called hierarchical deterministic wallets, one individual is easily able to control an almost infinite number of addresses.

Therefore, because of how the Bitcoin network and its address system work, considerations about how many bitcoins are in the hands of how many people are absolutely nonsense.

Moreover, Bitcoin is a new digital asset that, like all technological innovations, rewards early adopters, that obviously are far fewer than those who invest later. It is then absolutely normal that early adopters are the ones who are likely to hold more bitcoin but they are also the ones who took the greatest risk by having invested in Bitcoin when there were still many question marks. This is also the case for any company, where early investors are typically the ones that hold the larger share and that most benefit its possible growth.

Image Credits: Yegor Petrov