One of the many facets of cryptocurrencies is it’s transparency. Unlike conventional methods of fiat transactions, there exists a public ledger which is essentially a record-keeping system for all valid historic transactions. For each transaction there must be a sender and a receiver. In order to transact, both the sender and receiver must possess digital wallets that hold the cryptocurrency balances. While it is near impossible to steal or change these balances from the outside, we are able to see the precise balances in an anonymous manner.
We’ve had a nosy peek at the top 1,000 wallets for the most popular cryptocurrencies with the goal to compare, comprehend and visualise their distributions. Before diving into the findings, let us first establish a few assumptions:
1. Each wallet is owned by a unique person
We know this is not the case as a person can own multiple wallets and distribute coins amongst them. This is especially true for those coin holders in the top 1,000 holders as it is safer to distribute coins using multiple addresses in case private keys get compromised or lost. However it is also very difficult to identify unique coin holders, with a reasonable accuracy as some complex transactional analysis would be needed.
Effect on distribution: The actual distribution is likely to more concentrated due to the presence of common actors amongst the top 1000 holders.
2. All wallets are active with the holder in possession of the private keys
According to chain analysis
, an estimated 20% of Bitcoins are now inaccessible by their owners due to lost or forgotten private keys. Back in 2008 when Bitcoin was worth a few dollars, owners could quite easily accumulate hundreds of coins very cheaply. Of course the small price paid meant that wallet holders didn’t care too much about securely storing their private keys in the manner we see today. The result is that many early investors in Bitcoin and Ethereum may have lost the keys to their coins making their holdings inaccessible. Effect on distribution: The actual distribution is likely to be less concentrated if we assume those lost wallets have a sizeable holding and are now inaccessible.
3. Exchange wallets are treated as a unique person.
Exchanges such as Binance
hold large amounts of coins on platform and in cold wallets. While we know that these cold wallets are held by organisations and not individuals, for the purpose of this exercise, we still treat them as unique individuals. In fact, this is a valid assumption as whether the holder is an organisation or individual makes no difference, what matters is that it is a singular entity and that entity holds the keys for all the funds. Effect on distribution
: If users held their coins off exchanges and into their own wallets it would result in a dramatic dispersion of coins and therefore result in a greater level of distribution.
Ranking (Most to Least Distributed)
*Transactions per second
It’s no surprise that the oldest and first cryptocurrency is by far the most well distributed cryptocurrency, arguably out of the entire crypto universe. Logic suggests that the longer a coin has been in existence, the more transactions would have occurred resulting in a higher probability of exchanges and therefore distribution.
With over 300,000 Bitcoin transactions per day and over 70 million wallets created as of March 2021, it's safe to say that out of all cryptocurrencies, elitist have the small control on the first-born Bitcoin. The top 1,000 ETH holders own double the amount of the circulating supply compared to the top 1,000 holders of Bitcoin.
According to data from Glassnode
, Miners still hold a significant portion of Bitcoin supply, an estimated 9.7% or 1.8 million BTC. While we have assumed a dissimilarity between exchanges and individual users, it is worth noting that an estimated 12.7% is owned by exchanges. This could be partly due to the fact that todays traders and investors rely heavily on centralised exchanges such as Binance and Coinbase.
2. Bitcoin Cash
Pioneered by Roger Ver, the birth of Bitcoin Cash was the creation of a ‘fork’ from Bitcoin. The block size was increased from 1mb to 8mb with the primary goal of increasing the transactional throughput and therefore promote Bitcoin Cash as a means for currency.
The distributions for Bitcoin and Bitcoin Cash are very similar. The reason for this likely due to the manner in which Bitcoin Cash was created. When the fork occurred, all Bitcoin holders received an equivalent amount of Bitcoin Cash in a 1 to 1 ratio. Theoretically, the distribution should be near identical. One reason why they are not identical could be due to the fact that lost wallet holders of Bitcoin did not ready their wallets for the bitcoin cash fork by moving to an exchange or wallet that supported the fork. This means that legacy wallets only capable of storing Bitcoin would not have received the equivalent Bitcoin Cash. A bit like someone sending a foreign currency to your own native currency, it's simply incompatible.
While Bitcoin cash is placed number 2 on our list, it is worth mentioning that there is quite a large leap in terms of distribution compared to bitcoin.
If the top 1,000 Bitcoin Cash holders represented global GDP, the richest holder would represent France.
On Number 3 on the list, we are the younger brother of Bitcoin, Litecoin. Created by Charlie Lee, Litecoin has 4 times the number of Bitcoin Coins, making it more collectible. If Bitcoin is considered to be ‘digital gold’, then Litecoin is certainly ‘digital silver’.
It's creation aimed to offer faster transaction rates thanks to shorter block processing times- 2.5 minutes, compared to 10 minutes of Bitcoin. As evidently displayed with the transactional capacity, it does offer a much faster method of transacting value than Bitcoin.
What we do find particularly interesting is that when Charlie Lee sold all his holdings in 2017 when the price ballooned over $300, the price was barely impacted. This indicates that Lee didn't hold a significant amount and that the market had good liquidity. Compared to other cryptocurrencies, founders have been known to hoard a significant amount, in some cases well over 30%.
Litecoin has more ATM support than any other cryptocurrency, except Bitcoin.
Ethereum, ranked number 2 in terms of its market cap, comes in at number 4 on our list in terms of its distribution. While still a cryptocurrency, Ethereum offers a vastly different proposition to Bitcoin. What Google is to websites owners, Ethereum is to aspiring cryptocurrency founders. A completely open-source platform that allows anyone to create third-party decentralised applications to be built on top of the Ethereum network as a means to validate transactions.
Vitalik Buterin is the major driver behind Ethereum and currently owns around 352,000 ETH which represents about 0.3% of the circulating supply available today. From our bubble plot we can see that Ethereum has a similar percentage of supply owned by the top 1,000 when compared the Litecoin. The reason why we have ranked Ethereum at number 4. is due to the higher concentration amongst the very elite top 10 holders. It is likely that Ethereum holders in the Top 10 exist in the form of exchanges, having custody of a large pool of users. How many you might ask? Well we have no idea. As the old saying goes, If you don't own the private keys you don't own the coins. We hope that these funds are completely safe wherever they are hold but if history has something to say, you cannot be certain.
Perhaps the biggest unknown about Ethereum is is supply. Unlike other coins on our list, the supply of Ethereum has been inflating each year making the precise quantity difficult to quantify. According to an exchange icrypex, Ethereum has an annual inflation rate of 3.77% which actually more than USD dollar. While this might cause concern to some, you can have comfort in the fact that the inflation is exponentially tending to zero over the coming years.
24 out the top 100 market cap coins are built on the Ethereum platform
Built by the CTO of Ethereum, Dr Gavid Wood built Polkadot dubbed as Web 3.0. One of the major aims of the project is to enable custom side-chains with public blockchains. In addition to this, the project is planning for the future and trying to find ways for increasing the transaction capacity of public blockchains through a process known as sharding. Given it’s relatively recent creation. Polkadot is actually rather well distributed.
Polkadot has the highest transactional capacity out of all cryptocurrencies on our list and therefore incentivising users to transact without much friction in the form of waiting times. Distribution aside, Polkdat is going head to head with Ethereum with the ultimate prize of winning over the developers. If you win over the developers, you create useful apps, with useful apps, you win end users. The biggest difference between Polkdat and Ethereum in terms of it's technology is the way in which the network is built. Ethereum has a digital highway where apps have to pay to use the highway in the form of GAS irrespective of the use. Polkdat, on the other hand has been built to have multiple highways that are designed for specific purposes. It will certainly be an interesting technological battle over the coming years.
If the top 1,000 Polkadot holders represented companies on the Nasdaq exchange, the richest holder would represent Alphabet.
Uniswap is the newest creation on our list with it’s token. It is the largest decentralized exchange and fourth largest cryptocurrency exchange. Built on top of the Ethereum blockchain, it currently accounts for 30% of all transactions on the Ethereum network. Given the fact that is an exchange, the wallet holders are likely to be inaccurate and assumption number 1 would fall down heavily for this people’s project. In fact, 60% of the genesis supply has been allocated to Uniswap community members, 21% for the team and 18% for investors. That sums up to 39% of coins being owned by a very small number of individuals.
In terms of token utility, the primary use case is to provide a means for users to purchase Uniswap alongside other tradable coins and add their coins to trading pools. In return for adding liquidity to these pools, users are rewarded with a share of the 0.3% transactional fee charged on trades.
Uniswap describes itself as publicly owned and self-sustainable infrastructure. Given the relative infancy of this project, it might just need more time for the project to meet it's definition. At the momement publicly owned its a bit of a chase.
Nearly 40% of all Uniswap tokens are owned by the team and investors.
If there was ever a coin that really didn’t intend on being in the Top 10 cryptocurrencies by market cap it’s Dogecoin. The founders, IBM programmer Billy Markus and Jackson Palmer from Adobe decided to create Dogecoin to support the internet meme ‘Doge’. Traditionally the meme features a Shibha Inu dog alongside some old school comic sans text which describes some sort of internal monologue.
It’s biggest fan is perhaps the most influential figure today- Elon Musk! Recently, Elon tweeted a picture of the infamous Shibha Inu Dog barking at the moon. Within the crypto community the word ‘moon’ is usually used in relation to a dramatic price increase upwards, like a rocket Falcon 9 launch. More recently, Elon Musk has tweeted
of sending the meme coin into space and even asked users if they would like to pay for Teslas in Dogecoin! We're not exactly sure if Elon actually meant this as the richest holder owns nearly a third of all supply. That's enough to wipe out the entire liquidity multiple times over should the owner want to sell. Just 10 holders own nearly half of all circulating Doge supply.
The second project on our list to be built on top of the Ethereum blockchain. Described as a tokenized oracle network, it’s purpose is to provide price and events data using a blockchain agnostic protocol. Ranking second from last, the richest holder of ChainLink, who are the founders themselves own a sizeable 35% of the supply. How they intend to use these tokens is a wild unknown. What is certain though, is that the coin is very poorly distributed at the time of writing.
Distribution aside, Chainlink is an extremely ambitious project that has it's eyes on bridging the gap between traditional and crypto institutions in a trustworthy manner. Having partnered up with companies like Swift and Google, it seems to be on the right track to make it's goal a reality.
The native coin for Binance is in hot demand right now. It’s primary use case is to reduce trading fees. For each trade, investors and traders alike save up to 50%, if they own some Binance coin as use their BNB as a means to pay for the transaction fees. According to Binance, other use cases include using BNB as a currency for in-store payments.
When Binance initially launched the token was built using ERC-20 standards on the Ethereum blockchain however they have since extended the blockchain to their own native Binance Smart Chain, BEP-20. This has had a considerable impact on our analysis, according to both etherscan and blockchair, the circulating supply on the ERC-20 chain is 16,579,517 BNB. There is a total circulating supply of 154,532,785. We can only assume that the difference in these two figures is the amount held on the BEP-20 blockchain for which we do not currently have comprehensive data on. As such, the distribution you see here is only confined to the ERC-20 chain which represents about 10% of the total supply. According to the ICO whitepaper, 40% of the tokens were allocated to the founders. Given the centralised nature of Binance, it’s no surprise that the distribution is also centralised. We must say that Binance has served the crypto community and acted as a trustworthy exchange for the people.