You can still hear the legend of “whales” in the cryptic marketplace – billionaires who have huge amounts of digital currencies in their wallets. Most of them – due to the specifics of blockchain – are anonymous. In every myth there is one grain of truth (or even several grains). The research shows that in fact, a large part of such resources are held by quite a small number of investors in the cryptic space.
A minority has more than a majority
The problem is especially with altcoins. In the case of some of them, “whales” easily gain almost 50% of all coins.
Talking about whales and ownership by concentration of an asset
Addresses with more than 1%:$BTC 39 addrss owns 11.1%$ETH 154 addrss owns 40% $BCH 105 addrss owns 28%$LTC 128 addrss owns 47%$BSV 104 addrss owns 25%$ADA 39 addrss owns 40%$Tether 140 addrss owns 58%
— intotheblock (@intotheblock) January 9, 2020
Examples? In the Cardano (ADA) network, 39 addresses contain about 40 coins. The situation is slightly better with blockchain Ethereum (ETH), but even here you can find 154 portfolios that have huge amounts of tokens – a total of 40% of the total supply. This may affect the network in case of switching to PoS.
In the Tether network (USDT) we have 140 different addresses, which have accumulated about 58% of the total supply. However, the total USDT supply is difficult to track because tokens are issued in several networks. Most USDT tokens are also on the exchanges where they are used for arbitrage.
Overall, the data show that a total of 461 portfolios contain at least 40 percent of the ETH, LTC, ADA and USDT supply.
Altcoins and whales
The problem of centralization is also very often discussed in the context of Ripple, which is responsible for issuing XRP tokens.
It is worth noting that a frequent reason for concentrating altcoins in a relatively small number of portfolios is that they are transferred less frequently than e.g. BTC. This applies, for example, to the market for tokens that were issued under the ICO. Throughout 2018, they have very often lost value, so their investors have been ‘breeding’ them for the future so as not to sell them at great loss. With market prices falling, most digital coins remain dormant, waiting for better times. However, this also creates the risk of dumping when prices rise again during a possible new bubble.
Significantly, fans of the crypto are enemies of centralization. It turns out, however, that it is not so easy to escape from this idea even in the blockchain market.