Despite discussions about democratizing finance, a small number of investors still own the vast majority of Bitcoin.

According to Bloomberg, the National Bureau of Economic Research (NBER) recently released data indicating that only 10,000 individual investors possess almost one-third of all Bitcoin in circulation. This study builds on prior research by distinguishing between intermediaries that process large amounts of Bitcoin on behalf of users and privately held accounts, such as cryptocurrency exchanges, dealers, and brokers. Intermediaries will own around 5.5 million Bitcoin by the end of 2020, while individuals will own approximately 8.5 million. The top 1,000 investors, termed “whales,” held almost 3 million Bitcoin tokens.

To put it another way, at the price of $32,203.64 on January 1, 2021, middlemen held $177 billion in Bitcoin, while individuals held $274 billion. The total value of the Bitcoin held by these 1,000 investors was $96.6 billion, or $96.6 million each investor. To arrive at that figure, one must ignore the fact that transferring that much Bitcoin would cause a market disruption and have an impact on the cryptocurrency’s value (a Bitcoin is presently valued around $62,400). Given that no one knows who is behind those 1,000 accounts, it’s also likely underestimating the level of control.

Those behind those accounts most certainly gained significant Bitcoin holdings early on and continued to amass wealth—possibly by manipulating prices with the sheer weight of their holdings. Crypto enthusiasts, on the other hand, are unlikely to be alarmed if their own financial trajectory resembles that of the whales on a smaller scale.

“To our knowledge,” paper authors Igor Makarov of the London School of Economics and Antoinette Schoar of the MIT Sloan School of Management remarked, “we have the most comprehensive data on crypto entities used in academic research to date.” “There are 1,043 unique things in our data collection. 393 exchanges, 86 gambling websites, 39 online wallets, 33 payment processors, 63 mining pools, 35 scammers, 227 ransomware attackers, and 151 dark net markets and illicit businesses are among those included.”

According to the analysis, scams and other criminal activity on the Bitcoin network are widespread, though probably not to the extent that authorities have recorded.

“We estimate $550 million is moving to addresses identified as scams, $16 million is flowing to identified ransom payments, and $1.6 billion is flowing for dark net payments and dark net services,” the authors wrote. “Around $1.7 billion is flowing to gambling-related addresses, and another $1.4 billion is flowing to mixing services,” according to the report.

“We cannot rule out the potential that some of the larger addresses are controlled by the same entity,” the authors said, adding that “concentration measures are almost probably an underestimate.” One example, according to Bloomberg, is the 20,000 different addresses held by Satoshi Nakamoto, the identity for the person or people who invented Bitcoin and then vanished without taking their money. According to the technique used in the study, these accounts belonged to 20,000 different people.

Miners, or computer farms that generate new Bitcoins, are even more concentrated, according to the NBER, with the top 10% controlling 90% of mining capacity and the top 0.1 percent controlling 50%. This is due to the increasing difficulty of mining new Bitcoins, which scales in terms of processing and hence power consumption, resulting in large-scale Bitcoin farms leveraging vast stockpiles of dedicated hardware as the primary method of generating new units.

According to the academics, Bitcoin’s “inherent concentration” makes it “susceptible to systemic risk” and “means that the majority of the gains associated with higher adoption are likely to accrue to a small number of users.”

According to Bloomberg, this might expose the Bitcoin network to a “51 percent attack,” in which a malicious party can only take control by seizing control of more than half of the network’s miners. Such an attack would be unprecedented in extent and is extremely unlikely, at least outside the world of nation-states or James Bond villains.

Read the full study here: NBER Study