What happens when 1% of Bitcoin holders control 99% of the BTC supply?

Bitcoin first came into existence on January 3, 2009, when Satoshi Nakamoto mined the genesis block, minting the first cryptocurrency. In the years since, a few wallet addresses have accumulated a large portion of the supply.

According to the Blockchain Council, more than 19.71 million bitcoins have been issued to miners as block rewards. Satoshi Nakamoto’s white paper stipulates that there will only be 21 million bitcoins in existence, which means that most of them are already in circulation.

BitInfoCharts data shows that about 1.86% of wallet addresses (more than one million) hold more than 90% of the total BTC currently in circulation. These individuals or entities, known as "whales," hold large amounts of cryptocurrency.

Bitcoin Rich List: Source: BitInfoCharts

Caroline Bowler, CEO of Australian cryptocurrency exchange BTC Markets, said in an interview that the concentration of BTC ownership in a small number of addresses has both challenges and benefits.

“On one hand, it raises concerns about market manipulation, centralization, and liquidity constraints, ” she said.

“On the other hand, it provides these major shareholders with tremendous market influence, strategic advantages and exclusive opportunities.”

Bowler said that for the broader Bitcoin ecosystem, the centralization of the cryptocurrency highlights the importance of continuing efforts to promote decentralization and enhance market stability to mitigate potential risks related to uneven wealth distribution.

Satoshi Nakamoto’s original Bitcoin white paper proposed a decentralized peer-to-peer transaction system that did not require financial institutions or intermediaries. His goal was to wrest financial control back from the elite.

According to Exploding Topics, there are just over 46 million BTC wallets holding at least $1 worth of it. Less than half of these wallets hold more than $100 worth of the cryptocurrency.

Bitcoin wallet balance. Source: Exploding Topics

BitInfoCharts data shows that only four wallets hold between 100,000 and 1 million BTC, totaling 688,681 BTC. The next 100 largest holders hold a total of 2,464,633 BTC. These 104 addresses together account for approximately 15.98% of the total supply.

Bowler speculated that if the entire BTC supply was accumulated by a small group of “whales,” the entire ecosystem would be changed.

“Having 100% of all Bitcoin concentrated in a handful of addresses would fundamentally change the dynamics of the Bitcoin ecosystem,” she said.

“It will centralize control, undermine core principles of decentralization, and could lead to market manipulation, loss of trust, and increased regulatory scrutiny.”

At the same time, Bowler said these theoretical holders could have unprecedented power over the BTC network and its future, an outcome she believes could damage BTC’s reputation and drive users to more decentralized alternatives.

“If 100% of Bitcoin is in the hands of a few people, then interest and development in Bitcoin will likely fade away,” she said.

“The point of Bitcoin is that it is ubiquitous, and transactions and uses are popular among ordinary people. If it loses that popularity, then it’s likely that an alternative will emerge.”

Unprecedented market control, but that's all

Phillip Lord, president of cryptocurrency payment app Oobit, noted that if a small number of addresses own the majority of BTC, these whales will gain more control over the market, but they will still not be able to change the Bitcoin network or protocol.

“This centralization could affect the market because these addresses can influence the price of Bitcoin through large transactions,” he said.

“However, owning such a large percentage of Bitcoin does not necessarily imply direct control over the protocol or the ability to change its code.”

Whales already have a significant impact on Bitcoin market dynamics, and the huge amounts of Bitcoin they hold give them the power to sway supply and demand. As a result, traders and others in the space tend to keep a close eye on any transactions by whales.

When whales increase their Bitcoin reserves, prices tend to surge, while selling some of their holdings causes prices to fall.

Source: CryptoQuant/Cryto India

Lord said there is a distinction between BTC as a cryptocurrency and the Bitcoin network, which is the decentralized infrastructure of the project.

While individuals can own BTC as a token, the Bitcoin network follows the principle of decentralized architecture.

Lord believes that the protocol or code can be changed, but it requires a decentralized consensus process, not one that controls the majority of BTC. Changes are proposed through Bitcoin Improvement Proposals (BIPs), which are then discussed and reviewed by the community.

“For a change to be implemented, it must have broad support from miners, developers, and node operators,” Lord said.

“Once enough consensus is reached, the changes are incorporated into a new version of the Bitcoin software, which users can choose to adopt. If a supermajority adopts the new version, the changes become part of the Bitcoin protocol.”

Governance model relies on community consensus

Jonathan Hargreaves, global head of business development at Elastos, a Web3 ecosystem developing layer 2 solutions for Bitcoin, said that any concentration of wealth in the hands of the top 1% remains a core problem for the global economy.

According to Oxfam International, a British nonprofit, 81 billionaires own more than 50% of the world's total wealth.

If BTC were to go down this path, Hargreaves said, “centralization could lead to centralization.” This could change “the fundamental principles of Bitcoin,” which seek to redefine the social contract to achieve global consensus.

However, he believes that any amount of BTC will not provide additional control over the network, and the only additional benefit is wealth.

“Bitcoin and decentralized currencies initially promised greater inclusion, but that goal has not materialized as expected,” Hargreaves said.

“However, Bitcoin’s governance model does not empower holders to change its core mechanisms. Key principles such as the 21 million bitcoin limit and non-inflationary nature are immutable, so the 1% gain is limited to wealth creation opportunities.”

Certain aspects of the BTC code have been modified or removed in the past. Operation Concatenate (OP_CAT) was an opcode that allowed users to combine two data sets into a single transaction script, but it was disabled by Satoshi Nakamoto in 2010 for security reasons.

Hargreaves said the governance model relies on community consensus involving developers, node operators, miners, core development teams and technical staff, similar to a typical open source project.

“Ownership concentration may not in itself pose an immediate threat, but the concentration of capital could erode these principles over time,” Hargreaves said.

“However, it is expected that these community stakeholders, including Satoshi, may resist attempts to influence or buy consensus. Therefore, I view 100% BTC ownership not as a threat, but as an attempt to buy the Bitcoin network.”

There is nothing stopping whales from holding all the Bitcoin

Sasha Ivanov, founder of the Waves Tech ecosystem, said that at this stage there is no mechanism that can provide "fair distribution and prevent the traditional Pareto distribution of wealth," where the top holders own all the BTC.

He believes that whale addresses that own the largest supply of a particular asset bring them material benefits because they can indirectly control prices and engage in market manipulation.

“The big guys have the financial power to bend the landscape in the direction they see fit,” he said.

“This could lead to the complete centralization of Bitcoin, as the community would have no financial incentives and would be driven entirely by the vision of a group of large investors.”