Wednesday, June 27, 2012

The Bitcoin Richest: Accumulating Large Balances

By Jon Matonis
Friday, June 22, 2012

Everyone is familiar with Forbes 400 as the definitive list to wealth in America. But few people know about the world's up-and-coming bitcoin richest and what motivates them to accumulate and maintain large balances.

The Bitcoin Richest ranks the top worldwide holders of bitcoin wealth on the blockchain. The caveats are that we cannot identify the affluent person or business (but you know who you are) and the same entity may hold the private keys to multiple bitcoin addresses. At the current exchange rate of $6.50 per BTC, the top address on the list holds control to an astonishing $2.85 million in total value (as of 6/20/12). Top ten balances are clickable to show dates with transaction history and my analysis follows:

BTC Balance                Bitcoin Address (Hash 160-bit format)

438824.90216295 8bf24a18a58ab500d30c73bf21dbf4703d31ad2c
105555.0000000 582431b9e63d2394c8b224d1bc45d07ae95d2379
79956.00100000   a0b0d60e5991578ed37cbda2b17d8b2ce23ab295
59258.88000000   89a37004da17f792487bcc26f853c7722c56fd91
53000.00000000   3d9e561f21d312f9b8b46e74169263e2452d5591
50129.66980000   2004f419e735115cb2a42cbc76f5b0a20c9698f8
50000.00000000   863ec44fbf7c9ed0819b52f275006b22ba781794
50000.00000000   f1c87a5e8ff7d14e74b858089bf771c94b1b6db4
47457.46000000   6fbe1851f5d1de5477d147e93b3da5c0c98f4e8e
45000.00000000   f68212be6db427d4b30f01113920db0e9e457c8d

Source: Bitcoin richest addresses created on June 19, 2012 by znort987 via blockparser.


What can we learn from this list? First, it demonstrates that a broad group of people are comfortable enough with the bitcoin crypto to exit the traditional banking system and leave significant value on the blockchain for extended periods. I can only guess that they must have a rigorous onsite and offsite backup process for retrieving the private key or perhaps they rely on Brainwallet for the utmost in mobility.

Also with the exception of the top three addresses, the wealth is evenly distributed as 8,000 BTC is the cut-off to make the top 100 list. Incidentally, this has remained consistent with a similar list computed in December 2011 in which the cut-off to make the list was 6,925 BTC.

But why leave your wealth in a distributed proof-of-work system instead of a traditional bank? In a broad sense, bitcoin wealth offers protection from unpredictable political risk such as sovereign confiscation, excessive taxation, and capital controls at the border. In addition to preservation of value when compared to national fiat currencies, bitcoin wealth eliminates bank solvency risk and the risk of exogenous shocks to the uber-leveraged financial pyramid. Remember, a pyramid was not a monument but a tomb.

One of the challenges confronting bitcoin consultants in certain industries is how to transfer bitcoin value in amounts of $10 million or more for purposes of trade settlement and for the mitigation of jurisdictional bank risk. With the total bitcoin market capitalization at approximately $60 million and the largest single address holding merely $2.85 million, you can begin to see the obstacles. The bitcoin market is still too nascent and small for robust use in global trade settlement. Liquidity and depth would have to increase significantly to accommodate requests without severe price disruption.

Thanks to the excellent work of, we can get an idea of current trade and settlement usage by looking at the 100 largest bitcoin transactions culled from the most recent 50,000 transactions. Bitcoin Days Destroyed also provides an indication of transaction volume that attempts to strip out transfers to oneself and account reorganizations.

For further reading:
"The death of banks – and the future of money", Detlev Schlichter, June 20, 2012
"Underground Remittances - From Hawala to Bitcoin", Mondato, June 20, 2012

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