Will the high concentration of Bitcoin become a power game for financial sharks?

According to Bitinfocharts, about “2% of Bitcoin addresses control 95%” of the Bitcoin, reflecting the current high concentration of Bitcoin. This raises a question: Will the high concentration of Bitcoin become a power game for financial sharks?

Supporters' viewpoint:

It is believed that Bitcoin is the most powerful tool for class solidification in history. “Bitcoin counteracts excessive currency issuance and protects labor results from dilution” is a beautiful lie concocted by speculators seeking moral justification for their speculation.

1. The “sovereignty endowment” of Bitcoin is essentially asymmetric: due to high centralization, the common people have no sovereignty.
2. The fundamental contradiction between speculation and labor value: The value growth of Bitcoin highly relies on the influx of funds from later investors (the “greater fool theory”), and ordinary workers buying Bitcoin are converting the fruits of their labor into speculative chips, ultimately becoming victims of harvesting.
3. The transfer of power hidden under the guise of technological idealism: Bitcoin rules have become rigid, reduced to the jungle law of “code is law,” consolidating the privileges of early players.
4. Scarcity ≠ Fairness, and may even exacerbate plunder: When the total amount of assets is fixed and highly concentrated, it can become a tool for accelerating wealth polarization. Even the fiat currency system can alleviate this problem through universal inflation.
5. The Paradox of Personal Node Enhancement: The trend of personal node enhancement in the AI era may not necessarily require Bitcoin to be realized; a more reasonable personal sovereignty is based on “programmable public infrastructure” (such as UBI systems and DeFi with open APIs).

01 | Bitcoin is not meant to solve social equity.

Bitcoin is not designed to pursue absolute “fairness.” First, we must understand that “fairness” itself is not an objective, fixed standard, but a relative concept influenced by multiple factors such as culture, social background, and economic conditions. In any society, “fairness” is always a dynamic topic that is continuously debated and interpreted. In fact, fairness is more of an ideal goal in the operation of society; it is one of the motivations that drive people to pursue higher objectives, rather than a completely achievable ultimate state.

At this point, the design philosophy of Bitcoin differs fundamentally from traditional concepts of social fairness. The core idea of Bitcoin is the decentralization and free circulation of digital currency, which focuses more on providing a relatively stable and fair means of value storage and exchange without central control and third-party intermediaries. The fairness of the Bitcoin system is reflected in its provision of security and transparency for transactions through cryptography, rather than pursuing a certain social meaning of “class equality” or wealth equalization.

In the Bitcoin ecosystem, there indeed exist different participants who may have significant disparities in terms of economic status, technical capabilities, and market influence. This disparity does not imply that there is “inequity” within the Bitcoin system itself, but rather reflects the class and diversity that are commonly present in markets, technology, and human society. Whether in traditional economic systems or in new systems based on decentralized technology, class differences always exist. The emergence of Bitcoin is precisely to address the opacity and centralization issues in traditional financial systems, and to provide users with greater freedom and choice.

Even in the future, when artificial intelligence can bring great material abundance and change the way resources are distributed, it will still be impossible to eliminate the hierarchical structure of society. The existence of classes is not only due to the unequal distribution of resources but also stems from the diversity of individual differences in knowledge, ability, motivation, and other factors within human society. Even if everyone has basic living security, new classes will still form in other dimensions of society, such as innovation ability, leadership, education level, and social influence.

Furthermore, even if the abundance of material wealth and the widespread access to technology bring everyone's living standards closer to equality, the social class structure can still be manifested through other non-material aspects. The competition in human society goes beyond material wealth; it also includes the leading positions in thought, culture, education, and technology. These factors will continue to shape the social class structure, even as technology and wealth themselves become more widespread. Therefore, class is essentially not merely tied to material wealth, but involves a more complex social dynamic.

In summary, the existence of Bitcoin is not to eliminate social classes, but to provide a new financial system and resource distribution method that emphasizes individual freedom, privacy protection, and a decentralized economic model. In any social system, the existence or absence of classes is not only influenced by the economic system but also deeply related to social culture, technological advancement, and the diversity of human behavior. Therefore, relying solely on technology or economic means cannot completely eliminate social classes, nor achieve so-called absolute fairness.

02 | Whether buying Bitcoin is considered speculation depends on the investor's attitude and approach.

Buying Bitcoin does not equal turning labor results into speculative chips, becoming a target for harvesting. Even the most hardcore asset, if treated speculatively, becomes a speculative asset, such as leveraged high-frequency trading of gold. In fact, over the past decade, Bitcoin's average annualized return has been very strong, despite its high volatility, it remains a high-yield asset in the long run and has consistently outperformed other major investment products.

From 2013 to 2024, the average annualized return of major investment products over this decade is compared:

Bitcoin: approximately 77.92%;

S&P 500: 9% - 10%;

Gold: 2% - 4%;

U.S. Real Estate: 8% - 10%.;

US Bonds: 2% - 3%;

The price growth of Bitcoin does not solely rely on the “greater fool theory.” Its growth comes from global recognition of it as a decentralized asset. Although Bitcoin's price is highly volatile, its long-term value primarily depends on the market's recognition of it as a non-national currency, an anti-inflation asset, and a store of value.

03 | Bitcoin is not absolutely rigid; it has its ways of evolution.

1. The design philosophy of Bitcoin: stability and conservatism

The design philosophy of Bitcoin differs from many other crypto projects. The core idea of Bitcoin is “decentralization,” and it is very conservative in its technical architecture. The designer of Bitcoin, especially Satoshi Nakamoto, has explicitly set some very basic rules with the aim of making Bitcoin a decentralized currency that is resistant to censorship and tampering. These rules are mainly reflected in the following aspects:

● Limited Supply: The maximum supply of Bitcoin is capped at 21 million coins, which is an important characteristic of Bitcoin aimed at preventing inflation and maintaining the scarcity of the currency.

● Consensus Mechanism: Bitcoin relies on the “Proof-of-Work” (PoW) mechanism, rather than the more modern “Proof-of-Stake” (PoS) mechanism, which means that Bitcoin's blockchain maintains a higher energy consumption and has a slower update speed.

● Upgrades and Innovations: The upgrade process of Bitcoin is very cautious, and any changes require broad community consensus. Although the Bitcoin community has innovations like the “Lightning Network” to address scalability issues, the core protocol of Bitcoin itself has remained relatively closed and conservative so far.

These characteristics can be seen as a manifestation of “rule rigidity.” The innovation of the Bitcoin system is gradual and conservative, avoiding frequent changes to the core protocol, which to some extent prevents unnecessary risks. However, this conservatism also means that Bitcoin's iteration speed in certain aspects is relatively slow, especially compared to other crypto projects such as Ethereum and Solana. But this conservatism is one of Bitcoin's advantages, allowing it to maintain long-term stability as a reserve currency and store of value.

2. How Bitcoin undergoes upgrades and iterations:

1. Community Consensus Mechanism:

Bitcoin upgrades are typically achieved through a “soft fork” or a “hard fork”. A soft fork refers to backward-compatible changes to the Bitcoin protocol, meaning it does not affect the validity of the existing blockchain, while a hard fork signifies significant changes to the protocol that may result in a chain split incompatible with the old version of Bitcoin. These upgrades require consensus from a broad group of stakeholders, including Bitcoin developers, miners, node operators, and community members. This “democratic” decision-making process ensures that Bitcoin cannot be easily controlled by a single party, while also making the upgrade process relatively slow and less susceptible to external pressures.

2. Bitcoin's technological innovation:

● Lightning Network: To address scalability issues, especially the challenges of high transaction speeds and costs, the Bitcoin community introduced the “Lightning Network” as a second-layer scaling solution. The Lightning Network allows users to make almost instantaneous and low-cost payments by establishing payment channels without needing to record every transaction on the main chain. This innovation, while not altering Bitcoin's core protocol, effectively solves the scalability problem of Bitcoin.

● Taproot Upgrade: In 2021, Bitcoin implemented the Taproot upgrade, the largest protocol upgrade since 2017. Taproot improved Bitcoin's privacy, smart contract capabilities, and transaction efficiency. It further enhanced Bitcoin's functionalities by making smart contract execution more efficient, making it more competitive, especially in competition with platforms like Ethereum.

3. The innovation and iteration capabilities of Bitcoin:

The innovation and iteration capability of Bitcoin is not lacking, but rather has its specific way and rhythm. Due to Bitcoin's design philosophy that emphasizes decentralized consensus, this makes it impossible for Bitcoin to undergo rapid hard changes or adjustments like some centralized projects. Innovation and iteration depend on discussions within the developer community and acceptance by all network nodes, so Bitcoin's “updates” are made after long and careful consideration, especially in avoiding network splits and damaging network stability.

The upgrade process of Bitcoin places a strong emphasis on ensuring security and stability, which also means that it is not prone to frequent and radical technical changes. For example, on the issue of scalability, the Bitcoin community has not chosen to enhance performance by changing the consensus mechanism (such as from PoW to PoS) like Ethereum, but is more inclined to enhance its scalability through Layer 2 solutions (such as the Lightning Network), maintaining the stability and security of the protocol itself.

04 | The scarcity and high concentration of Bitcoin do not equate to the exacerbation of wealth polarization; rather, the inflation of fiat currency is.

First, the scarcity of Bitcoin does not directly lead to wealth polarization, but rather the behavior of market participants and early investors has influenced wealth distribution; secondly, the inflation mechanism of the fiat currency system does not genuinely alleviate the wealth gap, but may instead exacerbate the rich-poor divide, especially to the detriment of middle- and low-income groups.

1. The relationship between the scarcity and fairness of Bitcoin

● Scarcity and Fairness: Scarcity itself does not directly determine fairness. The scarcity of Bitcoin is a core feature of its design, intended to prevent inflation and currency devaluation. Whether scarcity leads to fairness is more about how these scarce resources are allocated and obtained, rather than the scarcity itself. The scarcity of Bitcoin does not necessarily lead to “wealth polarization” because Bitcoin is freely exchangeable, and everyone has the opportunity to participate.

● Wealth concentration issue: Indeed, in the early stages of Bitcoin, due to the advantages of pioneers and miners, there may be a concentration of wealth. However, this is not an inherent flaw of Bitcoin, but rather a common phenomenon in the early stages of the market. As Bitcoin becomes more widely adopted and liquidity increases, the market gradually tends towards a more balanced distribution of wealth. Just like other asset markets (such as stocks and gold), initial wealth concentration is a normal phenomenon, and later on, with the proliferation of technology and broader participation, wealth distribution tends to diversify.

2. The Inflation Mechanism of the Fiat Currency System and Wealth Distribution

● Inflation and Wealth Distribution: The inflation of fiat currency systems can indeed alleviate the phenomenon of wealth concentration in the short term, but it does not address the fundamental issue. The “wealth redistribution” brought about by inflation is, in fact, a kind of “tax” on all members of society, and this tax is not equitable. In reality, the most direct victims of inflation are often the middle and low-income groups, as their wealth reserves are primarily in the form of cash or deposits, and inflation decreases their purchasing power. The wealthy are often able to offset the impact of inflation through asset investments (such as stocks, real estate, precious metals, etc.).

● The reversed effect of wealth polarization: The fiat currency system attempts to alleviate the concentration of wealth through inflation, but this logic is flawed. The inflation mechanism (especially under monetary easing policies) systematically dilutes the value of money, which may actually exacerbate wealth inequality, as most wealth tends to be concentrated in the hands of asset holders who can achieve higher returns through asset appreciation. Meanwhile, the wealth gap often widens during inflation, as low-income groups are unable to hedge against the depreciation of their wealth through asset appreciation.

05 | The strengthening of personal nodes is an inevitable product of productivity advancement, Bitcoin provides assurance rather than a solution.

The strengthening of individual nodes is not directly empowered by Bitcoin or the UBI system, but is closely related to the progress of productivity. With the continuous advancement of technology, especially the development of technologies like artificial intelligence, individuals will gradually possess greater autonomy and capability. For example, the high maturity of AI may allow everyone to have tools similar to the “Aladdin's lamp,” which not only enhances productivity but also liberates individual power. Therefore, the strengthening of individual nodes is a natural result of the evolution of social productivity; it is a manifestation of technological innovation empowering individuals.

Against this backdrop, as individual capabilities improve, social organizational forms will inevitably change to better adapt to these new demands. For example, individuals will place greater emphasis on the protection of labor achievements and pay more attention to the autonomy and security of wealth. This also creates a demand for new wealth protection mechanisms (such as Bitcoin), but Bitcoin itself does not directly address the issues of wealth distribution or social equity; it is more like a new way to safeguard wealth sovereignty.

The design of Bitcoin is not intended to “redistribute” wealth through some mechanism, but rather to provide a decentralized means of security that does not rely on traditional financial systems. The core advantage of Bitcoin lies in its fixed supply and decentralized nature, which makes it a relatively stable store of value that can protect against inflation and depreciation of wealth in traditional currency systems. Therefore, Bitcoin offers individuals a means to combat systemic risks and maintain wealth sovereignty, rather than addressing fairness issues directly through wealth distribution.

Similarly, systems like UBI (Universal Basic Income), while providing a minimum living guarantee for each individual in the era of AI, aim to ensure that everyone has at least basic economic security amid the social changes brought about by technological advancement, rather than addressing the issue of unequal wealth distribution. UBI is not intended to strengthen individual nodes, but rather serves as a protective measure for socially disadvantaged groups, ensuring that no one is left behind during social transformation.

In general, the strengthening of individual nodes is an inevitable result of social productivity and technological progress, with Bitcoin and the UBI system both providing guarantees for this process: Bitcoin addresses economic risks by ensuring wealth sovereignty, while UBI ensures a minimum living guarantee. These mechanisms do not directly address issues of fairness, but rather provide individuals with the conditions for survival and development in the new era.

06 | Is the high concentration of early Bitcoin a fatal problem?

From the perspective of value storage, Bitcoin is very similar to gold, just an upgraded decentralized digital version. It's easy to understand this issue by looking at the history of gold's development. In the early days, the concentration of gold was also very high, but now the problem has gradually eased over time (currently, about 70% of the world's gold reserves are concentrated in the hands of central banks and financial institutions), and it no longer has a decisive influence.

1. The concentration issue of early gold

Gold has not historically achieved complete equitable distribution in its role as currency and a store of wealth; in the early days, gold was primarily concentrated in the hands of the following groups:

1. Conquerors and Colonizers:

In ancient and medieval times, the acquisition of gold was closely related to conquest and colonial expansion. Western colonial powers obtained large amounts of gold through the conquest of regions such as South America. For example, during Spain's colonial process in the Americas, the large-scale plunder of gold led to a significant concentration of gold in the hands of a few nobles and states.

2. Aristocracy and Imperial Centralization:

In feudal society and the imperial era, gold was often a symbol of royal power and nobility. Great empires such as China and the Roman Empire centralized gold in the hands of emperors and the powerful, making it difficult for ordinary people to acquire gold ownership.

3. Control of financial institutions:

With the formation of the financial market, gold gradually became a monetary reserve and financial asset. Banks, precious metal traders, and financial institutions controlled the circulation and reserves of gold through means such as the gold standard. Until the early 20th century, the majority of the world's gold reserves were concentrated in the hands of a few large banks and countries.

2. The evolution of the golden landlord class

Although gold underwent a process of centralization in the early stages of history, over time, the way gold is held has gradually changed, moving towards a broader distribution:

1. The impact of the gold standard:

The establishment of the gold standard gradually made gold the standard currency unit in international trade, with countries accumulating gold reserves in their central banks. This process, to some extent, enhanced the universality of gold as a means of international payment, making it no longer just the privilege of a few nobles and wealthy individuals.

2. The democratization of gold (late 20th century):

In the early 20th century, especially after World War II, with the changes in the global economic system, the purchase and holding of gold gradually became accessible to the general public. In the United States, during the 1930s, although there was a gold ban (such as the Gold Reserve Act of 1933 under the FDR administration), the right to hold gold was gradually restored, allowing ordinary investors to participate through bank deposits, trading, and investment.

3. The popularization of gold as an investment asset:

After the United States ended the gold standard in 1971, gold gradually transformed into an investment commodity. With the emergence of financial instruments such as the stock market, gold ETFs, and gold futures, ordinary investors began to have the opportunity to indirectly hold gold through these financial products. Gold became more “democratized,” allowing more ordinary people to access investment opportunities in gold through these channels.

4. Current distribution of gold:

Currently, gold has not been fully liberated from wealth concentration. Although the gold market has opened up and investors can invest in gold through various channels (such as ETFs, futures, etc.), the reserves of gold are still highly concentrated in large countries and major financial institutions. For example, the Federal Reserve, European Central Bank, and others still hold a significant amount of gold reserves, while the gold holdings of ordinary investors are relatively low. According to data from the World Gold Council, approximately 70% of the world's gold reserves are currently concentrated in the hands of central banks and financial institutions, with relatively little gold held by retail investors. The issue of gold concentration has gradually alleviated over time and no longer has a decisive impact.

3. The concentration of Bitcoin.

The distribution of Bitcoin shares similarities with gold, but also has some unique characteristics:

1. Early centralization issues:

The early distribution of Bitcoin was very centralized. The creator of Bitcoin (Satoshi Nakamoto) and early participants (especially miners) acquired a large amount of Bitcoin, with about 80% of Bitcoin held by a small number of early users and mining pools, which is similar to the early centralization of gold.

2. Current concentration of Bitcoin:

Currently, the concentration of Bitcoin is still relatively high, although over time, more and more individuals and institutions are joining the Bitcoin network. According to Bitinfocharts, about 2% of Bitcoin addresses control 95% of the Bitcoin, which means that Bitcoin wealth is still highly concentrated in a few wallets. Whale addresses (addresses that hold a large amount of Bitcoin) still dominate the market. Although blockchain technology itself provides decentralization guarantees, the value of Bitcoin remains susceptible to manipulation by a few large holders.

3. The decentralization challenges of the Bitcoin network:

Although the blockchain technology itself provides a guarantee of decentralization, the “power” controlling Bitcoin is still in the hands of mining pools and large holders. In particular, the concentration of mining pools remains an issue. Although the Bitcoin protocol does not have central control, over 50% of the computing power is concentrated in a few large mining pools, which allows these pools to influence decisions in the Bitcoin network in certain situations, making Bitcoin still susceptible to manipulation by a small number of large holders.

4. The trend of concentration for Bitcoin in the future:

The degree of decentralization of Bitcoin is continuously increasing, but the issue of wealth concentration has not been fundamentally resolved. As an asset, Bitcoin still faces challenges similar to those of gold: early winners hold most of the resources, while later investors can only participate at a higher cost. Currently, the value growth of Bitcoin relies more on institutional investors and large capital inflows, as these institutions can control the market by purchasing large amounts of Bitcoin, while ordinary retail investors often find themselves at a disadvantage during market fluctuations.

The decentralization of Bitcoin may improve with the further evolution of blockchain technology and the maturation of financial markets. For example, the emergence of technologies such as the Lightning Network and layer two protocols can promote the popularization of Bitcoin by reducing transaction costs and increasing transaction efficiency, further decreasing wealth concentration and market manipulation.

4. The concentration of wealth in the early stages of the market is a common phenomenon and not a fatal issue.

In any emerging market or emerging asset class, the initial concentration of wealth is almost inevitable. This applies not only to Bitcoin but also to traditional assets like the stock market and gold. This phenomenon can be explained by the following factors:

● Information Asymmetry and the Advantage of Early Entrants: In the early stages of emerging markets, usually only a small number of participants (such as developers, early investors, technical experts, etc.) can access accurate information and seize investment opportunities. The early “miners” of Bitcoin are a case in point, as they obtained a large amount of Bitcoin through extensive Bitcoin mining. These early participants were able to gain an advantage in the face of market “information asymmetry” and technical barriers.

● Market Network Effects: Similar to the economic principle of network effects, early participants in a market with fewer participants have a greater opportunity to achieve higher returns. As the market matures and the number of participants increases, while the share held by early market participants no longer dominates, they can still benefit from network effects, driving the overall value growth of the market.

● First-mover advantages in capital and technology: In the early stages of Bitcoin, miners and investors relied not only on the technical advantages of early entry but also on investing large amounts of capital to enhance mining efficiency. Through capital and technological advantages, early Bitcoin holders reaped doubled returns on Bitcoin's price and network effects.

The early concentration of wealth in Bitcoin is not fatal. With the popularization of technology, the maturation of the market, and the increase in participants, the distribution of wealth will gradually diversify. The decentralized nature of Bitcoin and its function as a store of value lay the foundation for its long-term development, preventing it from becoming a “speculative fool's game.” Its core value lies in its potential as a global decentralized currency, and the trend of decentralization stems from technological advancements and network participation, rather than wealth distribution. As technology and networks expand, the issue of wealth concentration is expected to be alleviated and will no longer have a decisive impact.

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