Big insight from tiny fraction of bitcoin owners

Quick—Take a guess: How many individuals own at least 1 BTC?

I was asked this question today at Quora, a popular Q&A blog covering a variety of technical and economic disciplines. Under my alias “Ellery”, I am the most viewed author on Bitcoin and the blockchain.

While this question may sound like a factoid for a trivia game, the answer has far reaching impact on your pocketbook and your future. It goes to the heart of a debate between warring factions: In the 2nd half of this answer, I address a more pressing question:

Is Bitcoin a pyramid scheme? Or are we still early on the adoption curve?

But, let’s start with the question at hand…

There is no certain answer to the number of people who own Bitcoin or how many own more than 1 BTC. We know that tens of millions of wallets have been created, but this certainly doesn’t help. Although the value of every single wallet is publicly disclosed on the blockchain (most have a zero balance), there is no way to determine who owns each wallet. Some may be controlled by organizations or custodians on behalf of many individuals, while others may be just one of many wallets with a single owner.

Most of my Bitcoin is in a wallet or a vault hosted by Coinbase, the San Francisco exchange. When I log into my account to view my wallet ID, I see that I have dozens of wallets—all valid. The large number of wallets is not related to my wealth. Rather, it a byproduct of my many small transactions. Coinbase creates a new wallet each time that I buy, sell, or purchase something with my BTC. There are good reasons for this practice, but it certainly muddies the correlation between wallets and number of owners.

There are 16.6 million coins in circulation today (a bit less, since some have been irretrievably lost). That puts a cap answering the question. There cannot be more than this many people with a full BTC—currently worth about USD $5900.

But, we know that the number of individuals with a full coin is considerably less. After all, many people in my own circles own dozens of coins, and Satoshi is very likely to hold 1 million BTC. Coinbase and Bitstamp are just two of very many custodial exchanges (i.e. they offer a cloud wallet or vault service to their clients). They host many hundreds of wallets with more than 50 coins. In almost each case, the client has provided single-user taxpayer information to these services, and so it is very unlikely that a significant fraction of these wallets belong to more than a single person or family.

And, let’s not forget that a far greater fraction of exchanges fly under the covers. That is, they don’t collect taxpayer information or report the wallets that they administer to any authority—nor to analysts or journalists like me.

So, while no one can accurately estimate the number of individuals who own 1 or more BTC, the answer is very likely under 2.5 million, worldwide. 1

The number of people who have heard of Bitcoin is growing rapidly. In the United States, fewer than one in twenty people were aware of Bitcoin just 2½ years ago (at the beginning of 2015). By September 2017, almost one in four USA adults a reasonable idea what it is—and most of them could debate their position on its future. 2

There will never be more than 21 million bitcoin. This is the mathematical upper limit. Compare this with the current US population of 323 million. So even if all Bitcoin owners were in America (they are not!) and if no one owned more than 1 BTC, fewer than 1 in 19 Americans could own a full Bitcoin today and fewer than 1 in 15 after all bitcoin are mined.

If we consider the global population of 7.6 billion, fewer than 1 in 458 people could own a full Bitcoin today. Since most early adopters have more than 1 BTC, the actual fraction is probably much smaller than 1 in 25,000 individuals.


In the introduction, above, I said that the question about how many people own more than 1 BTC leads to a more profound question. In fact, this innocent trivia question, leads to insight about adoption and the economics of investing in a deflationary instrument as it spreads throughout commerce, investors and all sorts of institutions.

Moral of the story…

The original question asks for a simple number. It doesn’t ask for editorial perspective. But it’s tough to resist. With fewer than 1 in 25 thousand people owning a bitcoin, a reasonable question is:

Will adoption increase, even if interest is limited to only one sector?

For example, what if Bitcoin falters in all but one of these venues: Bleeding edge geeks, collectors, investors, p2p payments, interbank transfer, debt settlement, or treatment in some regions as a currency.

Answer: Even if Bitcoin continues to show strength in just one of these areas, it will eventually be used or accumulated by millions of new users—even if they don’t realize it!

Do you see where I am going with this? Even if you believe that Bitcoin will…

  • never be treated as a store of value (this is nonsense of course),
  • only be used on one continent (nonsense, again),
  • never erode payment & settlement services such as Visa or PayPal (it already has),
  • that governments can successfully block payments or deter growth (they cannot—and they are gradually realizing that it does not interfere with taxing or spending or sovereignty),
  • that another digital coin will overtake Bitcoin (it cannot—the reasons are subtle, but they are well understood)…

Even if you believe in all of these limiting factors, the overall demand for Bitcoin has barely begun. We have not even started climbing the hockey-stick curve toward limited adoption as an occasional, alternative payment mechanism.

At conferences and in my own classroom, I am often asked: Should I still acquire Bitcoin? —Or is it too late? After all, it has risen from a fraction of a penny to $6,000 in just a 7 years. And from under $1000 to $6,000 this year alone!

I am not a financial advisor. I often speculate, but never offer guidance. I embrace the wisdom that past performance is never an assurance of future gains. But, I ask students to look at the assumptions and at the math: Unlike US dollars, shares in Apple, pork bellies or gold pressed latinum, Bitcoin is firmly capped. There will never be more than a paltry 21 million coins. That means that each coin absolutely, positively must increase in value with even a modest adoption scenario.

The Argument Against Bitcoin

Bitcoin is a pure supply-demand commodity. Since the supply is fixed and well understood, the only argument against acquiring Bitcoin arises from a belief that demand will dwindle. This is the argument of someone who believes that Bitcoin will fail to gain any further traction in any sector.

Perhaps you believe that something else will displace it, or that governments will find a way to effectively defeat it. If you have been reading my Blog (or my Quora answers) for more than a few months, then you already know that neither scenario is realistic.

I believe that investment in Bitcoin a speculative asset retards adoption. I defend this opinion in many interviews and articles. Although I hope for fewer speculators and more ‘legitimate’ users, I own an outsize share of the world’s future value store, transfer media and fungible, liquid asset. I am guilty of the speculation that I seek to deter.


1 & 2 CRYPSA Research, Feb 2015 and Oct 2017, Cryptocurrency Standards Association. Polls conducted at Rein’s New York Deli in Vernon CT and Spectrum Center, Irvine CA.


Ellery Davies co-chairs CRYPSA, publishes Wild Duck and hosts the New York Bitcoin Event. He sits on the New Money Systems board at Lifeboat Foundation and kicks off the Cryptocurrency Expo in Dubai this month. He frequently consults and presents.

Jump into Bitcoin with Intuitive Understanding

In the past, I have written articles for beginners:

More recently, I have written about economics of adoption, tech issues / growing pains, and the politics of a stateless money that cannot be controlled:

It’s time to try something different. The largest segment of society is still sitting on the sidelines. They want to know more about Bitcoin, but they don’t want baby steps. They are business people, students, armchair economists or investors—and they want to get up to speed quickly.

Grab a cup of coffee and view these two videos by the eloquent and charismatic Andreas Antonopoulos. They can bring anyone up to speed on the economic and geopolitical ramifications of Bitcoin—without wading through code, math or gobbly-geek. If you are college educated or experienced in finance or economics, these short presentations are all you need. You can fill in the blanks with your own experience or by checking out the articles linked above. They provide the missing details.

Who is Andreas Antonopoulos?

No one knows who is Satoshi Nakomoto, the effusive genius behind Bitcoin and the blockchain. So without an inventor or founder to appear on TV news interviews or the evening talk shows, we have Andreas Antonopoulos as the charismatic face of Bitcoin. He is intelligent, passionate, incredibly articulate and he is an advocate for individual empowerment.

Like Andreas, I teach a class on the Blockchain, give academic lectures, consult to banks and businesses, write columns and develop courseware. But there is no way to get around the fact that I run a distant second behind Andreas. His voice (and his widow’s peak hairline) are associated with the most important financial development of the 21st century.

I first met Andreas at the 2015 MIT Bitcoin Expo. Later that month he was keynote speaker at the New York Bitcoin Event at which I was co-host and producer. Way back then, Andreas told me that Bitcoin would never become a money—and so, it would never be a threat to national currencies. Well, if these two videos are any guide, then he has certainly changed his mind. Either way, my more popular peer is now in violent agreement with my view of Bitcoin’s full potential, and so it is no accident that these videos will also give you a dose of our shared economic and political perspective.

  1. Fake News, Fake Money (26 minutes)

2. Money as a System of Control (17 minutes)

These videos don’t describe how Bitcoin works, where to obtain it, or how it is mined. Those are just details. Instead, the videos put Bitcoin into perspective against the history of money and the geopolitical interests of governments. Once you have viewed the videos, browse the articles linked at the top of this page. They backfill the details. Then, you will have become a Bitcoin pundit the quick way…by jumping into the deep end of the pool!

Bad News is Good News for Bitcoin Investors

Bitcoin was hit by a double whammy this week. On Tuesday, Jamie Dimon of JP Morgan declared that Bitcoin is a fraud that will “blow up”. Then, just this morning, a Bitcoin exchange in China announced that it would shut its doors in response to verbal pressure from regulators and an uncertain regulatory environment.

Don’t ya just love it when bad news breaks on Bitcoin? I sure do! It creates a buying opportunity. After all, just look at what happened after the last five bouts of bad news:

In each case, the Bitcoin exchange rate dropped—very briefly—and then climbed higher with renewed vigor. Heck it, doubled from $2400 to $4800 in just the past month! But here’s a the real question: Does either bad news events have legs? Does it spell the end of Bitcoin adoption and enthusiasm, at least for now?

After all, if it were discovered that the math behind Bitcoin were flawed, and that anyone could create forged coins, the empire would come tumbling down. In my book, this would constitute a crisis. But what about now? Do these two damning events—and a 35% correction in the past week—constitute a long-term crisis? To answer, we must first determine if public fears over these two events are credible…

China and JP Morgan: (a) A frightened authority (b) Simple Ignorance

Like most governments, the Chinese are concerned that the growing flight to Bitcoin is impacting liquidity of their national currency. [A superb presentation by Andreas Antonopoulos—Click it, after you read this article]. They are also concerned about the large number of Bitcoin exchanges that operate outside of a tight regulatory framework. They obscure the flow of money in and out of the country and they are a clear scapegoat for tax evasion or other criminal activity. Like any agency charged with financial regulation, the Chinese seek to reign in and regulate these maverick exchanges.

It is interesting to note that the Chinese government is not discouraging Bitcoin mining or even personal savings—only the proliferation of unlicensed exchanges and quasi-anonymous users. After all, More than 50% of all mining is done in China, and it helps to balance the loss of liquidity in the national currency.

Bitcoin is experiencing increased adoption—not just as a payment mechanism—but as a new form of stored value. Is this is a bad thing for governments? Surprise! When a government loses control over its own reserve and monetary policy, it may present more of an opportunity than a threat—for both  citizens and governments. Gradually, economists, treasury secretaries, reserve board governors and monetary tsars will are coming to the same conclusion. But regardless of your position on this point of debate, here is a fact that is less controversial…
When governments attempt to restrict an activity that cannot be economically monitored or enforced—or at least when they attempt to do it in a way that leaves no relief valve for hobbyists, business, commerce, research or NGOs—they ultimately fuel the activity that they set out to stifle. Ultimately, if the public cannot discern a reasonable basis for government censorship or excessive restrictions, it leads to interest, innovation, adoption and the emergence of hot new markets.

Consider, again, the graph of Bitcoin price -vs- Bad news events at the top of this page.

On each date highlighted above, there was a damning piece of information that should cause early adopters to reconsider their enthusiasm for Bitcoin. In fact, the Hearn Dump really should have ended the whole party. A core developer sold off his entire BTC savings and claimed that the experiment was a failure. He published an article with his reasons for believing that Bitcoin was dead. Likewise, the SEC decision to prohibit the creation of an exchange traded fund (the Winkelvoss ETF), it sent a clear signal that governments really didn’t consider cryptocurrencies to be an asset at all.

But the graph demonstrates that each piece of “bad news” fueled a miniature rally. That’s because Bitcoin has none of the elements of a pyramid scheme. It is not an MLM and it cannot be manufactured or controlled by any organization. Rather, it is an exercise in pure supply, demand and market recognition. It is pure adoption mechanism that leads to a two-sided network. It’s benefits multiply as more users join the party.

What about Jamie Dimon at JP Morgan? He says that Bitcoin will crash.

Bitcoin has had a rocky road these first 8 years. Major exchanges have been bankrupt or worse, enormous criminal conspiracies were among the early adopters, the SEC has prohibited the creation of an ETF based on cryptocurrency, rogue spin-off coins are driving a wedge among users, and there are serious problems related to scaling and governance. A casual observer might wonder who is in control and who can be held responsible? After all, the idea of an economic mechanism that is altered by democratic—but decentralized—factors is new and radical. How can Bitcoin evolve, adapt and grow in the absence of an authority at its heart?

This confusion arises from the newness and unfamiliarity of blockchain architecture. Skepticism is natural. Indeed, Bitcoin is guided by an authority, but it doesn’t reside at the center of the network. It resides at the edges. This is the concept behind Proof-of-Stake and Proof-of-Work. Unlike a classic authority, your will matters just as much as anyone else’s. It is exceptionally democratic, self-enforcing, and resistant to gaming.

This is a difficult concept to wrap our heads around, because it is so different than we were taught and it is different than we have experienced for centuries. For this reason, Jamie Dimon’s statement that there is nothing behind Bitcoin presents a buy opportunity for individuals who were late to the table. Jamie may not yet understand intrinsic value, but we can educate ourselves. Bitcoin has more standing behind it than the US dollar.

… But don’t take this as investment advice. Bitcoin should not be thought of as an investment. It is the future of money. Speculation (both day trading and long term buy-&-hold) act to retard the eventual adoption of Bitcoin as a serious monetary instrument. Although I have Bitcoin, I do not encourage people to think of it as an investment. It is more important that it be used for ordinary business and commerce:

  • Products and services
  • Loans and debt settlement
  • Stored value transfer (gift cads & prepaid services)
  • Escrow
  • Quotations and price guarantees
  • Interbank exchange
  • Smart contracts
  • Liens and letters of credit

When the fraction of Bitcoin transactions servicing these consumer and business activities exceeds the fraction driven by savers and speculators, the dominos will begin to fall rapidly.

Articles about Jamie Dimon and JP Morgan…

  1. Jamie Dimon: Bitcoin Is A Fraud
  2. John McAfee: I challenge Jamie Dimon’s bitcoin skepticism
  3. Crypto Is Here to Stay (Whatever Jamie Dimon Might Say)

Can we draw a conclusion? Certainly, we can. And, we can toss in a prediction. It’s not even a high risk prediction. The recent pullback has no fundamental basis. No legs at all. The two “bad news” are not just a red herring—they present a buying opportunity. If I were allowed to give investor advice (I am not; and I don’t), I would express my opinion with more verve and obvious conviction.

Caveat Emptor (Everything comes with a disclaimer)…

I am a Bitcoin educator, proponent, early adopter and blockchain consultant. But here is the contradiction: Although I am also a Bitcoin investor, I discourage others from treating Bitcoin as an investment. Use it, but please don’t save it!

Why do I discourage others from investing in Bitcoin?

It’s not that I don’t believe that Bitcoin will increase in exchange value. It will rise spectacularly, as adoption grows. But Bitcoin will not become ubiquitous and trusted until the majority of coins are recycled into the market for payments, settlement, loans, interbank transfers, escrow, contract settlement, etc. That is, its use for business and commerce must exceed the fraction of trades that are driven by savers and speculators. Until this happens, Bitcoin will remain volatile. It will be the subject of suspicion. It won’t be used for large settlements and it won’t become the money itself.

Speculation acts against fluidity. It won’t block the eventual acceptance of Bitcoin as a global currency. Hoarding is not a deal stopper. But It retards momentum and delays the inevitable.


Ellery Davies co-chairs CRYPSA, produces The Bitcoin Event, edits A Wild Duck and is moderator of LinkedIN Bitcoin P2P, the largest discussion group of it’s kind. He is keynote at this year’s Digital Currency Summit in Johannesburg and sits on the New Money Systems board at Lifeboat Foundation. Use the contact form to inquire about a live presentation or consulting engagement.

Spell it Out: What, exactly, backs Bitcoin?

On August 1 2017, the value of a Bitcoin was at $2,750 US dollars. Today, just over one month later, it is poised to leap past $5,000 per unit. With this gain, many people are asking if Bitcoin has any genuine, inherent value. Is it a pyramid scheme? —Or is it simply a house of cards ready to collapse when the wind picks up?

In a past article, I explained that Bitcoin fundamentals ought to place its value in the vicinity of $10,000.* (At the time, it was less than $450, and had even fallen to $220 in the following year).

For many consumers viewing the rising interest in Bitcoin from the stands, there is great mystery surrounding the underlying value. What, if anything, stands behind it? This is a question with a clear and concise answer. In fact, it has a very definitive and believable answer—but it is easiest to understand with just a little bit of historical perspective.

At one time, G7 fiat currencies were backed by a reserve of physical Gold or the pooling or cross-ownership of other currencies that are backed by gold. That ended in 1971 when the Bretton Woods agreement was dissolved by president Richard Nixon in Ithaca NY.

Today, US currency is backed by “The good faith and credit of the American worker” (This is the government explanation of intrinsic value). But in truth its future value is loosely tied to one simple question: Does the typical vendor or consumer (for example, someone accepting a $20 bill in exchange for a movie ticket or 2 large pizzas) expect it to buy these same things in the next few months?

A considerable number of speculative components contribute to the answer. For example:

  • What About the Big Picture? DEBT! Everyone knows that a house built on debt cannot thrive forever without a continuous stream of productivity and income. Is the money being printed without a commensurate added value to the nation’s capacity to repay debts?
  • Public Trust: Good faith goes beyond debt. Can consumers and creditors be certain that a change of government won’t cause rampant inflation or a willful failure to retire future debt? Can they be assured that their fellow workers will continue to produce and export manufactured goods in ever increasing quantity?
  • Guns & Tanks: Citizens are compelled by law to pay their taxes in official state currency. Even for those who attempt to fly under the wire or use alternate currencies during the tax year, this ultimately forces fiat currency to be recognized and honored.
  • Geopolitical Stability: We have been a debtor nation for decades and we have significant political and economic disputes with our largest creditors (China and nations of oil-rich gulf states). What would be the effect of them (a) moving away from the dollar as their reserve currency, or (b) investing the trillions of dollars they have earned in some other country?

This list is not exhaustive, but all constituents boil down to two fundamental concepts: Supply-and-demand and How long will demand last?

The dollar is an invention of a transient government. Even with a long history and complex banking framework, it is no more real than Bitcoin. Supply and demand for any commodity is based on popular recognition, anti-counterfeit features, innate desire and public goodwill. The real question is what contributes to the desire to own or spend Bitcoin?

The answer is that Bitcoin is backed by something far more reliable and trustworthy than the transient whim of elected legislators. It is backed by something that carries more weight than the US government. What could possibly guaranty the value of a Bitcoin? After all, it does not convey ownership in gold, and it has no redemption guarantee. There is no picture of Caesar on the coin. (In fact, there is no coin at all!)…

Answer: Bitcoin is backed by math, a firm cap, a completely transparent set of books, and the critical mass of a two-sided network. Although it can be taxed (like any asset), it can be owned and transferred with impunity and without recourse. These may not seem like critical components of intrinsic value, but they are. In fact, they define intrinsic value in the modern era.

Related:


Ellery Davies co-chairs CRYPSA, produces The Bitcoin Event, edits A Wild Duck
and is keynote at this year’s Digital Currency Summit in Johannesburg.

BCH: Did I throw away $$$$? Perhaps…

Yesterday was D-Day in the Bitcoin world: On Tuesday, Aug 1st 2017, Bitcoin Cash (BCH) forked off of Bitcoin (BTC). For anyone with control over their wallet and private keys, they now have an equal amount of BTC and BCH.

I have a Bitcoin wallet. Yet, I don’t have any new Bitcoin Cash—and I have no one to blame but myself. Will I ever get the BCH associated with my pre-fork coins? I think that it is likely, though certainly not assured. If not, it will still be my fault. After all, I had fair warning from the company that I trust as custodian of my assets.

A Cryptocurrency Mantra:
“Woe be the person who trusts decentralized cash to a custodian”

I trust Coinbase for good reason. I left my BTC in my Coinbase wallet and vault throughout the fork. Let me tell you how I view the risks of failing to remove my coins before August 1…

  1. Coinbase was clear in warning that BTC withdrawals would be frozen before and after a fork. No problem…I had no immediate need to access my coins.

2. Coinbase warned they had no plan to support BCH—not even for withdrawal after a fork.

I accepted this 2nd warning, even though their reasoning and motives were terribly weak. But, today, I feel very sore. I need a morning after pill! Bitcoin still trades at the level of the past week—about $2700 US/BTC. But my non-existent BCH holdings have significant value! It was briefly as high as $750 per coin, and is now trading at $475. This means that even if I have no desire to save or spend the new coin, I no longer have the option to liquidate my forked asset. I lost a slam-dunk opportunity to capture 17½%.

We’re not talking about a theoretical gain or a gain that assumes liquidation at a momentary spike. We’re talking about right now—a missed opportunity to pocket thousands of dollars!

Am I angry? Not really. I am disappointed in my lack of initiative, but I have only myself to blame. For the record, I don’t believe that I have a reasonable legal claim against Coinbase. After all, they warned me! But, I hope that they will give me my forked coins—eventually. They have already acknowledged to conspiracy theorists that they will not keep the forked BCH, in the event that they create a conversion mechanism. In that case, they will allow withdrawal by the owner of the associated BTC. Now that they see dramatic fractional value, how could they not complete the fork?!

Where Does This Leave Me?

I’m not poorer today than I was yesterday, and I am surprised to find that I have not lost value in original Bitcoin. But, I missed a zero-risk opportunity to gain 17½% overnight. It was staring me in the face and I passed it up. At least I draw comfort in my confidence that Coinbase will complete the fork. Please, Coinbase: Complete the fork!


Ellery Davies co-chairs Crypsa & Bitcoin Event, columnist & board member at Lifeboat, editor
at WildDuck and will deliver the keynote address at Digital Currency Summit in Johannesburg.

Free, Online Blockchain Courses

I develop Bitcoin and Blockchain courses for a profitable venture—And so, I may be shooting myself in the foot with a competitive referral. But, hey!—It’s for a good cause.

Jeremy Boris; Zero to 60 in six months

Jeremy Boris has a degree in business management. He became interested in blockchains a few months ago. In just the first half of this year, he has leapt beyond the realm of enthusiast. He already casts himself as a blockchain developer.

Now, Jeremy seeks to spread the joy (and the potential for career income). Here is his annotated list of free, online blockchain courses, covering all six critical technologies.

Everyone needs a starting point. This is a great one!

Wallet Security: Cloud/Exchange Services

3½ years ago, I wrote a Bitcoin wallet safety primer for Naked Security, a newsletter by Sophos, the European antivirus lab. Articles are limited to just 500 hundred words, and so my primer barely conveyed a mindset—It outlined broad steps for protecting a Bitcoin wallet.

In retrospect, that article may have been a disservice to digital currency novices. For example, did you know that a mobile text message is not a good form of two-factor authentication? Relying on SMS can get your life savings wiped out. Who knew?!

With a tip of the hat to Cody Brown, here is an online wallet security narrative that beats my article by a mile. Actually, it is more of a warning than a tutorial. But, read it closely. Learn from Cody’s misfortune. Practice safe storage. If you glean anything from the article, at least do this:

  • Install Google Authenticator. Require it for any online account with stored value. If someone hijacks your phone account, they cannot authenticate an exchange or wallet transaction—even with Authenticator.
  • Many exchanges (like Coinbase) offer a “vault”. Sweep most of your savings into the vault instead of the daily-use wallet. This gives you time to detect a scam or intrusion and to halt withdrawals. What is a vault? In my opinion, it is better than a paper wallet! Like a bank account, it is a wallet administered by a trusted vendor, but with no internet connection and forced access delay.

Exchange and cloud users want instant response. They want to purchase things without delay and they want quick settlement of currency exchange. But online wallets come with great risk. They can be emptied in an instant. It is not as difficult to spoof your identity as you may think (Again: Read Cody’s article below!)

Some privacy and security advocates insist on taking possession and control of their wallet. They want wealth printed out and tucked under the mattress. Personally, I think this ‘total-control’ methodology yields greater risk than a trusted, audited custodial relationship with constant updates and best practice reviews.

In case you want just the basics, here is my original wallet security primer. It won’t give you everything that you need, but it sets a tone for discipline, safety and a healthy dollop of fear.


Ellery Davies co-chairs Crypsa & Bitcoin Event, columnist & board member at Lifeboat, editor
at WildDuck and will deliver the keynote address at Digital Currency Summit in Johannesburg.