Some maximalists my scream that this is too high and proves a "premine" and centralized control.
But, that couldn't be further from the truth.
The reason ETH's distribution seems so focused is actually smart contracts.
Unlike some other currencies, ETH actually gets used for a purpose.
A lot of time that purpose requires depositing something into a contract, often in a trustless manner in which you still control the asset.
A great example is wETH where we deposit
Ether in order to get Wrapped Ether for standard ERC20 use.
This smart contract usage is what skews the distribution on ETH, and can make it seem like it isn't fair.
So what happens if we remove the smart contracts and only look at exchanges, individuals and funds?
This means when it comes to equity of distribution, Ethereum and Bitcoin are in a league of their own.
No other coin comes within an order of magnitude of their distribution.
They fail to account for how much ETH is lost or inaccessible. That's something you can only do manually.
We identified at least 6.2M ETH that is confirmed burned/lost, and another 3.8M ETH that is likely lost or burned.
The fantastic team at @ethhub_io, have a nice chart for us to review the staking rewards based on amount of ETH validating.
It gets down to GIC rates at 100M staked. Which we know won't be the case, as that would leave ETH with a very low liquidity.
Exchanges maintain strong cold wallet reserves, and most exchanges do not take a fraction reserve approach. But, this could change under ETH2.0 due to the staking rewards.
Let's assume that some major exchanges will keep full reserves, and some sketchy ones will keep next to no reserves. We'll assume that 80% of cold exchange funds stay cold.
That means we can remove another 20M ETH.
Which leaves us with 44.6M ETH that is currently in a position where it could likely enter into staking.
But that is the absolute max amount.
Basically this means we expect adoption of a new tech to come in waves.
13.5% early adopters.
34% early majority.
These waves are ultimately based on product maturity.
It is a bit hard to calculate how much of that 44.6M ETH would fall into each tranche.
Because the percentage in crossing the chasm is not based on the ETH balance.
It's based on the number of holders - which is not a standard distribution.
But, as a rough estimate.
2.5% would be 1.15M ETH
13.5% would be 6M ETH (7.15M ETH total)
34% would be 15.1M ETH (22.3M ETH total)
Those early returns don't account for EIP-1559 burning, or increase in ETH price.
And as we know, ETH2.0's roll out will cause some serious price action:
That may not seem that shocking at first, but, compare it to the stats across all Ethereum addresses.
Where 54.39% of addresses are cold (1 year+) and 39.93% of addresses are idle. With only 5.68% being active.
So what does this mean?
That rivals the roughly $600M in new capital influx that Bitcoin was estimated to see last year.
But, for Ethereum, that was only on whale accounts, and only in the past 6 months.
Whales love ETH & BTC. Nothing else has this level of inflow.
These new addresses often bought $100,000 - $250,000 worth of Ethereum, and they represent around 6% of the top 10,000 addresses. (Or ~$100M in new ETH purchases in the past 6 months)
Let's repeat that in its own tweet, so you can retweet it at naysayers.
In the past 6 months, whales have bought more than $650M in new Ethereum purchases.
That means in the past 6 months, whales have bought more Ethereum, than all new Bitcoin inflow last year.
This means the average exchange has only around 40% of their holdings in cold reserves.
But, among that there are some winners and losers:
Finding #9 - Coldest Exchanges
BitFlyer, Gate.io, Coinbase and Kraken have the best ratios of cold to hot holdings.
Up to 78% cold.
They don't take chances with your crypto.
Around the time that Tron took over Poloniex, it seems some cold wallets drained. Not entirely, just to fractional reserves.
Which is odd.
If Circle was taking the assets, they would have fully drained the wallets. So why did Poloniex seem to go lower liquidity?
Those wallets then drained into exchanges, but, only exchanges that listed Tron.
Around this time, BEFORE the announcement, there was an increase in buying activity on Tron.
Did Tron switch Poloniex to fractional reserves to pump their own token price?
It might justify the high price paid for a dying exchange?
The price action might be unrelated, and Poloniex may simply be cross-market trading on other exchanges.
But the sudden shift in cold wallet balance is concerning.
It may be worth the Ethereum community debating forking unclaimed funds in ETH2.0, staking them, and using the revenue for community based funding.
Only two early grant holders who were in the top list heavily sold ETH. In both cases this was to fund large businesses in the crypto space that have struggled with revenue.
At least two founding members have also not ever touched their genesis grants.
That means Vitalik only sold around 26% of his ETH holdings over the past 5 years, most of it when ETH was low in price.
On the other hand, he has donated at least 21% of his ETH to supporting the ecosystem, and he holds the remainder.
This dismantles the narrative of Ethereum being a founder based scam.
Vitalik owned, at max 0.9% of ETH.
For every ETH he has sold, he has donated the equivalent to the ecosystem.
This goes to show that Vitalik believes in the vision of Ethereum isn't here for a get rich quick scheme and puts his money where his mouth is.
But, perhaps most importantly, that nearly all EF founders are in the same boat.
Finding #17 - Top Tokens:
Among Genesis & Top 250 individual accounts, the only tokens we see are ANT, BAT, ENG, ENJ, GNO, GNT, HOT, KNC, LINK, MKR, MLN, OMG, POWR, QSP, RDN, REN, REP, TKN, ZRX & @tokensets.
In all cases the tokens are only owned by 1-2 addresses each.
It seems likely that as we edge closer to Phase0 rollout, ETH miners are getting ready to convert mining operations into staking operations.
Which will lower their costs. Some miners continue to heavily sell, possibly indicating they won't be stakers in the future.
This hording seems to be only around 20% of miners, but, they are hording at aggressive levels.
This may mean we see around 80% of miners shift to other PoW chains. Which could be great for ETH's little brother ETC.
It also means we have a chance to further improve decentralization if we can make it easy for users to host their own nodes on low end hardware.
Either way, profiteering miners are bullish on the future of ETH.
The last 3 times we saw exchange deposits grow by 4-5x in under a one-month span, lead to market drops >40% of the price.
This is the only time I've been able to identify the inverse. There is a major positive sentiment being shown in the market right now.
Speaking of Bitfinex,
Finding #23 - BitFinex Used User Funds to Vote on ProgPoW
BitFinex withdraw 1.17M ETH from their hot wallets to cold wallets to take place in the CarbonVote on ProgPow.
With swirling acusations around NVIDIA and AMD, and a GPU data center helping to fund ProgPoW (trustnodes.com/2019/01/10/rum…) it's no surprise that we identified 36 other cold addresses that sprug to life to vote in favor of ProgPow and went idle again
This validates what most people suspected.
The community doesn't want ProgPoW.
Big self-interested parties want ProgPow.
We were able to identify the source and destination of 80% of transactions from all other exchanges with ease.
Only Coinbase (and Tornado.cash) made it more difficult.
First, I mapped address moves vs tweet volume and tweet sentiment related to ETH.
The first thing I noticed is that negative ETH sentiments do occasionally shift the price downward.
This is "shaking out weak hands" - mostly ETH novices who don't know enough to
shrug off the disinformation.
Then I noticed that buying action from whales surges after this sell off.
That makes sense. Whales move money in to exchanges to buy more ETH when the market drops.
But, this is where it gets really interesting.
There are multiple addresses that shift USDC, USDT, DAI and Paxos into exchanges BEFORE large spikes in anti-ETH tweets (both spikes in volume and negative sentiment)
Most Whale addresses move money in AFTER the social spike, and only respond to about 8% of spikes.
However, a handful of addresses (seemingly out of Asia and Europe) move the assets, almost without fail, BEFORE the shift in sentiment.
How often do these magical addresses seem to predict new increases in negative tweets?
Roughly 86.7% of the time.....
You don't need to be a data scientist to realize that level of correlation is highly suspect.
Now, not all of these negative sentiment spikes are effective in moving the price.
In fact, it works less than 7% of the time. But, when it works, it works well.
And these whales are somehow always magically ready to capture it.
Which likely suggests that these addresses are actually funding ETH FUD or spreading it via bots so they can accumulate.
That sounds like a bad thing - but,
if the funding for most of the hate about your project, comes from people who are simply trying to get in on the project at a better price - that says something about your quality and your future.
But it is something I plan to investigate further, as there would be some sweet sweet irony-filled justice if some of the top BTC maxis were funded by ETH money :)
Finding #30 - Delicious DeFi
In the top 250 wallets only TokenSets, Tornado.Cash and Maker have been used by individually owned wallets.
In the top 10k we also find Uniswap, Aave, Bancor, Compound, Kyber, Loopring, Nexus Mutual, Melon and Augur.
Whales are increasing their stake.🐳
New whales are funneling in. 🐋
Eth is more transacted than BTC. 🔷
There was more capital inflow into ETH than to BTC.💸
There is less ETH than you thought. 🙀
Not that much ETH can stake first round. 📈
Staking returns could be as high as 17% early on. 📊
Whales are accumulating. 📈
Haters are accumulating. 📈
Miners are accumulating. 📈
Eth is as decentralized as Bitcoin. 😎
ETH founders still hold most of their ETH. 💪
Vitalik donates 1 ETH to the ecosystem for each ETH he sells. 🙏
Even market manipulators who fund FUD against ETH or short-sell, only do so to buy more ETH. 💰
Very few whales are using DeFi right now. Plenty of room to grow. 📈
Those whales who are using DeFi are rapidly increasing their holdings. 🐳🐳🐋💸📈💸🔷