Comprehensive Analysis: Ethereum’s Supply Distribution and Implications on Network Security
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On-Chain Insights: Ethereum’s Supply Concentration
In a recent update on the social platform X, the on-chain analysis firm Santiment shed light on how various assets within the Ethereum ecosystem compare in terms of supply concentration among the top 10 wallets. Santiment’s shared chart reveals the trend of this indicator across eight cryptocurrencies over recent months.
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According to the data, a significant 51% of Ethereum’s supply is held by the largest 10 wallets on the network. This concentration is higher than most other ETH-based tokens on the list. The two cryptocurrencies surpassing Ethereum in this metric are Shiba Inu (SHIB) and Uniswap (UNI). UNI slightly exceeds ETH with a 52.2% concentration, while SHIB exhibits a much higher concentration, with 62.3% of its supply held by the top 10 wallets.
Generally, when the supply of a cryptocurrency is heavily concentrated, it is not regarded as favorable, as a small number of actors can significantly influence the market.
Implications of Supply Centralization
In addition to market impacts, supply centralization can also compromise network security. Ethereum employs a Proof-of-Stake (PoS) consensus mechanism. In this system, validators, also known as “stakers,” must lock up a portion of ETH to gain the opportunity to add the next block to the blockchain. The larger a validator’s stake, the greater their chances of being selected. If a single validator were to control more than 51% of the supply, they could theoretically exert total control over the blockchain.
This kind of risk is absent in Bitcoin, which uses a Proof-of-Work (PoW) system where miners compete with computational power. However, even in PoW, if a participant manages to control over 51% of the computational resources, they could potentially manipulate the network.
Given that Ethereum’s top 10 holders control half of the supply, a coordinated attack remains a theoretical possibility, albeit with low probability. Nonetheless, the concentration of tokens such as ETH, SHIB, and UNI in few hands is a critical aspect to observe. Conversely, some tokens in the ecosystem display a more balanced distribution: USDC (28.6%), DAI (31%), and Chainlink (31.5%), which are considered more “healthy” according to this metric.
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