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In today’s time, if we talk about cryptocurrency, Bitcoin has taken a higher position in the majority of people’s minds. It was doctored as a reward for the “mining” of Bitcoins, meaning, competing globally to solve complex algorithms.
What is the Bitcoin Ecosystem and how does it work?
A Bitcoin ecosystem is a chain of tasks performed by individuals. It includes miners who actually earn coins by solving complex algorithms. The second in the chain are traders who control the Bitcoin-to-fiat cycle, and strive from the profit made. The final link of the chain are the consumers, who use these coins in order to buy goods and services.
A classic bitcoin transaction consists of the information about the buyer and the seller represented in a bogus manner, all the inward and outward transactions of coins and their timestamp.
Stakeholders involved in the global network of Bitcoin
The most essential stakeholders in the decentralized bitcoin ecosystem involve Node operators, who provide the blockchain data. Miners, who carry out the validation check for any Bitcoin transaction and in return are rewarded subsidized Bitcoins and a certain percentage of transaction fees according to their contribution in the block, tools for mining and of course, the Bitcoin users.
The US National Bureau of Economic Research (NBER) disclosed three elements of the Bitcoin ecosystem to fathom crucial variables underlying the digital asset’s network, ownership and concentration in a report titled “Blockchain Analysis of Bitcoin Market” by Igor Makarov and Antoinette Schoar.
Transaction volume and network structure:
According to the authors, equal to 90 percent of Bitcoin transactions were not associated with any insightful activities from an economic point of view; instead they were merely a result of Bitcoin protocol design and was highly preferred by majority contestants in order to maintain their anonymity.
Composition of Bitcoin miners:
On the basis of regional composition of the miners, the Bitcoin transactions are validated and handled in order to maintain the authenticity of the transaction. If you take the data of the previous 5 years into consideration, according to the report, the Bitcoin mining industry is about to reach its saturation. Approximately, 90 percent of the mining is carried out by the top 10 percent of miners, while the other half of the mining capacity was steered by just around 50 miners. In the current time, as the prices of cryptocurrencies is gradually increasing, the Bitcoin mining industry is becoming less concentrated.
Stakeholders and owners involved:
Ever since people came to know about Bitcoin, people have been intrigued to know who is the largest holder of cryptocurrencies, how much worth of cryptocurrencies do they hold etc. Websites particularly source their data from the “Rich List” which, as reported by the paper referred above, is considered as the most credible source of information within the crypto community.
As per the report, by the end of 2020, individual investors had accumulated 8.5 million Bitcoins. The paper also stated that, top 1000 investors manage 3 million Bitcoins and top 10000 investors manage around 5 million Bitcoins, approximately.
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
