Introduction

The latest price hikes in the cryptocurrency markets has introduced huge amounts of new money into the crypto market. According to CoinGecko the total market cap of crypto markets has passed the 1 trillion $ mark. Between the summer of 2020 to the end of 2020 the market cap rougly tripled from 300 billion $ up to the 1 trillion $. Interesting is, how much of this new money has flowed into the top wallets. In this post we calculate some common statistical representations of wealth inequality for the top twenty ERC-20 tokens, listed by Etherscan. To measure the inequality of wealth between the addresses, a Gini coefficient and other measures will be calculated.

Data

The data for our experiments consisted of just over 1 million wallets. To make the results more meaningful, wallets with token balance of under 1 were discarded. This resulted in 535,727 wallets remaining. The largest address measured in USD was worth 1,520,740,000 this is the largest Crypto.com multisig wallets, which held at the time of analyis 20% of the total CRO supply. The smallest wallet was worth just 0.028 USD. Average (mean) value of the wallets was 78,275. The wallet data set could be described quite well by the fact that you could make it to the most top 25% of wallets with an address worth 1600 us dollars. This implies that the mean is skewed heavily by a minority of super high-value addresses. This is further confirmed by the standard deviation which was 535,727. Some of the data might contain burn wallets or for example staking contracts which might hold large amounts of tokens, but aren't owned by a single entity. Generally it should be considered that the addressess are not necessarily mapped to single persons, a person could of course own more than a single address.

Results

The average Gini coefficient when comparing the tokens was 0.9552. A measure of 1 would mean that the distribution would be completely uneven, in other words all of the tokens would be held in a single address. So it is safe to say that the Gini values show that the top ERC tokens seem to be quite inequally distributed. The token with smallest Gini coefficient was the OKEx exchange token OKB. In the other hand the highest Gini was found on CRO the crypto.com token that also held the largest valued address mentioned earlier.

When measuring all of the addresses by their value in us dollars and calculating a Gini for them combined, the Gini is 0.9904. Other measurements calculated was how much of the total token USD value does top 2, 5 and 10 wallets hold. For example top 10 USDT wallets hold 37% of the value and the top 10 CRO wallets hold 91%.

Conclusions

It is safe to say that the top ERC-20 tokens are heavily unequal when it comes to their wealth distribution. Still it is debatable how much of a problem this situation is. Still when considering the implications to the market price dynamics of these tokens, it should be noted that when a single entity holds a large amount of a particular token, it is possible for them to devalue the market price of the token by market selling their tokens. Generally token holders should research what kind of dynamics are planned around for example to the issuance of new tokens. The ERC-20 token minting process can be fundamentally different than something for example Bitcoins constant decrease of the supply of new coins.