How do Bitcoin's "One-Bitcoin Millionaires" safeguard their bitcoins?
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How do Bitcoin's "One-Bitcoin Millionaires" safeguard their bitcoins?
The owners of the wealthiest Bitcoin addresses do not agree on the best way to protect Bitcoin.
Navigating Web3 tides with focused insightsAuthor: Unchained
Translation: Luffy, Foresight News
If you want to securely hold large amounts of bitcoin, it makes sense to understand how the wealthiest bitcoin holders approach this task. While there's no guarantee of foolproof security, these individuals stand to lose the most from mistakes and are therefore more likely to engage in deep thinking and research regarding bitcoin security.
Identifying the wealthiest bitcoin holders can be difficult, and asking them to reveal full details of their security practices is even less likely. However, the bitcoin blockchain provides us with some valuable information—after all, the transaction history and balances of all bitcoin addresses are publicly available.
What information can we gather?
If an entity (individual or group) holds a large amount of bitcoin, they might distribute it across multiple different addresses, resulting in smaller balances per address that may not attract attention. In some cases, it's impossible to associate different addresses with the same wallet or owner. In others, linking addresses requires blockchain analysis, typically relying on advanced techniques and assumptions that don't guarantee accurate results.
Although it's hard to determine exactly which entities are the wealthiest bitcoin holders and how much they own, identifying the richest bitcoin addresses is straightforward. Several websites track these addresses in real time, and the characteristics of these addresses can offer valuable clues about secure bitcoin storage.
For example, if you're familiar with address types, you know that any address starting with "1" is a P2PKH address and must therefore be single-sig. Similarly, any address starting with "bc1q" and 42 characters long is a P2WPKH address, also necessarily single-sig. Bitcoin held in either of these address types isn't protected by multisignature. Using SSS or MPC would be the only way to achieve institutional-grade security, as discussed in our article on thresholds here.
Likewise, any address starting with "3" is a P2SH address, and any address starting with "bc1q" and 62 characters long is a P2WSH address. These address types could potentially use multisignature. However, the signature structure only becomes visible when bitcoin is spent from these addresses. Some P2SH addresses are actually single-sig—a configuration briefly popular during early SegWit adoption. Therefore, if such an address has never transacted, its custody structure remains unknown.
Data Analysis
Let’s examine the 81 addresses holding over 10,000 BTC each as of January 30, 2024—addresses collectively holding more than 2.5 million BTC.
* Possibly lost
** Not using MPC
Among these 81 addresses, at least 6 hold possibly lost bitcoin (179,302 BTC). These six addresses were created by their owners in 2010 or 2011, when bitcoin was worth far less and not taken as seriously as it is today. Five have never been used, and one last transacted in July 2010.
The remaining 75 addresses use various custody structures; let’s break them down:
As explained in our article discussing institutional-grade threshold security, these 53 single-sig addresses likely use SSS or MPC. However, two of them probably do not use MPC, since they were created before 2018—the year the first MPC threshold protocol for ECDSA was invented. These addresses likely use SSS instead.
The 16 known multisig addresses have all transacted, thereby revealing their specific multisig quorum structures, which vary widely:
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4 entities: 3-of-5
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3 entities: 2-of-3
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2 entities: 2-of-2
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1 entity: 3-of-9
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1 entity: 4-of-8
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1 entity: 3-of-8
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1 entity: 4-of-6
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1 entity: 3-of-6
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1 entity: 2-of-6
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1 entity: 3-of-4
The 2-of-2 multisig is the only quorum structure on this list that does not inherently protect against single points of failure. While 2-of-2 multisig prevents theft, it requires additional methods to prevent loss (such as using distributed SSS or MPC shares for each key).
Conclusion
After reviewing this data, at least one thing is clear: The owners of the wealthiest bitcoin addresses—including major cryptocurrency exchanges and even the U.S. Department of Justice—do not agree on the best method for securing bitcoin.
Some entities use multisig addresses with typical quorum configurations like 2-of-3 and 3-of-5, along with several unusual ones. Many others use single-sig addresses, which may rely on SSS or MPC. Details about SSS or MPC threshold quorums are never recorded on-chain, limiting the scope of this investigation. Some of these single-sig addresses may not use any threshold security at all, meaning certain bitcoin reserves worth over $400 million currently lack adequate protection.
As mentioned in a recent article, multisig always offers higher security ceilings than single-sig. By using single-sig addresses (used by at least 70% of addresses holding over 10,000 BTC), entities miss opportunities for enhanced security. While single-sig does offer benefits in terms of spending convenience and lower transaction fees, for entities holding hundreds of millions or even billions of dollars in bitcoin, these advantages are outweighed by security concerns.
It remains unclear why single-sig addresses are so prevalent among bitcoin’s top holders. This may stem from lack of education or historically limited availability of products and services combining SSS and MPC with multisig solutions.
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