Analyzing Bitcoin's Decentralization: Coefficient of Variation Approach and 21 Million Divisibility

Abstract

Bitcoin, a decentralized digital currency, has received a lot of interest due to its potential to challenge the traditional financial system. This study applies a coefficient of variation analysis with an emphasis on the idea of dividing the entire supply by 21 million to determine the degree of decentralization for Bitcoin. The coefficient of variation is a statistical indicator of diffusion, making it possible to analyze how many Bitcoins different stakeholders hold. We can learn more about the degree of wealth concentration or distribution among Bitcoin users by examining the degree of decentralization using this method. This research calculates the coefficient of variation using publicly available information on Bitcoin addresses and the holdings linked to those addresses. The findings will contribute to the ongoing discourse on Bitcoin's decentralization and shed light on the potential impact of the fixed supply of 21 million Bitcoins on wealth distribution within the Bitcoin network.