Why the 9th, 10th and 11th richest bitcoin wallets just got drained
It's a spooky move at a time like this, but in this instance, it's good for bitcoin.
The 9th, 10th and 11th richest bitcoin wallets were all emptied, in that order, over the space of a few hours yesterday. Each had about 66,000 BTC currently worth some $275 million, each was created in late November/early December 2013 and each was topped up with their final 66,000-odd bitcoin amounts in late November/early December 2014.
Those wallets weren't touched in any meaningful way until now, late November/early December 2018.
So, is it time to make that "the end is nigh" sandwich board or is there a good explanation for all this?
Is it time to panic?
No, unless it's for reasons unrelated to these bitcoin movements.
These wallets clearly belong to an active entity – probably Coinbase by the looks of it – and are almost certainly being drained for maintenance purposes. Here's how you can tell.
The way they move and why they move
The exact movements across all the wallets has been to divide the funds up.
The first move was to split the wallets into exactly 100 identically sized chunks of about 660 BTC, plus a 200 BTC remainder. These new 660 BTC chunks were then further divided into 10 BTC pieces, also with remainders.
The remainders are being swept into some of the same wallets, and after some bouncing around, a lot of those 10 BTC chunks are also being recompiled and sent to those same wallets in batches of 200 BTC.
Basically, the big, old wallets are being broken down, processed and then re-assembled in a bunch of new wallets, including but not limited to the following:
Now, if you look at the intermediary wallet addresses for those 660BTC and 10BTC chunks, you'll notice they have a particular address format:
The 200 BTC transaction is headed towards a standard wallet, while all those other 661.78 BTC transactions are going to a little-used and somewhat experimental Bech32 wallet type. The "bc1" prefix in their addresses means that it's a Bech32 wallet, rather than the usual address types which are simply preceded by "1".
Bech32 is intended to be a better way of doing things in two main ways:
- It's a SegWit address format. This basically means that it can make bitcoin transactions smaller, so you can fit more transactions onto one block. As such, SegWit addresses can help make bitcoin transactions faster and cheaper.
- It aims to offer a higher and more future-proof degree of security.
That Bech32 addresses are being tested on such a large scale highlights how effectively bitcoin is still developing and advancing as well as how carefully it's proceeding.
A significant step
These tests might be quite a significant step because, as you can see, they represent an enormous live Bech32 trial. These wallet movements took the usual Bech32 output volume of just a few hundred all the way to about 70,000 at the peak, and there was clearly a lot of new Bech32 movement starting at the end of November.
Who's doing this?
It's not entirely clear who's doing these tests, but one might reasonably guess that it's Coinbase.
Firstly, those old, rich wallets cropped up at about the same time as Coinbase, back in 2013, and spent the next year accumulating. Secondly, on 29 November Coinbase announced that it was about to start some scheduled maintenance that would cause movement on the blockchain. That's exactly when the most recent round of Bech32 tests kicked off.
Many observers habitually construe these kinds of movements as a portent of doom, feeling that nothing good can come of bitcoin leviathans awakening and potentially plunging the bitcoin world into an era of triple-digit darkness.
However, in this case, it looks like very good news because it definitively shows that bitcoin is still improving and evolving.
Anyone can predict the death of bitcoin, but the blockchain suggests otherwise and the blockchain doesn't lie.
- Digital Dollar Foundation: Why the former CFTC head is pushing for digital USD
- Understanding Australia’s proposed digital wallet regulations
- Fidelity is doubling down on Bitcoin mining in the lead up to the halving
- Raiz to introduce new fund with Bitcoin exposure
- Venezuela approves crypto casino and gambling with the Petro cryptocurrency