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Rise of the Zombie Bitcoins

Published on June 22nd, 2014 by John W. Ratcliff


Rise of the Zombie Bitcoins

The bitcoin blockchain is a seductive dataset to mine.  Every single transaction ever performed since its inception on January 3, 2009 is publicly available.  You can actually download a copy of it to your own computer if you have 20 gigabytes of disk space to spare.  In addition, there are several ways to search the blockchain online using sites like and BlockExplorer.

Not only is this database seductive it is also deceptive.  Even though we have access to every single transaction ever performed there is still an enormous amount of missing information as well.  Having access to the blockchain leads many researchers to draw false conclusions about what this data actually means.  

Of Bitcoin Public Keys and People

There have been a number articles about income inequality and address distribution which are, quite frankly, mostly bunk.  There is no way to associate bitcoin public keys with specific people (as opposed to those which are auto-generated for intermediate purposes by bots, gaming sites, and mixers).  There are millions of bitcoin addresses that contain ‘dust’ which are spam from early in the history of the blockchain when you could send transactions without a fee. At that time there was no fee required, so attackers sent out millions of bogus requests trying to destroy the bitcoin network by clogging it with garbage transactions worth one billionth of a penny in value.  Every single one of those millions of bogus transactions are all still enshrined in the bitcoin blockchain, recorded for all time in permanent history.  If you do a graph of bitcoin address distribution over time, they pop out of the ether and infect the blockchain like so much noise.  Once a change was made to the bitcoin protocol to better deal with these kinds of DDOS (distributed-denial-of-service) attacks, the address distribution becomes a bit more reasonable.  That said, you still have the residual effects of things like Satoshi Dice, exchanges, trading bots, and all manner of activity that is far removed from the ‘one address = one person’ assumptions found in so much arm-chair analysis.  Here is a link to a graph which shows unique bitcoin addresses used over time.  As you can see from this it is true that, until after January of 2011 (two years after the beginning of bitcoin), there was almost no activity.  However, starting in June of 2011, is when these ‘attacks’ on the network began in earnest.  In addition to this there was also the development of gambling websites, exchanges, bots, and other activities which caused the number of addresses to explode.  Clearly these do not correspond directly to individual people managing their own wallets.  Similarly you can see ‘attack’ like behavior in the transaction volume over time as well in this graph.


(Link to Excel File with data.)


(Here is the same data, but excluding the public keys with zero balance.  You can see how much of the blockchain is polluted with dust addresses.)

This image shows the number of unique public key addresses which have existed in the bitcoin blockchain over time.  The total number of unique public key addresses ever used is about 36 million.  The vast majority of those (highlighted in green) have a zero balance indicating that they were merely used for intermediate transfer and no longer hold any value.  The area in red indicates the number of addresses with a non-zero balance but contain only ‘dust’, a miniscule amount of value so small as to be essentially zero and in total is completely insignificant.  Many efforts to ‘analyze’ bitcoin value distribution includes these ‘dust’ addresses as if they represented individual bitcoin investors, which they do not.  The area in blue represents the number of bitcoin public key addresses in use with a non-zero balance yet contain more than ‘dust’ value; though it should be taken into consideration that many of these too contain value so small that they should not represent the ‘holdings’ or ‘investments’ of individuals.  Many of these are small amounts of bitcoin, more than a few pennies worth, on cell-phone wallets, tip-jars, exchange addresses, etc.

The bitcoin blockchain records transactions which represent the transfer of value throughout the network over time and, by analyzing these transactions, we can know some things with certainty.  For example, we know which bitcoin public key addresses have ever been used in history.  We know how many spend transactions and how many receive transactions have ever been performed relative to that address and, of particular interest for the purpose of this article, is the fact that we know the last time someone ever did a spend transaction using a particular public key address.  Only a spend transaction definitely proves that someone owns and controls the private key, since anyone can send money to a bitcoin public key.

The Blockchain Begins

Let us take, as a case in point, the first bitcoin transaction ever performed in history, which corresponds to the first ever mined bitcoin block by the infamous ‘Satoshi Nakamoto’.  Here is a link to that transaction.  This very first transaction, which was the result of a newly mined bitcoin block (known as a ‘coinbase’ transaction), went to the following public key address:  1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa

If you follow that link you will see that, lo and behold, there are 908 bitcoin transactions associated with that address!  However, all of these are the result of random people on the Internet making donations (probably better described as ‘offerings’ to their lord and savior Satoshi).  You will see that not a single spend transaction has ever been performed from this public key.

Now, let us take a look at the second bitcoin transaction in history.  Six days later Satoshi mined another bitcoin block and received yet another 50 bitcoin reward worth, at the time nothing, but worth today about $30,000 USD.  Here is the link.  These 50 bitcoins were sent to a different public key address: 12c6DSiU4Rq3P4ZxziKxzrL5LmMBrzjrJX.  If you follow that link you will see that this address has received only 13 transactions since people were a little less excited about the second block than they were the first.

The third bitcoin mined block corresponds to this transaction and this public key address.  This block was mined on January 9, 2009 and then, much later, on August 25, 2013, some generous soul decided to throw 0.1 bitcoins to Satoshi (about $60 today).

Finally, at block number four (this transaction) we find that no one has ever offered up a donation to Satoshi to the following public key address.

And this continues for block #5, #6, #7, #8, #9, and so on and so on.  Every ten minutes for the next couple of years bitcoin blocks were mined, sent to a new public key address, and then never, ever, ever, spent.  They sit there still just waiting.  The vast majority of all of these bitcoins were likely mined by Satoshi Nakamoto himself.  However, others were mined by people who downloaded and played with the software.  Many curious technologists probably installed the mining software when it could still run on a CPU and just let it run for a while to see what the whole thing was about.  Then they deleted it or otherwise have long since lost the hard drive or the machine which mined those bitcoins.  It is important to remember that, for the first two years, bitcoins were nearly worthless.  Here is a graph of the market price of bitcoin throughout its history.  As you can see, it took until January of 2011 for a single bitcoin to be ‘worth’ even one dollar.

So, the big question remains, what about all of those bitcoins which were mined up until that point?  Where are they?  What happened to them?  How many are there?  Do they still exist or are they lost forever?  What about the Zombie bitcoins?  Will they rise from the dead to destroy the bitcoin economy and market, or are they lost forever?

We can answer some of these questions, like how many bitcoins should be considered ‘zombie’ coins, and we can make some educated guesses as well.  The fact remains that approximately 30% of all bitcoins in existence are ‘zombie coins’, untouched for over a year and a half and likely lost forever.  If you remove 30% of all bitcoins as having any chance of ever influencing the economy, this changes an awful lot of assumptions people make when they evaluate the market.  Likewise, if these bitcoins were ever to rise from the dead, they could wreak havoc on the marketplace and cause an enormous amount of disruption.

We should begin this analysis with an admission that there is no way to know 100% for sure whether these zombie bitcoins are truly permanently dead or not, especially since we know a great number of these bitcoin likely belong directly to the mysterious Satoshi Nakamoto himself, the person (or persons) who created the bitcoin software and mined most of the bitcoins for the first two years.  For more on this here is a detailed technical analysis which argues persuasively that Satoshi personally owns roughly one million bitcoins which have never been spent.

The Sleeping Dragon Hoard

So, with Satoshi being the elephant in the room, we must ask the question, does he or does he not, control the private keys necessary to ‘spend’ these bitcoins?  The answer, quite frankly, is that we have no way of knowing.  All we know is that, to date, he has not spent them; nor has he done so much as move them to a newer wallet.  He has done nothing with them.  In fact, if Satoshi were to do a single send transaction from any of these old mined blocks, it would set off alarm bells around the bitcoin community immediately; with the implied message ‘The Kraken has Awakened’.

From everything we know about Satoshi he appears to have been pretty meticulous about his personal security and he most certainly realized the potential if bitcoin were to succeed over the long term.  He wrote about that possibility extensively and it is ingrained in the heart of the design of this network.  In fact, as mysterious as Satoshi seems to be, we actually know a great deal about him because, for two years, he interacted publicly with the community a lot.  Here is a phenomenal book which contains the complete collected writings of everything Satoshi ever posted about bitcoin.  We can gain a lot of insight here. Not only do we have this, we must also take into consideration the very real possibility that Satoshi Nakamoto is, quite likely, Nick Szabo, and we can find a lot of his writings here.

The possibilities are:

  • Satoshi lost or threw away the private keys for his own personal reasons and has never shared that information with the community.

  • Satoshi controls the private keys but, on principle, has decided that he will not, nor will he ever, use them.

  • Satoshi is dead and the keys lost with him.

  • Satoshi controls the private keys and ‘has a plan’ for how he intends to use them at some unknown point in the future. It is interesting to speculate on what that plan might be.

    • It is probably safe to assume that his plan would not involve giving himself untold wealth (he is already wealthy beyond anyone's wildest dreams on paper and has chosen not to do so yet).

    • He probably has no intention of using his dragon hoard of zombie bitcoins to destroy the thing that he built.

    • He may have some plan to distribute the bitcoins to achieve some personal political goals while, at the same time, not destroying the value of the network.

The bottom line is that we simply have no way of knowing, and the fact that we do not know creates a degree of uncertainty which is discomforting.  Ideally Satoshi could make some sort of public announcement as to his intentions, but so far this seems unlikely.  All we can do for now is wait and see, though it is probably safe to assume that he doesn’t intend to do anything which would intentionally harm the monster that he created.

So, if Satoshi likely controls roughly 10% of the outstanding zombie bitcoins, what about the remaining 20%, what can we learn about them?  Actually, by analyzing the movement of ‘zombie’ coins over time we can learn quite a bit.

Will Power and Zombie Coins

For the purposes of this article a ‘zombie bitcoin’ is defined as all bitcoins associated with a public key address which has had no send transactions for over 18 months.  Why 18 months?  Because today bitcoins are worth about $600 apiece, and back in December of 2013 they were worth over $1,000 apiece.  Anyone who owned bitcoins prior to 18 months ago would have acquired them at a maximum cost basis of probably about $30, and that is estimating very high.  Much more likely most had a cost basis of under $10, and the average overall is well under $1.  You would need to have incredible willpower to resist a 4,000% or even astronomically higher return on an investment.  When we look at the history of these zombie coins, it turns out, that many people succumbed to their desire to cash out and they did indeed rise from the dead.  As the price of bitcoin rises, the number of ‘zombie’ bitcoins outstanding declines over time.  Each time there is a price rise, we can see it shake loose more zombies as they re-enter the active economy.  

Over time a trend develops, fewer and fewer bicoins rise from the dead and those that remain appear ‘stuck’ and unchanged.  At this time all of the outstanding early bitcoin mined blocks have almost completely flat-lined and are unchanged regardless of what happens with the price.  It is extremely important to understand that, for the purposes of this analysis, bitcoins are considered ‘alive’ based on any spend transaction no matter how small.  This means that if a person owns a thousand bitcoins that cost them $1 apiece and they then sell just one of those bitcoins; maybe to buy a coat at, or maybe they want to move it to a different wallet, then this action marks all one thousand of the bitcoins associated with that public key as being ‘alive’ even if they are the results of many outputs.  For bitcoins to be considered ‘zombie’ coins, it means that they are 100% absolutely untouched in any way whatsoever for over 18 months.  

While there may be plenty of people who ‘got in on bitcoin early’ over a year and a half ago when the price was a fraction of what it is today and these people are still holding out for even greater returns, one would expect many of them to at least cash out ‘a little bit’ for some fun.  Realize that any ‘spend’ transaction demonstrates that the individual is in active control of that private key.  We don’t care whether or not they are still sitting on a lot of potential profit, what we are trying to determine is which bitcoins are irrevocably lost forever and to do that involves determining whether or not anyone has access to the private key needed to move or spend those bitcoins.

So, if realizing a 4,000% profit or otherwise cashing out just some of your bitcoins to buy a toy isn’t motivation enough, what other reasons might there be for people to move their bitcoins over the past 18 months?  Well, in the last year and a half we have learned a great deal about bitcoin wallet security.  Imagine you were sitting on a stash of bitcoins you bought when they were worth one penny apiece but today are worth a million dollars.  Now, let us say, that you are so bullish on bitcoin that you don’t need or want a million dollars today, you are waiting for it to be worth ten or a hundred million dollars in a few years.  However, wouldn’t you question your security?  This would be like holding onto a single winning lottery ticket.  One would think a person might be pretty careful with it.  The owner of that lottery ticket would keep it secure and would probably double, triple, and quadruple check that the numbers are right.  The same thing applies to a dragon's hoard of bitcoins.  Wouldn’t you want to move them to a more secure wallet, or simply do a small ‘test send’ to make sure that the private key is still valid and that your backup isn’t corrupted?

If you are so secure about your bitcoin wallet from a year and a half ago that you don’t feel any need to test it or otherwise transfer it to something more secure, then you are a braver person than most.

Due to the advances in bitcoin wallet security and simple human psychology, it is hard to imagine that a huge percentage of the outstanding zombie bitcoins are under active control.  There can be no doubt that there are some, but they are probably getting close to being statistically insignificant at this point.  This can be seen in the zombie bitcoin burn-down chart where, over time, the rate at which zombie bitcoins come back to life is steadily decreasing.

In conclusion, while there can be no way to know with absolute certainty the status of zombie coins, by looking at trends historically over time, it is probably safe to assume that the vast majority, totalling approximately 30% of all bitcoins mined to date, are irrevocably lost forever, most having been thrown out because they were worthless at the time or the victim of a hard drive crash.

Even though we cannot know with absolute certainty we can still monitor these zombie bitcoins over time and increase our level of confidence that they are unlikely to re-enter the active economy and cause disruption.  Moreover, if we were able to know with an even higher degree of certainty we could adjust some of our assumptions about the overall bitcoin economy in terms of things like market-cap and relative velocity.  

Once you exclude the 30%of  zombie bitcoins what remains is a much more healthy looking distribution within the economy showing a nice balance between bitcoin used as a long term store of value and that which is actively participating in the economy on a regular basis.

Zombie Power : Bitcoin Public Key Addresses Storing the most Financial Energy

Here is a link to a spreadsheet which shows every single bitcoin public key address in the blockchain with a balance of 50 bitcoins or higher; there are a little over 60,000 of them.  It is important not to make the mistake of assuming these keys are associated with individual people.  Many keys are controlled by organizations which pool funds from many other people.  Moreover, many people spread their bitcoins out across a great number of public keys.   All we can say is simply that a certain number of bitcoins are distributed across a certain number of keys and, of particular interest for this article, we can identify those which contain a large balance and have not been touched in a very long time.  This spreadsheet is sorted by a column labeled ‘ZombiePower’ where ‘ZombiePower’ is computed as the total number of bitcoins associated with an address times the number of days since it was last used.  It is somewhat interesting to take a look at a few of the addresses with the highest ‘ZombiePower’ value, which you can think of as essentially ‘stored financial energy’ waiting to be released.

Here are the five public key addresses with the largest ZombiePower value.

  1. 1FeexV6bAHb8ybZjqQMjJrcCrHGW9sb6uF : Contains 75,957 bitcoins and has never had a send transaction performed on it.  Many people have sent money to this key ‘begging’ for a donation. This address was created on March 1, 2011.

  2. 12ib7dApVFvg82TXKycWBNpN8kFyiAN1dr : Contains 31,000 bitcoins and last had a send transaction (demonstrating that the private key was under control at that time) was on July 24, 2010.

  3. 12tkqA9xSoowkzoERHMWNKsTey55YEBqkv : Contains 28,150 bitcons and has never had a send transaction performed against it.  It was first created on April 5, 2010.

  4. 16cou7Ht6WjTzuFyDBnht9hmvXytg6XdVT : Contains 53,000 bitcoins and last had a spend transaction on May 13, 2012.  This key has received 160,595 bitcoins and sent 107,595 over its lifetime.

  5. 1HQ3Go3ggs8pFnXuHVHRytPCq5fGG8Hbhx : Contains 69,471 bitcoins and has never had a send transaction.  It was created on April 9, 2013.  These are not considered ‘zombie’ bitcoins.

It is somewhat amusing to see how people are spamming these public key addresses with small send transactions to either beg for money or advertise their website.

Zombie Bitcoin Burndown Chart

What follows are two ways of looking at how the ‘zombie’ bitcoins evolve over the lifetime of the blockchain.  In these graphs the zombie bitcoins have been broken down into six categories, two of which are so small that they don’t even show up on the chart.  The categories are:

  • CoinBase50 : These are public keys which received a 50 bitcoin miners reward within the first four years of the lifetime of the blockchain.  You can see these in the graph as the bottom layer of blue.  These represent by far the largest collection of truly zombie biticoins which have remained largely unchanged since they were created.  The bulk of these are assumed to belong to Satoshi himself and/or other very early miners who presumably have lost control of those private keys.  You can see how the bitcoins in this category have essentially flat-lined as being untouched for the past two years.

  • CoinBase25 : These are public keys which received a 25 bitcoin miners reward, however they do not even show up in the graph.  This is due to the fact that by the time the blockchain reward halved to 25 bitcoins virtually no one left them sit untouched.  They were almost all sent out as part of the mining-pool reward system.

  • ColdStorage : These are bitcoin public keys which are not associated with any mining reward block and have only received bitcoins but never spent any, and have remained untouched for over 18 months.  These are most likely cold-storage wallets which you can see changes in value over time.

  • OldUsed : These are bitcoin public keys which have both send and receive transactions so, while they are likely not really ‘cold storage’, still they have remained untouched for over 18 months.

  • Dust : These are bitcoin public keys which contain less than one millibit of value.  Even though there are millions and millions of these public keys, in total, they don’t add up to enough significant value to even register on this chart.

  • Alive : These are the bitcoins associated with public keys which have had spend transactions within the past 18 months.

This graph is presented in two ways, first using absolute time and the second using relative time.  With absolute time, you will see that no bitcoins are considered ‘alive’ until 18 months ago from the current date of June 18, 2014 when this chart was generated.  This gives you a clear view of the bitcoins distribution by age and type over time.

The second version of the graph uses relative time, meaning that at each snapshot it is showing how many were considered zombie relative to that date.  It is the same data either way, just a slightly different way of looking at it.


(Zombie Bitcoin Burndown Chart using Absolute Time measured against June 18, 2014.  Here a link to the raw data that produced this graph.)


(Here is the same burndown chart but using relative time.  Here is a link to the raw data which produced this graph.)


(Finally, here we are zooming into the bitcoin zombie burndown data for just the past 18 month period.)

Bitcoin Value Distribution

The following graph shows the distribution of bitcoin value by age of last send transaction.  You will see that about 30% of all bitcoins in existence are classified as ‘zombies’ and do not appear to be contributing to the active economy.


(Here is the link to the spreadsheet which produced this graph.)

Now let us look at the same graph, but excluding the zombie bitcoins.  The resulting value distribution looks a bit more balanced and vibrant if you exclude these probably lost bitcoins from consideration.


Of course these two images just show us a snapshot of the value distribution at just one moment in time; in this case for June 18, 2014 when this data was collected.

What happens if we compute this value distribution for every single day since the inception of the bitcoin blockchain and graph it over time as an area chart instead?  What you end up with is the following fascinating graph.


(Here is a link to the spreadsheet containing the raw data that was used to produce this graph.)

What should be of interest is the activity of the volume of bitcoins associated with addresses which are being used within a one month time frame; this includes the first three color bands of the area chart showing those used in the past day, past week, and past month.  This indicates fairly rich and vibrant value transfer activity happening on the network.

Since we know that most of the real action in the bitcoin space has been happening since January of 2013, here is the same area chart, but only focusing on the past year and a half.


References and Data:

All of the analysis for this article was done using the open source bitcoin blockchain parser which can be found here.

For documentation on how to understand the raw bitcoin blockchain as it is stored locally on your computer, you can use this link.

Here are the links to all of the charts and data presented in this article.

Image : Zombie Bitcoin Burndown Chart - Relative Over Time

Image : Zombie Bitcoin Burndown Chart for the Past 18 months.

Image : Bitcoin Value Distribution by Age of Last Send Excluding Zombie Bitcoins

Image : Bitcoin Value Distribution by Age of Last Send Transaction Pie Chart

Image : Bitcoin Value Distribution by Public Key and Age of Last Send Transaction Over Time

Image : Zombie Bitcoin Burndwon Chart Over the History of the Blockchain

Image : Bitcoin Value Distribution by Public Key and Age of Last Send Transaction Since January 2013

Image : Number of Unique Public Key Addresses Over Time INcluding Those With a Zero Balance

Image : Number of Non-Zero Balance Bitcoin Public Keys Over Time

Spreadsheet : Zombie Report using Relative Time

Spreadsheet : Bitcoin Public Key Counts Over Time

Spreadsheet : All Bitcoin Addresses With a Balance over 50btc and sorted by ZombiePower

Spreadsheet : Bitcoin Value Distribution Pie Chart

Spreadsheet : Bitcoin Value Distribution Area Chart

Spreadsheet : Zombie Bitcoin report using Absolute Time


Zombie Bitcoin Illustration done by artist Manuel Fallmann.

Bitcoin blockchain parser and data analysis by John W. Ratcliff.


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