Comment by justboxing | Hacker News Reader

Comment by justboxing | Hacker News Reader

> the approximately 1,000 people who hold an estimated 40 percent of all bitcoin, or an average of around $350 million each.

I've seen this statement over and over again for the last few months in various news outlets and blogs, but I'm having a hard time wrapping my head around this statement.

I understand these 1000 people are what are popularly known as the "Bitcoin Whales" but how did most of them come in possession of a vast majority of bitcoins?

Traditional FIAT currency, like USD for example first comes into circulation when the US Government prints it, and then slowly makes it was into the hands of individuals via contract payments, salary payments etc etc.

With Bitcoin, who was/is that central entity that distributed the original coins? And in exchange for what? How much does this anonymous 'Satoshi' individual own? Did he only write the specs and the blockchain stuff for bitcoins, or did he also create said bitcoins and then grant himself a bulk of the coins like how Charles Lee did with Litecoins?

I couldn't find an explanation for this -- i.e. how did the BitCoin Whales come to posses 40% of the Bitcoins between themselves - anywhere, no matter how much I google it. Anyone?

The mining difficulty was much lower at the beginning. Satoshi, the creator, has about 1 million bitcoins from this early mining. [0]

[0] - https://en.m.wikipedia.org/wiki/Satoshi_Nakamoto

Also Hal Finney and others who helped in the beginning may have left sums of BTC behind (RIP). A personal anecdote, somewhat related: In the early days, I mined several blocks from the wallet itself, on an AMD Sempron or Duron, at about 800-900mhz. Even then, this took a few days and then weeks before eventually becoming impossible with the advent of mining pools and GPU mining arrays.

Speaking for myself only, some of us just lost or discarded them because they had no value, and mining them was more of an act of altruism, so while it was fun seeing the numbers go up, it was easy to lose track of a wallet. I don't think electrum seed phrases were around yet at that time, either, or I had no knowledge of them if they were.

I think people massively underestimate the number of Bitcoin which are forever lost. I’d put it at well over 50%, and the true market cap is much less than we think it is because of this. IMO “Satoshi” coins are part of this unrecoverable set, but of course I have no data to base that on, just a hunch.

A coin that vanishes unpredictably would be the worst sort of money. Ironically, under Gresham's Law, such a currency would dominate other forms of money because everyone would be in such a hurry to exchange it for goods before it disappeared.

BTC can be divided into satoshis, which are extremely small units. If someone loses 1 BTC, the value of all the rest simply goes up.

For those wondering, a satoshi is 1/100,000,000 of a bitcoin.

At the current bitcoin price of $14591, a satoshi is worth $0.0001459190.

The maximimum amount of minable bitcoins is 21 million.

Current global gold supply is ~ $7 trillion

If bitcoin completely replaces gold, bitcoins will be trading for about $333,333.33, so a satoshi would be worth ~$0.0033.

And if BTC reaches $33M, which is not impossible, that implies $0.33 is the smallest unit of currency.

People use quarters for mostly everything now, so this is again quite reasonable.

Reasonable how? That's a $530T+ valuation at the current number of tokens, or about two times as much as the total global wealth according to Credit Suisse. [0]

[0] https://www.credit-suisse.com/corporate/en/research/research...

I meant satoshis are a reasonable "smallest unit" even at absurd valuations.

But that's not necessarily impossible to attain. If BTC wins and the world switches, the resulting bubble might be that big.

Don't go there, I got rid of them through my own actions. This isn't some serendipitous disappearance, this is not a takeaway from my anecdote, and certainly not something that should be used to detract from the value of BTC.

This isn't coins that have turned to dust when you take them out of your wallet to spend - this is coins that have been lost overboard from a cruise ship in the middle of the ocean.

Gresham's Law technically applies to nonidentical versions of the same legal tender. That's not applicable to Bitcoin, because there is no material difference in the manufacture of individual Bitcoins, and nobody is forced to use or accept it.

But to think this through, maybe there would be three components to the dynamics of such a theory.

1) Bitcoin will continue to vanish as holders die, forget about their bitcoin, or lose access to their wallets.

2) Up until a certain point, this will cause the value of Bitcoin to increase, as reduction of the Bitcoin supply is deflationary. Those who recognize that this deflation is occurring will hang on to their Bitcoin, because of the expectation that their holdings will appreciate in value.

3) After a certain point, people will realize that much of the total Bitcoin capitalization has been lost/forgotten, and they will be in a hurry to use Bitcoin (sell it for goods) before their holdings become too large in proportion to the total non-lost capitalization still in circulation. Proportionally large holdings are worthless if they cannot be liquidated or used. (Similarly, imagine a currency with two holders, half each; neither is incentivized to accept large transactions because if one sells out, the other is left owning the entire currency by himself.)

I predict that people will realize that Bitcoin is incapable of robustly facilitating a global amount of transactions without centralization in banks/hubs/wallets/exchanges, thus defeating its stated advantage of immediacy and anonymity, far faster than individual coins fall out of use.

I think anyone panicked right now over the loss of their BTC because of a lost key, broken HDD, forgotten pwd, or the BTC just it isn't there anymore for reasons unknown-- those people will never feel secure holding BTC again in any form. The psychology of loss is powerful, and grown-ups just don't put their life savings in insecure stores of value.

The value of BTC is part scarcity and part network effect. In a rational world (what we usually get in the long term) disappearing BTC would have an impact on the network effect. Interestingly, Gresham's Law suggests it would be a positive effect. A likelihood that wealth will be destroyed at death-- I would think that would deter adoption.

Funny that you mention that because people in many countries panic daily over the loss of their life savings in banks or government-backed hard currency. They have seen them vanish to a scale that can't even compare due to corruption, politics, incompetence, or reasons unknown.

The psychology of loss is powerful indeed

> incapable of robustly facilitating a global amount of transactions without centralization in banks/hubs/wallets/exchanges

Banks/(3rd party) Wallets/(3rd party) exchanges is centralisation.

Lightning network hubs for example are not -and could scale much better, with less friction, than any transaction systems that we currently have. But plenty of things are going on, if it's not that it will be something else, it's only a matter of time.

All bitcoins are created from mining rewards. As the number of coins has increased (and more people started mining), the difficulty goes up and less coins are produced.

These 'whale' entities either ran mining operations early enough, or (more likely) took a huge bet on the direction this was going and decided to accumulate - like the Winklevoss twins did - by buying as many as they could from miners.

You know the famous pizza for bitcoin story?

The media always tells the story this way: Joe Person traded eg 10,000 bitcoins for some pizza, in what is believed to be the first commercial transaction.

You know what they always miss in the story? Joe Person did that same deal several times, which you can see by reading the forum thread that still exists. Joe Person missed out on a billion dollars in Bitcoin value in exchange for maybe a dozen pizzas.

How did Joe Person get tens of thousands of bitcoins? That's how easy it was to mine back then.

Wait 2, 10 or 20 years and a pizza may look like a good value again. Think of it like the Hindenburg or the Wright biplane. Yes, it works and demonstrates a principle. That doesn't mean it will keep flying.

> what is believed to be the first commercial transaction.

I'm pretty sure Alpaca socks were sold before that famous pizza.

How foreboding!

https://priceonomics.com/when-the-great-alpaca-bubble-burst/

(1) The asset not the product is the thing being marketed (i.e. live alpacas, not fiber)

(2) investors have unrealistic expectations (alpaca fiber would replace wool, despite the lack of infrastructure; and besides the fact that people don’t really wear that much wool)

(3) information is controlled through industry sources (most of the information the researchers were able to dig up was put out by breeding associations)

You and parent poster make for a wise conversation. The closing sentence — telltale signs of a speculative bubble — can be read for BTC, one to one. Brilliant!

In the beginning, you could mine tons of Bitcoins on your laptop. They were also close to worthless, so you could buy very many for very cheap.

Satoshi did not pre-mine, I believe. So, if you read his announcement, and started mining right away, you'd be as rich as him.

People were spending tens of thousands of Bitcoins on stuff like pizza in the early days and there were significantly fewer Bitcoins back then. That's hundreds of millions of dollars today.

So all some of them had to do is keep them around. Others just bought them later on. Winklevoss twins put $100 million in Bitcoin years ago. I imagine many rich Chinese people wanting to evade money transferring rules in China did, too.

Satoshi has a million Bitcoins.

> Satoshi has a million Bitcoins.

Wow. Didn't know that. So if he/she tried to cash out, then the identity would be out right, since he/she would be attempting to deposit the cash equivalent ( FIAT ?) into a real bank account?

I don't think they would cash all of it out anyways. That is, if Satoshi is just one person

Given the amount of secrecy Satoshi has demonstrated before it'd be shocking enough to see the coins move much less move to a well known address (e.g. coinbase).

Satoshi is dead, or in prison. No way they could go 10 years without spending a single coin.

So you know every single one of Satoshi's addresses? (pro tip: you don't)

I am Satoshi!

So uh, not anymore dammit,

There’s no way to tell the entire holdings of Satoshi though so it’s quite possible she/he had other wallets and has made bank. Mining was easy for quite some time and once people were selling lots of coins it’s possible Satoshi was a buyer (if for no other reason than to help kickstart the market for them).

This assumes they only mined into a single wallet. They could have easily switched personas as a normal early bitcoin enthusiast. I would suspect that if you wanted to track the real Satoshi(s) down, you would start with a list of the earliest adopters. I would also look at people that maybe weren't the most vocal as they probably wouldn't have wanted to bring attention to themselves. Maybe they really did just completely step back though.

Satoshi could have also mined later when difficulty was still not so bad and have other wallets people don't know about. So in theory Satoshi could have cashed out couple millions from his later wallets already and be living on some island in Caribbean.

It's definitely conceivable that he/she would not be so greedy as to touch the origin coins. It's enough to cash out couple millions from later wallets, buy some nice house near beach and live very comfortably.

Of course, I still think much more likely scenario is that Satoshi is dead or lost his/her private key.

It's very unlikely that he/they are either dead or in prison. Satoshi went silent for over a year, and then only came out and sent a single message when Dorian Nakamoto was pegged as Satoshi.

The first folks who were mining bitcoin back in the day when mining for coins was not resource intense at all.

Some are miners. The others are early investors. All bitcoins were mined at some point, so they bought them from miners who cached out, or other investors who bought them from miners, etc. I don't think a significant number of them sold goods in exchange for their bitcoins.

wouldn't it be more accurate to say "wallets"? I am sure many of these are owned by large groups of people.

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