It's time for an inequality index for cryptocurrencies distribution | Hacker News Reader

It's time for an inequality index for cryptocurrencies distribution

63 pointspog92110 comments

It is quite famous that 95% of Bitcoin is owned by 2% of accounts. This concentration not only risks to threaten blockchain's own premises, but also exposes minor investors to risk of whales who lead the market and can easily speculate on prices since they can influence the price trends.

Is there any crypto inequality index? I thought that Gini index could work too!

I would like to find an inequality index in the cryptocurrency description on CMC and similar, it would help me make better investment choices.

What do you think?

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> This concentration not only risks to threaten blockchain's own premises [...]

BTC was designed specifically to avoid any kind of _state control_ and by _state control_ I mean something along the lines of a central bank. Adding protections here and there will inevitably lead to a system that is similar to current financial system with all the bells and whistles.

I think you're missing the point: BTC tries to sell lack of any kind of control (or protection, however you want to call it) as a _feature_.

The silly thing is that crypto is now following the stock market for the most part, at least the big coins like BTC/LTC/Doge/etc are.

Market goes down, crypto seems to go down with it. Look at something like 1-month BTC and 1-month APPL or something.

It's not supposed to be doing this. I think this is happening because it's become so easy to purchase that people now just have it in their "portfolio", basket of everything, and when they want to sell, they just sell everything, stocks and crypto. They are the same thing to a lot of people.

This means it is getting tied into the existing financial system anyway, even without specific "controls" like central banking.

> it is getting tied into the existing financial system

The fact that its price somewhat correlates with the stock market and the fact that two parties can exchange bitcoins without any government being able to prevent the transactions from happening are two entirely unrelated things.

What's more, the first matters little (only because volatility can sometimes be annoying), while the second is an essential, even defining property of the system.

> It's not supposed to be doing this.

Why not? Again, Bitcoin was designed to solve one problem: allowing economic entities to exchange value freely.

Other than - maybe - the fixed supply, nothing was ever built in the protocol to control its price.

> It's not supposed to be doing this.

Is it really not? Both stocks and cryptocurrencies act as inflation hedges against the central bank.

It’s really not. It is highly correlated with high risk assets and growth shares. It is anything but an inflation hedge, which is why it has been plunging as inflation rises and will fall more if interest rates rise.

If it were an actual currency things might be different, but instead it’s just another high risk speculative asset.

Just because BTC is temporarily correlated with risk assets, that doesnt mean it wont change.

Also, it's better to look at charts by starting at the beginnning of this 4 year cycle, dont pick out a bearish 6 month period and falsely claim BTC fails the inflation test. Short termism and Bitcoin's monetary policy are incompatible.

It certainly fails the inflation test without any doubt today.

You seem to be saying that it might pass it in the future.

Wrong, real inflation has been rising at an alarming rate for more than a decade, it didnt start in Q4 of 2021.

If you choose to measure BTCs performance poorly (3-6 month windows), you are just feeding yourself a false conclusion since Bitcoin had a 5,000,000x return over the past decade.

You’ll need evidence for that, and a way to disambiguate Bitcoin’s performance as an inflation hedge from the speculative bubble.

> it did a 5,000,000x plus return in that time

Then it is self evidently not an inflation hedge.

BTC's monetary policy makes it an inflation hedge regardless of what humans are doing with it, the cycles just take 4 years to play out. The evidence is literally in the code.

No need to complicate things, just focus on 2 key questions...

1. Is the BTC supply inflation rate lower than the US dollar’s (and other fiat currencies)?

2. Will it be lower for the forseeable future?

That will give you the simple answer you are looking for...both answers are 'yes' btw.

Price and supply are independent. Bitcoin isn’t a currency. It’s a speculative asset. It doesn’t matter whether it is inflationary within its own realm, so these factors tell us nothing at all.

What matters is whether the speculative asset acts like an inflation hedge.

Spoiler: it does not. It acts like a speculative bubble.

Wrong. Monetary policy is the key here. Price discovery, volatility, reflexivity, add noise to the procession/price-chart but over any 4 year period the fundamentals matter. One would have to be insanse to claim btc doesnt act like an inflation hedge, it literally averages approx 200% return every year, over any 4 year period.

Gold is called an inflation hedge by many confused people, compare its performance to btc over the last 10 years and tell me which performs better in the face of fiat inflation.

>Price and supply are independent

Wrong. Price is literally discovered by supply vs demand.

Say 5 billionaires want to buy coin-x and the max circulating supply is 1 coin... When the bidding war starts, are price and supply independent?

I dont think you understand the topic we are discussing here, so I will move on.

Your argument seems to be that Bitcoin’s price has gone up a lot over the last decade, therefore it must be a hedge.

What you are not seeing is that over that time, every one of the promises made about Bitcoin’s utility has been systematically disproven, which is why it has now stalled.

Past performance is no predictor of future gains, as they say.

Here’s another question to focus on:

If it is mostly used to speculate, not transact, does the supply matter at all to the price?

Both cryptocurrencies and stocks are traded with leverage these days, and central banks control the price of leverage. So, if central banks decide to start raising interest rates, asset prices will go down because leveraging becomes more expensive.

Crypto has cooled off considerably during the last few months. It's kinda drifting on the waves of the stock market. It needs a new narrative to become "hot" again, than it'll decouple.

I’m baffled how people miss this even if it’s the mission statement of Satoshi himself: Bitcoin is a tool to prevent wealth re-distribution. It’s whole idea is to ensure that the accumulated wealth is preserved. In 2008 it was against the government bailing out the failed banks but it’s also against any government interventions, including easing the wealth inequality.

In essence, the idea is that if a teenager in 2010 acquired 10,000BTC the society owes him food, shelter and luxury for generations to come.

It’s like being a landlord whom passive income guarantees him and his family a good life with no work when people working their arses off to be able to pay the rent.

Wow - this is a really good description of Bitcoin. Similar to the tweet that said "Whenever I read 'decentralized', I think 'unregulated'."

The difference being that BTC has no utility that people depend on. They can refuse to buy the BTC from the now-GenZer or even the Winklevoss twins if they'd rather have food or shelter or a chanel bag rather than BTC. The real world phenomenon that this corresponds to is consumer price inflation or asset price inflation (assuming your asset is production capacity and the medium of exchange is BTC) Being a landlord, or being an oil baron in an economy that is dependent on petrol, is different because people actually need those things. So antidemocratic aristocrats who inherited a land with substantial oil reserves can now buy lots of startups via softbank or build artificial cities because our cheapest way to acquire petrol is still to dig it out of the ground in those countries where reserves accumulated in the last millions of years, and pay local rulers for the permission to do it.

If we assume that we should maintain the current scarce currency system, then the only solution would be to have multiple competing scarce currencies. However, Bitcoin is not really competing against anything except maybe gold.

> It’s like being a landlord whom passive income guarantees him and his family a good life with no work when people working their arses off to be able to pay the rent.

Not necessarily. The state still takes a percentage eg: property tax, maintenance, utilities, safety certifications, etc.

Why would the majority of people want that?

lack of any kind of control

Multiple choice question: Which of the following groups have lots of control over BTC?

A. BTC Core Developers

B. BTC Exchanges

C. Credit Card Processors/ACH Entities/Payment apps that allow people to buy BTC from fiat without exchanging physical cash

D. BTC Miners

E. Any judge in the country that can order you to hand over your BTC just like he/she can order you to dig up the cash he/she suspects you have and hand it over.

F. All of the above and many more

(It's F)

I understand your larger point but to be fair to gp you're responding to, he was scoping the word "control" to Central Bank since he actually wrote:

>and by _state control_ I mean something along the lines of a central bank.

So central bank control would be something like "expansion of money supply beyond 21 million bitcoins". Therefore, your options (B) Coinbase/Binance (C) Visa/MC/banks and (E) courts -- really have no "control" over that "central bankish" aspect.

EDIT reply to: >Central banks [...] don't have complete control about the money supply, because commercial banks also create money via fractional reserves.

The Federal Reserve (central bank) in USA is the entity that adjusts the fractional reserve requirement.

https://en.wikipedia.org/wiki/Federal_Reserve#Reserve_requir...

> The idea that no one can expand the supply of bitcoins beyond 21 million is a nothing but fairy tale.

It could theoretically be done but it would require the coordination of the Bitcoin developers + miners + node validators. A crypto-exchange like Coinbase can't do it.

As a previous case study, Coinbase was part of the group that aligned with majority miners to change the Bitcoin protocol to increase the block size -- but all that influence and miner support still couldn't get the Bitcoin network to adopt it.

This is a misunderstanding of how the money supply works. Central banks have a legal monopoly on the issuance of currency, but they don't have complete control about the money supply, because commercial banks also create money via fractional reserves. Over 80% of the money in circulation is created in this way by commercial banks. And this applies to bitcoin as well. Crypto-exchanges can expand the supply of any crypto-currency by creating deposits that aren't fully backed with reserves. The idea that no one can expand the supply of bitcoins beyond 21 million is a nothing but fairy tale.

Do you have any examples of any of the parties you listed successfully exercising their power against the protocol?

Sure anyone can affect anything but how did any of them selfishly affect the fundamental properties of the protocol?

Are you aware of BCH, BSV and ETC?

Ironically I think ETC is the only network here that proves your point, and I think most people would agree that the reasoning for moving to ETH was fair.

BCH and BSV are scam attempts, and I wouldn't say they've been successful.

Funny that BCH and BSV claim that it’s BTC that are the scammers.

The BSV folks are particularly vocal that BTC is a fraud.

I have a friend of mine that retired at 40 from working at a hedge fund and investing his personal money well. Bought an 80 acre farm, has a bunch of a horses, a wife 20 years younger than him and three kids. He’s literally the smartest person I know and he believes Craig is Satoshi and that BSV is the best investment to come along since AMZN. I don’t get it - Craig Wright seems like a con artist to me and I’ve spent a ton of time looking into it.

Proof that it’s F is that the protocol is extremely slow to change.

Yeah and in that sense it is basically the same as gold. Gold is a tool to entrench power. Bitcoin is a tool to entrench power. Conventional fiat currency is also a tool designed to entrench power. All of these so called "scarce" currencies achieved exactly what they were designed for.

The ideal that Bitcoin lets you escape the current financial dogmas is completely wrong, it's a parody of the existing system.

Something like Freicoin would be more appropriate as an alternative, e.g. an "abundant" currency that always makes itself available to anyone who wants to trade.

so instead we have “not banks” that are less accountable?

bitcoin has no banks, period.

right, most people keep their crypto in exchanges which are definitely not just worse banks

> most people keep their crypto in exchanges

Do they?

What is your evidence for this?

Also, if we assume they do, well ... their BTC is now potentially subject to seizure, hacking, fees, bankrupt exchanges ... well, their choice.

Darwinism at work as far as I'm concerned.

Not you keys, not your coins.

Most people don’t. In fact there are only 1.3M BTC left in exchanges today out of 18.9M BTC that exist.

There is about 250k BTC on ETH as WBTC, the largest secondary pool in escrow. Ren has about 18K BTC in escrow. Lightning network is about 3k BTC.

measuring all bitcoin in existence is a bit misleading because a significant 95% is locked up with 2% of accounts… which is the point of OP

My dog is closer to a bank than an exchange is.

your dog might also be more reliable

source: trust me bro!

Bitcoin maxis literally go insane telling people to take their coins off exchanges. It's part of the dogma.

Inequality can be measured by non-state entities, and would seem to provide (for example) useful signals to investors about the health of the ecosystem. I think bitcoins/cryptocurrency are largely bullshit and agree that their value proposition mostly comes from the promise to avoid regulation. But we shouldn't pretend that it is impossible for markets to do any sort of introspection without the force of law behind it. And in the case of bitcoin, they do at least know which wallets own which coins, right? Seems easier to track than cash.

Control by a few anonymous individuals with totally unknown interests is not an improvement on control by state entities whose interests are widely known.

Meh, since there's no hard registry of identities of owners, if someone would make and popularize an inequality index, that index would simply be gamed (e.g. by artificial splitting of accounts) to show whatever is most beneficial to show, as soon as a gameable metric is used for a practical purpose (e.g. making better investment choices), it ceases to be useful for that purpose as it gets manipulated, see Goodhart's law https://en.wikipedia.org/wiki/Goodhart%27s_law .

> 95% of Bitcoin is owned by 2% of accounts

The problem is, how do you measure this reliably? I'd wager that a large chunk of 95% of Bitcoin is either irrevocably lost or owned by Satoshi (estimate is at "between 750,000 and 1,100,000 bitcoin" -- and arguably these TXs will never be spent).

Simply put, there's no way to differentiate between coins that are just sitting there unspent and coins which no one can access anymore because of lost wallet keys (and there's no shortage of such stories).

The bigger problem is that addresses are not measures of people. A lot of addresses are purposely generated as throwaway accounts, never to be used again. A single person may have or use dozens of wallets. Or a single wallet may be used by a large exchange which represents thousands of depositors.

So much for Bitcoin’s vaunted decentralization. In fact the inequality is probably far more pronounced. Since multiple accounts can belong to one organizatipn - but not the other way around :)

PS: if a bitcoin wallet belongs to one centralized exchange, it’s still under centralized control!

Bitcoin's decentralization remains unaffected by its distribution. But its distribution is fine. Any distribution is going to follow the pareto principle. No getting around that.

If you're looking for idealistic purity, and assume it's worthless if unattained, you're wrong.

Somewhat a large strawman to go from “1% owns 92%” and “you just want idealistic purity”. And also “not decentralized” to “worthless”.

I thought this was supposed to liberate us from problems of the current financial system?

Decentralization of Bitcoin can be understood in a variety of ways.

1) To make forward progress: it is extremely centralized, all transactions in the world must go through a miner

2) In terms of concentration of ownership and effect on price: highly centralized, again

3) In terms of mining pools: once again, highly centralized

What exactly is the lure?

Decentralization is a security and censorship-resistant feature of Bitcoin. All transactions must go through a miner, but the only way to mine a block is by solving a SHA256 hash in competition with tens of thousands of other miners also trying to solve for the hash all around the world.

There is no way of saying 1% owns 92% (after all, I can churn out a million addresses used purely for one-off transactions, if desired, that's totally acceptable, wallets are practically free to produce). But it wouldn't matter if it did, because distribution of Bitcoin does not affect its security or censorship resistant properties. All transactions get the same amount of security. All holders are equal in terms of protection provided by the network.

Concentration of ownership of any capital asset is going to follow a Pareto distribution. That is not unique to Bitcoin... it's true of everything from stamps to stocks. Bitcoin never made the claim to some sort of idealistic theoretical "even" distribution as if that would be fair, but I digress... Bitcoin is also not the end all be all of crypto assets, and plenty of additional capital value has been distributed among the long tail of crypto assets that have cropped up since (over 60% of crypto's market cap is among other crypto assets).

Mining pools are not centralized entities. They are loose organizations that miners join to even out the yield on their mining equipment. A miner can fluidly leave and re-join a different pool at will. The pool's sole function is to smooth out yield. If a pool fails to do that, it loses its miners. It's not some central entity that can command the miners in it to 51% attack the network. That's not how pools work.

But even if they did, it would be painfully obvious that it was happening, and the Bitcoin community would mount a response, which may include a hard fork if desired.

I am more involved in the Ethereum community than Bitcoin. The lure is that I can borrow and send six figures worth of crypto in 2 minutes, and deploy it to a smart contract multisig and create an on-chain organization in a single afternoon that is used to deploy capital for anything from charitable fundraising to art commissions and auctions to online gaming production to startup operations. I can coordinate across jurisdictions frictionlessly. I can retain my assets when moving across borders. I can retain true ownership and custody of my funds without any central parties. I can earn yield on my funds by lending it out to on-chain options markets. I can fund any one I want on the internet without Paypal's permission or blessing. I can move to a third world country and still retain all of these capabilities.

It's not going anywhere, it's hugely valuable. It continues to get more powerful and more user-friendly.

I just want to clarify where I stand

I’m a huge proponent of Web3 and smart contracts

I just criticize Blockchain as the underlying layer. I am saying the emperor has no clothes. I mean, even Polygon the so-called “scaling solution” for Ethereum is still built on Blockchain, and so stuff like this happened a week ago: https://www.coindesk.com/tech/2022/01/06/polygon-under-accid...

No one asks how many websites or emails per second can happen using HTTP or SMTP. Guess why… there is no bottleneck. There is no block and no miner. The entire network is what’s called “embarrassingly parallel”.

What we need is programmable smart contracts that are on an embarrassingly parallel network. And we would have been there by now if not for the profit motive of the blockchain bagholders. Most technologies get faster and cheaper over time — but first gen crypto had besn perversely designed to become slower and more expensive with time and adoption!

I submit that the ONLY reason people stick with first-gen stuff like Bitcoin, Ethereum Classic, and NFTs of pictures that anyone else can view without “owning” them, is the profit motive based on speculative greed of finding a “greater fool” to buy your “store of value”, followed by the sunk costs of having bought into this outdated technology. The utility is minimal beyond STORING value and the store of value is a self fulfilling prophecy. It’s like if people rediscovered retro video games and speculated with them because they were so rare, except what’s sad is ALL THESE NEWER PROJECTS which have so much promise are pegged to Bitcoin and when its price goes down, it drags them down too.

You’ll eventually see them decouple and then I wonder what will make Bitcoin so much better than a random ERC20 token. Why “store value” when I can grow it 300% a month?

Ask yourself, how much should an SSTORE instruction cost on the EVM for “scalable” solution like Polygon?

It’s still a blockchain, so you’re going to have tons of machines store your dirty laundry…

And the more nodes join the network, the more expensive it will be to store the CURRENT state — not even history. Let alone state TRANSITIONS as more and more dapps adopt the chain.

I mean … this should be obvious to any mildly critically thinking technologist, and it was even pointed out to Satoshi in the newsgroups around 2009. Bitcoin could never become a “peer to peer cash system”, and the “world computer” can never scale to “web scale”. It’s a glorified mainframe where you rent time.

And all because of BLOCKCHAIN.

That’s what isn’t scalable. And all this crap about increasing the block size by N just misses the whole point!

You’re not supposed to have a network architected to have everyone store everything, and have giant bottlenecks on top of that. And Proof of Work is EVEN WORSE because you don’t know who will mine the next block so every cleint also tries SPAM as many miners as possible with their transaction. They’re al competing to get into a fixed-size block and you’re hoping this is the architecture to be adopted by the whole world anyday now?

Imagine if BitTorret or the Web worked this way. The industry will move to DHTs and will realize that the fact that you can move millions of dollars for a fixed $100 fee is a BUG, not a feature. It means that the long tail of much smaller transactions ALSO uses the whole firepower of the network, like if a dime was transported using an armored truck and a convoy. It’s not proportional.

There will eventually be 21M BTC and Satoshi mined 1M which is around 5%. Some people have estimated that ~20% of BTC is lost. That leaves 70% controlled by whales and exchanges.

Besides inequality in individual ownership of Bitcoin, there is also inequality of acquisition cost. The two are related since lower costs make it much easier to acquire large amounts as demonstrated by Satoshi himself. While we cannot reliably compute individual ownership inequality, all we need to compute cost inequality is the price history of Bitcoin.

Let d_0..d_n be all days in Bitcoin history sorted by price on day d_i. So d_0 is launch day, when Bitcoin was worthless, and d_n is the day when price last peaked.

Plot a graph where x coordinate is Sum 0<=i emission(d_i) and y coordinate is Sum 0<=i emission(d_i)*price(d_i).

If Bitcoin were a stable coin then this would produce a straight diagonal line. But not only did the price go up exponentially, at the same time the emission went down exponentially. The extent to which the graph lies below that line is the Gini index of Bitcoin price inequality.

That, and the fact that anyone can own an unlimited number of wallets.

Never is a strong statement; Bitcoin has resulted in a lot of investment in hardware that can solve problems similar to "what's satoshi's private key"

A lot of that is large centralized exchange wallets that hold crypto for retail investors.

You're describing the Gini coefficient. Here's an article on why you shouldn't overuse that: https://vitalik.ca/general/2021/07/29/gini.html That being said, 42% of all Bitcoin sits in 2100 addresses. Google "Bitcoin rich list" and you'll also be able to look on that site at other coins as well. People will point out that those are exchanges representing users. And I'll point out, crypt was invented to remove middlemen and exchanges are middlemen.

Crypto isn't intented to remove middlemen. It's intended to give people the choice of who to trust. People can choose to trust an exchange, or to self-custody, and deal with the consequences in either direction.

If I choose to self-custody, it's much safer to memorize a seed phrase than to store cash in my mattress. Most people don't bother and use banks. But I think it's good that people now have a choice in the matter.

> Crypto isn't intented to remove middlemen

That isn’t what the sales pitch has been for the last 13 years, with lots of fanciful rhetoric about removing the need for banks (“you can be your own bank!” is basically a cliché by now).

> If I choose to self-custody, it's much safer to memorize a seed phrase than to store cash in my mattress.

Are you sure about this? Lots of people have been phished or compromised, whereas someone breaking in and searching your house is relatively uncommon and limited to people in the same area whereas your cryptocurrency can be stolen by anyone in the world.

People give sales pitches for lots of things. You don't have to listen to them.

> Are you sure about this?

Whether I'm sure or not... I think everyone should be given the choice.

> People give sales pitches for lots of things. You don't have to listen to them.

No, but when something has completely failed to live up to the sales pitch and then people try to pretend they'd never made those claims, it's important to remember that track record when deciding whether to trust the new claims. This is especially true in the case of cryptocurrencies which have no value other than social consensus because the same people who were making those original claims stand to gain the most if the new claims convince someone else to buy otherwise worthless tokens.

> Whether I'm sure or not... I think everyone should be given the choice.

Which they have and nobody is saying should be taken away from them. This is about the conflict between the stated goals and actual demonstrated behaviour.

Bitcoin is a technology that has various use cases. Just because some person gives a sales pitch, doesn't mean that sales pitch becomes the benchmark by which to measure the technology. Bitcoin is decentralized and does not have one stated goal. Many people use it for many different reasons.

If someone keeps changing their claims or is otherwise acting scummy, just ignore them. There are shysters in every industry.

I realize you have a financial interest in us believing that but this isn’t random strangers but the entire movement dating back to the initial manifesto.

I mean... no, the success of this burgeoning asset class does not depend on me convincing a single HN poster in a long-buried thread. And there never was a "manifesto", at least not one that I've ever heard about. But thanks anyway for the discussion I guess

If you’re unfamiliar, here’s a link:

https://bitcoin.org/bitcoin.pdf

Wow you're right, that's quite a manifesto. Almost as provocative as this quicksort manifesto.

https://www.doc.ic.ac.uk/~mjw03/PersonalWebpage/pdfs/quickso...

I'll quote the first sentence from the Bitcoin whitepaper. "A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution."

Right; it allows not using middlemen but it doesn't force it. Forced decentralization is a mostly unsolved problem.

Wallets != people. Without proof of personhood, you never know the distribution.

This right here. Everybody running and screaming about the OP statistic have 0 knowledge how bitcoin works or purposefully spreading false information.

It's like the elections being stolen, or anti-vax propaganda or whatever other idiocy being spread on FB on any given moment.

No, OP is correct actually

>95% of Bitcoin is owned by 2%

This is just the lower limit on the concentration of wealth in Bitcoin, found from onchain data. Since people can have multiple addresses it is possible that the 2% actually control 97% or even more of btc supply

This isn't necessarily true, because some of those largest wallets are probably exchanges/trusts. It can go both ways: one wallet may have many owners, and one owner may have many wallets.

Can you tell me right now how many wallets does Satoshi have?

Isn't this a problem?

More specifically: assuming we can't derive it by some clever means, or approximate it from some tax reporting data, isn't it a problem that we can't get such a distribution?

I mean this not as a moral judgement, but more as a system dynamics concern. It's easy enough to see how wealth concentration can destabilize a money/value system absent other factors. So my concern isn't about what's right or wrong socially, but whether there might be a reason to question the implicit trust that the maths will work out.

Just wait until you find out that there's not even a block explorer for monero.

Most people keep their coins on exchanges which are represented as large single holders on the blockchain so it’s not an accurate characterization.

Many BTC addresses are owned by companies (e.g. exchanges, trusts, etc) and not by individuals. The Gini coefficient only looks at individuals, not companies. In other words, it doesn't treat Google as a person and compare its wealth directly to yours. So you can't directly compare those numbers.

>It is quite famous that 95% of Bitcoin is owned by 2% of accounts. This concentration not only risks to threaten blockchain's own premises, but also exposes minor investors to risk of whales who lead the market and can easily speculate on prices since they can influence the price trends.

It doesn't threaten it though. It would only threaten it if miners colluded. Crypto may be manipulated, but so is everything else, like Gamestock stock in 2021.

The crypto bubble is already deflating, with btc having fallen 40% in the past 2 months. These problems will fix themselves as the bubble continues to deflate.

Jul 16 2021, bitcoin was 30k, today it’s 40k, how is this a deflating bubble?

Because you just picked a randomly favourable date from an escalating speculative asset?

So did you?

was at 70k

false, https://www.yahoo.com/now/crypto-daily-movers-shakers-july-0...

> July 15, 2021

> Bitcoin, BTC to USD, fell by 2.84% on Thursday. Reversing a 0.29% gain from Wednesday, Bitcoin ended the day at $31,890.0.

https://www.youtube.com/watch?v=XbZ8zDpX2Mg

So we have an asset that follows a Pareto distribution[1]. Now if one has spent any time and resources investing they'd notice that this holds true for a lot of assets. Bitcoin is really not exceptional in this.

Are you after an asset that doesn't follow that distribution ? Do you consider this a good thing ?

[1] https://en.wikipedia.org/wiki/Pareto_distribution

The pareto distribution has an alpha parameter. If alpha is large enough, then one person/wallet contains the totality of the wealth, and the rest all have exactly zero of it. This is illustrated plainly by the limit of alpha -> infinite in the graph.

I think it's obvious that this extreme case is very bad. So there must be a point where alpha goes from being in "good" territory to being in "bad" territory, or there must be some gradient of "least concerning" to "most concerning".

The question asked by OP is basically equivalent to "what is the value of alpha?" Considering the potential for concern, this seems like a useful thing to measure.

I don't want to speak for anyone else, but when most people talk about wealth/income distribution or inequality, they generally aren't advocating for a flat line (everyone has an equal amount of dollars), they are generally advocating for keeping Pareto's alpha at some reasonable level.

A lot of those accounts are run by exchanges. So we don’t and can’t know true distribution. Unless Coinbase and binance release stats on their customers

> Unless Coinbase and binance release stats on their customers

And even then, I'd argue there's a lot of incentive to lie about it.

- https://rugpullindex.com rates some ERC20 pools by gini index

- In the future, we want to rank all of them

- Method specification: https://rugpullindex.com/specification#CalculatingtheEqualit...

I think a thought spent on crypto is a thought wasted.

I think this comment is a waste under its own assertion. No?

While I see your point of irony, and can only be amused by your comment and the apparent absurdity of my speaking my point, I’d say on balance and considering the future potential of thought waste, there is a net conservation of thoughts.

I'd rather see a currency that has a guaranteed validated identity tied to every wallet, and you can only have 1 wallet, and that wallet has a max limit on currency.

The coin would also tax based on hodl vs spending the lower your overall wealth and the more you spend monthly (more transactions, not more total) the more UBI you get, the more you hodl, the more your tax obligation is. The longer you hodl the more your tax obligation as well.

Basically use it or lose it, and if it could become pegged to the price of a loaf of bread or something wherever you live... then it could achieve some form of universality...but that last bit would be hard to figure out as I'm no economist.

If you mean you want a way to quickly measure how distributed ownership of a particular currency is, that sounds fine. You should be able to develop a decent visualization from blockchain explorers themselves without too much trouble. Well, some trouble. But it's possible. Any moderately good programmer should be able to do it for you.

Keep in mind, though, that other comments on this thread have pointed out that addresses and wallets don't have a 1 to 1 relationship with people. So you won't really be seeing who owns the most.

Leave the word "inequality" out of it. I don't think it means what you think it means.

> This concentration not only risks to threaten blockchain's own premises ...

And, yet another claim that needs to be justified.

Assuming one whale owns 20M Bitcoins, that still leaves 1M Bitcoins to use for transactions.

That's 10^14 satoshis, plenty enough to allow people to exchange value in complete freedom.

Can the one guy who owns the 20M tank the price by playing market games? Maybe, but why would he shoot himself in the foot by doing so?

And even if he did and - say - crashed the price down to BTCUSD = 2 ... would that prevent people from using Bitcoin to exchange value? Nope.

How are you defining an account when you say that 95% of BTC is owned by 2% of accounts?

Adir Shamir did long time ago: https://eprint.iacr.org/2012/584.pd

tl;dr: 98% of BTC in circulation at the time belonged to 2% portfolios.

fixed the link: https://eprint.iacr.org/2012/584.pdf

Thanks!

Easy to calc: https://en.wikipedia.org/wiki/Gini_coefficient

Yes I agree. Even if it's not a perfect metric, it'd still be useful.

How do you know concentrations is not even worse? Same person can have multiple accounts.

> It is quite famous that 95% of Bitcoin is owned by 2% of accounts.

Is it?

What's your evidence for this?

Bitcoin is not proof of stake so I’m not sure why this would matter.

> This concentration not only risks to threaten blockchain's own premises, but also exposes minor investors to risk of whales who lead the market and can easily speculate on prices since they can influence the price trends

The problem is that you can only associate value with a wallet, not an individual, and even that doesn't really make the market any safer; it just further exposes how terrible cryptocurrency is as an investment asset. Gold is valuable due to it's scarcity. Diamonds are popular due to their demand. Cryptographic hashes are valuable because of their transient demand and abundant supply.

Gold is expensive because of scarcity, that does not make it valuable. In fact, people are wasting their time on this planet, digging up gold which is merely supposed to represent wealth but not be wealth in itself.

If you think of gold as a speculative accounting system then it really is just a very resource inefficient way of book keeping. Digging up gold and going to war for gold mines makes you poorer, not richer. Yet people believe that this system is infallible.

Price is a function of supply and demand, so trying to isolate one or the other doesn't make sense.

Why does it matter how many people are associated with a particular wallet? The wallet with $150 worth of Bitcoin has the same amount of security as the wallet with $15M, and it's considerable. The protocol itself has never been hacked, despite holding nearly $1 trillion of value.

Arguably, if someone would hack BTC, he or she would have to make sure no-one found out.

Because if people knew that BTC was hacked, the bottom would fall out under it, and all your stolen coins would become worthless.

Not to say that I think it's been hacked....

Crypto will be the death of HN. OPs comment is something that has been talk about since 2012 and looking at one or two parent comments they cover the depth that is required to answer why this doesn’t matter or can’t be determined. However it’s crypto so now we have 50+ comments about why X thinks Y is stupid. Why crypto is a waste. Why crypto is the best. But its all 100% stupid unfounded word vomit.

HN has shows crypto is too polarizing of content to have intelligent discussion here.

IMO is should be banned from the site. You could replace these comments with comments from a reddit post that hit the front page and you wouldn’t know the difference.

We should never attempt to ban technology, it only grows more powerful in the shadows.

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