[HN Gopher] .01% of Bitcoin holders hold 27% of all Bitcoin
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.01% of Bitcoin holders hold 27% of all Bitcoin
Author : croes
Score : 259 points
Date : 2022-05-21 16:00 UTC (7 hours ago)
(HTM) web link (twitter.com)
(TXT) w3m dump (twitter.com)
| deeviant wrote:
| Mmmhmm, I just can't wait until proof of stake. That's going to
| fix everything. /s
| benjaminwootton wrote:
| .01% of USD holders probably own 27% of USD
| tasubotadas wrote:
| Did somebody just discover the power law?
| salawat wrote:
| Do believe so.
|
| The amount of electrocity that went into it is a bit a chafe
| though.
| wnevets wrote:
| Sometimes I wonder if the Monopoly board game should be
| required education.
| slickrick216 wrote:
| So much effort put into FUDing Bitcoin. Just don't buy it.
| randomhodler84 wrote:
| Or do, and ignore the same people that said it was stupid for
| the last decade and will probably say the same for the next.
| Meanwhile, those that understand the internet know that
| protocols are extremely long lived and might even outlast them.
| slickrick216 wrote:
| Don't tell the rest of them that. More for the rest of us.
| ideamotor wrote:
| Comparing this to other assets misses the point. Dollars have
| (imperfect) democratic governance. Whereas the entire ideology of
| crypto is to throw away what little feedback loop we do have.
| camjohnson26 wrote:
| How many of those are exchanges or dead accounts?
| MomoXenosaga wrote:
| The funny thing is that none of those whales can cash out without
| tanking the price.
| 323 wrote:
| Very misleading.
|
| The fact that Binance or Coinbase holds 10% of bitcoin doesn't
| mean that it owns 10% of bitcoin.
|
| You can say something similar about any fiat currency, because
| almost all USD for example lives on the balance sheet of the big
| banks - JPM, Chase, BoA, ...
| gitfan86 wrote:
| At one point crypto was about decentralization, and having
| advantages over the current banking system. But to your point
| it seems like it is no longer for most people, for most people
| crypto is about the price going up, regardless of
| centralization or usefulness.
| 323 wrote:
| The internet is decentralized. At the same time, 99% of the
| internet traffic passes through 15 or so tier 1 networks.
|
| Being decentralized doesn't mean that there are not huge
| entities which control most of the system.
| gitfan86 wrote:
| But the internet was never promoted as having value due to
| a large number of tier 1 networks.
|
| Bitcoin was created specifically as a way to counteract
| centralize control of money. The fact that many people
| store their crypto in central exchanges implies that they
| don't actually care about the advantage of decentralized
| money.
| 323 wrote:
| It doesn't matter what the internet was promoted for.
|
| Do you believe it's decentralization has value or not?
| Despite the fact that the vast majority of people use it
| just for Facebook and Instagram.
| gitfan86 wrote:
| The internet is valuable even though most of the traffic
| goes to a few sites. But that has nothing to do with
| decentralization. No one ever promoted the internet as
| useful because no site would ever be super popular.
|
| The value Bitcoin provides is that it allows you to
| bypass government controls and other monopolies on
| transferring money. If you put that Bitcoin on an
| exchange you no longer have that ability to bypass
| government controls because Coinbase will lock your
| account if the government tells them to do so.
| 323 wrote:
| And the government can lock you internet access too if it
| wants, see China.
|
| You are ok with 99% of people using only a couple of
| sites on the decentralized internet, but not ok with 99%
| of people keeping the crypto on a couple of exchanges on
| the decentralized bitcoin.
| nullc wrote:
| The ability to move your assets at any time elsewhere,
| into your own custody or to another provider is exactly
| what you get for sake of not having centralized control.
|
| It's fair to say that they likely care about it less than
| someone not using those services... but so what? The
| world isn't just black and white.
| [deleted]
| manquer wrote:
| https://www.nber.org/system/files/working_papers/w29396/w293...
|
| The authors are well aware of this, the analysis excludes these
| exchange accounts holding 5.5 M Bitcoin and is only about what
| is held in individual accounts which collectively own 8.5M
| bitcoin.
| tromp wrote:
| The best Bitcoin could hope to achieve is mirror the wealth
| inequality in fiat. But the nature of the emission, with half of
| all supply emitted in the first 4 years, has exacerbated the
| inequality. One cannot imagine one person holding several percent
| of all fiat.
| togaen wrote:
| Kinda like a pyramid scheme.
| zaik wrote:
| * addresses
| TomK32 wrote:
| which means it could be even worse.
| drexlspivey wrote:
| Coinbase cold storage holds billions of dollars for millions
| of people. Do you understand how bad this metric is now?
| jazzyjackson wrote:
| Is there a benefit to consolidating all those coins into
| bulk wallets?
|
| Why not have an address associated with each user?
| drexlspivey wrote:
| Yes consolidating outputs significantly reduces
| transaction fees
| manquer wrote:
| The study excluded all the exchange wallets [1], that makes
| the metric if anything more conservative than it is
| actually.
|
| [1] https://www.nber.org/system/files/working_papers/w29396
| /w293...
| joshcryer wrote:
| Not your keys, not your coins.
| ShamelessC wrote:
| https://fortune.com/2022/05/11/coinbase-bankruptcy-crypto-
| as...
| tshaddox wrote:
| Or less worse.
| bufferoverflow wrote:
| It's probably not. Exchange hot and cold wallets hold insane
| amounts, but most of that money doesn't belong to them, it's
| their clients'.
| dosenbrot wrote:
| Or maybe better. In the first days of bitcoin nobody cared
| about a lost key. A few thousand bitcoin on an account nobody
| has access to? These bitcoin shouldn't count, but it's hard
| to count them. Maybe declare all bitcoins that didn't move
| since eight years as lost?
| randomhodler84 wrote:
| And this is a stupid metric too. I have utxos that old that
| will be unspent for another 5y+
|
| I don't care about Bcash and other worthless forks and I
| could tell it was an attack to unmask old utxos.
| adnzzzzZ wrote:
| This analysis I saw says something else?
| https://twitter.com/woonomic/status/1512433154875101198 Which one
| is right? I haven't looked into it carefully.
| manquer wrote:
| Here is the paper
| https://www.nber.org/system/files/working_papers/w29396/w293...
| OsintOtter69 wrote:
| bko wrote:
| Doesn't this include large cold storage wallets of exchanges and
| mining pools? I don't know what the "appropriate" number is
| TekMol wrote:
| "Holders" is defined how? I have the feeling by address?
|
| If you add assets under management for all banks in the USA, you
| will probably get to an even more extreme distribution.
|
| Bank of America alone has $1.55 trillion under management.
| secondcoming wrote:
| It's time for me to unveil my Bitcoin0x11, where instead of
| hashes having to have a certain amount of leading zeros, it needs
| ones.
| thisisfalse wrote:
| nayuki wrote:
| It would be 0xFF.
| birthday wrote:
| Wait, so Bitcoin isn't being handed out equally to every person
| on earth?
|
| I thought the rule is we each will be given same amount?
|
| /s.
| [deleted]
| npc12345 wrote:
| This is fine.
|
| The point of Bitcoin is "they" cannot print more of it, they have
| to earn it fair and square.
| majormajor wrote:
| "They" (for even wider values of "they") can just make a new
| token instead of printing more of BTC. If people accept that
| that second one has value, that's gonna inflate prices since
| it's more money sloshing around.
| nightski wrote:
| Except wealth isn't power with Bitcoin. That's the entire point
| of PoW. PoS is a little different.
| DennisP wrote:
| Large stakers in PoS don't necessarily have more power over
| governance than large miners in PoW. _Some_ PoS chains have on-
| chain governance that give special voting power to stakers, but
| Ethereum 's PoS chain for example does not.
| iownzerobtc wrote:
| In PoW you can purchase miners. In PoS you can purchase
| validators. But PoS is easier than PoW to defend against a 51%
| attack as the offending validator set can be targeted.
| nightski wrote:
| Miners do not have all the power in PoW. Nodes and miners
| form a symbiotic relationship.
|
| Also it is in a miner's best interest to not disrupt the
| system as their livelihood and profitability depend on it.
| iownzerobtc wrote:
| Those arguments can also be made for PoS.
| Closi wrote:
| Of course with bitcoin wealth is power - you can use your
| bitcoin to influence people to do what you want, or to give you
| access to goods and services that people with less bitcoin /
| wealth can't access.
| [deleted]
| alphabettsy wrote:
| Someone buying or selling 5% of all Bitcoin wouldn't have any
| impact on its exchange value?
| nightski wrote:
| Of course it would, even if a little. It looks like that is
| typically less than the daily traded volume. But if you added
| another 5% on top of it surely it would affect prices. But my
| point is the ability to affect the price a bit doesn't equal
| power in terms of control over Bitcoin itself.
| [deleted]
| keybored wrote:
| Who's the Bernie Sanders of Bitcoin?
| f6v wrote:
| Methodology aside, would it be surprising if most of Bitcoin
| belonged to 1%? How would this asset be fundamentally different
| from other assets?
| anothernewdude wrote:
| This actually wonderful news. It means bitcoin is close to the
| point where it can easily be declared worthless since as a
| "currency" that isn't backed by anything there's no inherent
| value. Once a few players have the majority of the coin, there's
| no reason to play with them.
| iownzerobtc wrote:
| Several issues with using this metric to measure wealth
| inequality for crypto currencies, especially those with smart
| contracts like Ethereum.
|
| - A single address might be a contract like WETH, which can hold
| tens of billions of dollars worth of tokens despite all users in
| the network having access to it. Similar with centralized
| exchanges holding many tokens. Addresses are not users.
|
| - This metric often confuses "inequality of interest" with
| "inequality of wealth." A user holding $10,000 of ETH and another
| user holding $100 of ETH may be in similar fiat-wealth brackets,
| but one is more interested & invested in crypto than the other.
|
| - It is very easy to spin up a new wallet as it's effectively
| just a random unique number. A single user might have 10-20
| wallets with almost-zero tokens leftover, and all of their assets
| concentrated on one or two accounts, which further skews this
| stat.
|
| - A number of tokens in the network are inaccessible due to being
| locked in a contract or sent to a burn address. The standard ETH
| burn address has $250M worth of tokens.
|
| There is a lot of crypto disparity and inequality but this stat
| at face value is fairly meaningless.
| FabHK wrote:
| > Several issues with using this metric
|
| Which metric are you referring to?
|
| The authors of the paper on which the statement is based are
| fully aware and address most of issues you enumerate.
|
| See my other comment.
|
| https://news.ycombinator.com/item?id=31460346
| iownzerobtc wrote:
| Thanks for the link. The paper mostly only addresses one
| issue I that mentioned: attempting to distinguish
| intermediaries from individuals. It does not make any
| conclusions about how adoption of crypto as a whole will
| result in 100x more unequal wealth distribution than the
| regular economy which is what the OP tweets seem to be
| implying based on this 0.01% statistic.
|
| The paper does point to the fact that holdings are skewed;
| 400,000 individuals control almost half of the circulating
| supply, so--like with the stock market--a very small handful
| of players stand to benefit if the price continues to
| appreciate significantly. This is particularly a problem for
| crypto currencies like Bitcoin that have a fixed supply
| capacity and are primarily used as a store of value.
| (Disclaimer: I own no BTC and feel it has inherent problems.)
|
| Another study comparing Bitcoin, Ethereum and other coins to
| real world Gini coefficients finds similar results: that a
| small number of addresses hold a significant sum of tokens,
| but that overall wealth distribution in crypto currencies is
| often in-line with that of real economies.[1] The idea that
| crypto holdings mirror the wealth inequality of real
| economies is hardly surprising considering this is where the
| investors are coming from.
|
| Two more interesting points raised by [1] worth noting:
|
| > Results from both Bitcoin-like and Ethereum-like
| cryptocurrencies suggest that the wealth distribution is
| initially poor likely due to only a select few participants
| controlling the majority of the wealth. But this
| concentration often dissipates as more participants join the
| system, as observed in Bitcoin and Ethereum.
|
| > Bitcoin-like coins often have capped supply, i.e., the
| number of these coins are algorithmically limited to a
| predefined quantity to provide intrinsic value to the asset.
| Ethereum, on the other hand, does not impose a strict limit
| on the supply of Ethers. ... Thus the figures reported in
| this subsection will likely change significantly over time,
| unlike Bitcoin-like currencies in which a large proportion of
| wealth is already distributed.
|
| [1] https://ulir.ul.ie/bitstream/handle/10344/11073/Sai_2021_
| Cha...
| jeremyjh wrote:
| They are referring to the metric they imagined was in use
| based upon reading the title.
| jwilber wrote:
| None of these make this stay meaningless at face value.
|
| Almost all of your points apply to non-crypto as well, but
| nobody is denying wealth inequality there.
| iownzerobtc wrote:
| There is no doubt crypto includes wealth inequality as the
| network exists within our capitalist society. If 10% of the
| world population were to purchase crypto today, it would
| mirror the same wealth inequality we see in our fiat economy.
|
| But claims that crypto networks display 100x more wealth
| inequality is not supported by this statistic, and articles
| should not be basing their arguments on this stat without
| understanding the implications.
| plsbenice34 wrote:
| An invalid statistical argument that appears to support the
| truth is still invalid. Just like a proof for a mathematical
| theorem can be invalid even if the statement turns out to be
| provably true by other means.
| hihihihi1234 wrote:
| Nobody is "denying wealth inequality" here either, the point
| is just that the headline statistic may be a bad way to
| measure wealth inequality in crypto.
| salawat wrote:
| >Addresses are not users.
|
| Mmmmhmmmm. Welcome to the User-Agent problem. Unfortunately,
| Society will take your idea and massage it until the rest of
| society "safely" (to their thinking) can make that assumption.
| hammock wrote:
| What is the equivalent of this metric for physical gold, or
| even dollars?
| iownzerobtc wrote:
| Gini coefficient is often used in traditional markets:
|
| https://vitalik.ca/general/2021/07/29/gini.html
| hammock wrote:
| That's not what I meant. What portion of all mined physical
| gold is held by the top 0.01% of gold holders?
| MrMan wrote:
| In all markets there is no traditional vs non traditional
| market
| forgotmypw17 wrote:
| The crypto economy does not automagically solve all the old
| problems, but it does allow them to be more transparent and
| visible.
| Synaesthesia wrote:
| The fact is still that the crypto sphere is even more unequally
| owned than the economy or the stock market, which is already
| extraordinarily unequal.
|
| When I was first excited for bitcoin, it was because of its
| revolutionary capacity for people to transact without
| governments and banks, and to own and control that means
| themselves. Well that really hasn't panned out at all.
| aqme28 wrote:
| I'm sure this is true, but it's still not a good reason to
| put out bogus statistics. There are other ways to argue this
| point without hurting your credibility by lying about it.
| X6S1x6Okd1st wrote:
| > The fact is still that the crypto sphere is even more
| unequally owned than the economy or the stock market, which
| is already extraordinarily unequal.
|
| What are the specific figures & sources you derived this
| claim from? Last time I looked into this it was somewhat
| surpising, but there are _huge_ problems with the methodology
| (e.g. assuming that 1 address = 1 person is a really broken
| assumption)
|
| https://www.frontiersin.org/articles/10.3389/fbloc.2021.7301.
| .. is a good attempt, but still flawed methodology. It's
| latest estimate for bitcoin is gini index on wealth per
| account at ~0.45
|
| Which if it was a country would make it one of the _least_
| high in terms of wealth inequality which is hard to believe.
|
| https://en.wikipedia.org/wiki/List_of_countries_by_wealth_in.
| ..
| v0idzer0 wrote:
| > When I was first excited for bitcoin, it was because of its
| revolutionary capacity for people to transact without
| governments and banks, and to own and control that means
| themselves. Well that really hasn't panned out at all.
|
| This has panned out. This is the exact reality of crypto
| right now. It has nothing to do with inequality whatsoever.
| Solving inequality has not panned out, but it was never
| expected to, nor possible.
| emteycz wrote:
| Huh? I'm sending Bitcoin without involving any government.
| You're doing something wrong if you feel like you need to
| involve them.
| me_me_mu_mu wrote:
| Except come tax time you need to declare your crypto..
| emteycz wrote:
| Fortunately I live in a country where such thing is a big
| tabu. I only need to declare my gains (and only in case
| I'm holding less than a year) - and there are none if I
| am simply using BTC to send cash.
| colecut wrote:
| So btc has only gone down since you bought it?
|
| If you buy btc, and value goes up, and you use it to
| "send cash" that is a gain.
| emteycz wrote:
| BTC has stayed the same price for the duration of my
| transfers. It's just a few hours most of the time. There
| is also allowance in the law for this case - I don't need
| to declare anything unless I profit over $1k/year.
| jhgb wrote:
| > for the duration of my transfers
|
| What about for the duration of you keeping it in your
| wallet?
| emteycz wrote:
| I buy it when I need to transfer (usually using a Bitcoin
| ATM) and then transfer it immediately - and sometimes I
| deposit it to the target wallet directly.
| SemanticStrengh wrote:
| how does this compare to dollar?
|
| > That's 100x the wealth concentration of the regular economy
|
| sauce?
| oblak wrote:
| For starters, what "regular economy"? The global one? The one
| on the books, or the _real_ thing?
| donkarma wrote:
| but that doesn't matter to Bitcoin?
| curiousgeorgio wrote:
| Thank goodness Bitcoin wealth isn't distributed evenly among
| everyone who holds it. Show me a system where that's true (or
| even close to true), and I'll show you a system controlled by
| tyrants.
|
| Wealth equality != fairness. Effort, sacrifice, and contribution
| to the well-being of society is not - and never will be - equal
| for everyone, so rewarding everyone equally would be inherently
| unfair.
| tonguez wrote:
| "Thank goodness Bitcoin wealth isn't distributed evenly among
| everyone who holds it. Show me a system where that's true (or
| even close to true), and I'll show you a system controlled by
| tyrants."
|
| yeah that makes a lot of sense
| rhacker wrote:
| I'm surprised it's not 99% considering I figured most of it is in
| exchanges or coinbase.
| Smithalicious wrote:
| Does this really matter? Bitcoin is freely available on the
| market, there's is nothing stopping someone with enough money
| from acquiring an arbitrary share of the existing bitcoins.
| missedthecue wrote:
| No it doesn't really matter. Inequality by itself does not make
| anyone else worse off.
| Barrera wrote:
| That statement is not the focus of the video, which is an
| overview of the history of Bitcoin.
|
| Also, these estimates of wealth distribution all suffer from the
| same flaw: addresses do not correspond to users.
|
| A single address might lock the funds of thousands of people. For
| example, this is how exchanges operate.
|
| A single user can control thousands of addresses or more.
|
| It's extremely difficult to nail down how addresses relate to
| users. And that's by design.
| lvl102 wrote:
| Assets more concentrated than even diamond mines but it's going
| to democratize finance for humanity. Notice concepts such as PoS
| would make it even more concentrated.
| FabHK wrote:
| > Notice concepts such as PoS would make it even more
| concentrated.
|
| That is a common misconception, it seems to me. Assume a PoS
| scheme in which the probability that you get the reward is
| proportional to your share of all coins. Yes, large holders are
| more likely to get the reward, but if they get the reward, it
| basically increases their share by close to nothing. If a small
| holder gets the reward, they get a substantial boost. It
| averages out.
|
| It is a bit like a savings account. Everyone gets X% interest a
| year, so the big holders get more interest than the small
| holders, sure. But the proportions of wealth stay constant.
| xigoi wrote:
| Last time I checked a big PoS currency, you needed a very
| large amount of it to even be allowed to stake.
| meowkit wrote:
| To stake your own node, and run your own hardware, you need
| 32 ETH.
|
| If you don't have that, you can pool your ETH the same way
| you can pool compute for PoW.
|
| e.g. https://rocketpool.net/
| FabHK wrote:
| Oh, that changes the analysis then... those above the
| threshold would steadily gain over those below. Hmmm, a bit
| like the real world.
| tromp wrote:
| With PoS, every staker (on average) just maintains their
| fraction of the total supply. So PoS just enshrines the
| wealth inequality that exists at the time PoS starts.
| iownzerobtc wrote:
| Similar to how PoW distributes rewards: those with the
| capital to purchase mining power will reap benefits.
|
| This model unfortunately also exists in stock markets and
| most aspects of a capitalist society. Arguably PoS returns
| in crypto networks may be slightly more equitable long-term
| as it is not a permissioned and closed-door system
| (validators queues cannot discriminate based on class,
| race, credit score, region, and family for example).
| walkhour wrote:
| Bitcoin is not completely decentralized in the sense that every
| inhabitant in the world has the exact same share, but it's the
| most or one of the most decentralized assets.
|
| Those 0.01% don't have the same control over Bitcoin that the
| Fed has over the dollar. That is, that 0.01% wouldn't have been
| able to engineer the enormous inflation we have today for the
| dollar, but for Bitcoin.
|
| I don't think Bitcoin is about democratizing anything, it's
| about maybe you don't want your share to be diluted by 2-10%
| every year.
| lpapez wrote:
| What is the practical difference between your "share being
| dilluted" (dollar inflation) and "your share depreciating in
| value" (bitcoin price crashing)?
| walkhour wrote:
| That's like you asking me what's the practical difference
| between making $1M or winning the lottery and getting $1M.
|
| But to answer your question: the same difference that there
| is between chance and intention, for example, the same
| difference that there is between someone being murdered and
| that person dying accidentally. This difference is very
| important for most people and can have direct consequences
| in you life.
|
| In addition, the dollar is guaranteed to be diluted,
| meanwhile for Bitcoin, there's no such certainty.
| dosenbrot wrote:
| If you have enough bitcoin you could also buy and run many
| bitcoin miner, it's PoS with extra steps.
| arcticbull wrote:
| Yep, folks dont realize that proof of work and proof of stake
| converge at the limit. The only difference is quantity of
| environmental externalities.
| lvl102 wrote:
| Why would it converge when we are already starting with
| concentration? PoS would only work if we all started with
| nothing from t=0 which NO ONE in the crypto space would
| concede to because they don't want to give up their wealth.
| So in the end, you end up with something even worse than
| current state of capitalism.
| arcticbull wrote:
| Yeah, I agree with that assessment.
|
| I'm just saying that 'staking' in proof of stake isn't
| materially different than taking your Bitcoin and
| purchasing a share of a company that mines Bitcoin.
| [edit] you can always un-stake by selling your share.
| atweiden wrote:
| Staking is similar to buying lottery tickets at the
| store, except you need never leave your home or pay any
| money for the tickets. It's all about passive income
| generation.
|
| Mining is a business, with real costs and logistics to
| fret about.
|
| People should really stop doing the mental gymnastics to
| make push-button passive income generation seem
| extraordinarily challenging and, even more egregious,
| extremely equitable ("it's _at least_ as fair as
| Bitcoin").
| dropnerd wrote:
| anyone who has run a validator node on a slashing network
| knows there are real costs and logistics to pos staking.
| arcticbull wrote:
| Buying shares in a mining company eliminates all the
| challenges you describe for the would-be PoW "staker."
| nullc wrote:
| That's simply not true. The cost of the bitcoin miner
| itself is insubstantial (a small percentage of its total
| lifetime cost), the primary cost of mining is the commodity
| energy cost.
| reedjosh wrote:
| Conflating the two things like this is completely ignorant.
|
| Buying Bitcoin miners at first requires you to spend the
| Bitcoin.
|
| Mining may help you gain Bitcoin, but it doesn't much allow
| you to control Bitcoin.
|
| Pos literally gives you voting power over the currency's
| ecosystem just by having more of it. It completely
| concentrates control, and then it also returns gains to those
| with the larger stake (more wealth in said currency).
| iownzerobtc wrote:
| If you have significant fiat capital you can easily
| purchase mining power in PoW. Similar with purchasing
| validator power in PoS. The two are equal in that regard.
| Where they differ is that PoS is more resilient to 51%
| attacks of this nature than PoW is.
| jsiaajdsdaa wrote:
| Terry_Roll wrote:
| Saw this earlier https://www.youtube.com/watch?v=u1_gAgDBnOo
|
| and my immediate thought was the crypto tumblers are not working
| which then made me wonder if this is an in-plain-sight money
| laundering exercise using the power of celebrity!?!
|
| Elon Musk is definitely in market moving territory and sailing
| close to the window for things like buying Twitter and then
| pulling out, I wonder how many puts and shorts existed in dark
| pools? LOL
| niemal_dev wrote:
| Wealth distribution, with the bigger part owned by an extremely
| small percentile is like the history of human kind. We should
| take into account properties and any kind of ownership, such as
| national territory as well. Humans like to own as much as they
| can -- this is why wars happen.
|
| Regarding to bitcoin as a currency, as I read in some comment
| here:
|
| 1) You can't demand your money from your bank at any time given.
| This gives the banks the leverage to maintain and/or invest your
| money however they seem possible, rendering them a complete
| "Ponzi" machine (lending all the time in order to invest and make
| more money while paying out whatever you want to withdraw within
| calculated timelines).
|
| 2) Bitcoin can't print money as it is designed to have a fixed
| number of distribution. You can't inflate it. You have the
| capability to become your own autonomous, _independent_ bank.
| With a fiat such as USD, job wages do not increase in correlation
| to the USD volume. This promotes poverty, inequality and is
| completely unethical -- regardless if that effect is intended or
| not. There must be a public mathematically proven metric that
| constitutes as a stable currency, this is what Bitcoin is trying
| to solve. A so-called mathematical gold.
|
| 3) Different problems arise, such as: (a) incapability for
| consistent day-to-day payments due to processing inefficiency,
| (b) early birds get the bag, (c) global warming (hi tesla).
| vmception wrote:
| People that already have money can buy a bunch of bitcoin
|
| Along with early miners
|
| How is that controversial?
|
| There is zero mechanism to change that reality and not an issue
| bitcoin was claiming to solve. Whichever frothing at the mouth
| enthusiast told you otherwise can just be ignored.
|
| This is only news because people never made their own analysis
| after hearing someone else be excited for the wrong reasons.
| throwoutway wrote:
| Because shills say that it will democratize finance better than
| banks/USD/WTO/ and make a more equitable future. Which of
| course is bogus, and data like this is needed to contradict the
| lies
| vmception wrote:
| I think it already has, I could never get a flash loan
| elsewhere, or trade in some ways that I like. The closest I
| could get was access to some favorable margin systems.
|
| I don't think that has anything to do with bitcoin or any
| cryptocurrency's distribution. Its a boon, to me, that it
| functions like any other asset class, no reason to hold it up
| to fictional higher standards to discredit it.
| majormajor wrote:
| My main takeaway from concentration is that it indicates
| potential price volatility if a whale makes a move.
| alliao wrote:
| for all we know, 99% could be in one guys hand.
| hitovst wrote:
| People think there are 21M Bitcoin, but they have no idea how
| many millions have been lost forever already, and how many will
| continue to be lost going forward.
|
| I wonder how many of those 27% are lost.
| betwixthewires wrote:
| I'd like to see the methodology. I guarantee you they can't
| actually determine the claim.
|
| Beyond that, bitcoin wasn't designed to "decentralize wealth and
| power", it is a disingenuous claim made by an agenda poster.
| Bitcoin was created to take a step towards a future where
| economic power is not synonymous with political power. The
| natural distribution of wealth is not at issue, so long as it's
| just that: natural.
| FabHK wrote:
| > I'd like to see the methodology.
|
| https://www.nber.org/papers/w29396
| betwixthewires wrote:
| Is that the research cited in the tweet?
| FabHK wrote:
| The video in the tweet is based (at least partially) on a
| WSJ article that is based on that paper.
| abrichr wrote:
| Interesting. Can you please clarify what is meant by "natural"
| in this context?
| betwixthewires wrote:
| From a birds eye view, a Pareto distribution.
|
| From the ground, so long as nobody with political power
| influences the distribution of wealth and it flows with the
| market it is a natural distribution.
| abrichr wrote:
| If I understand correctly, this means that a natural
| distribution of wealth should have exactly zero correlation
| with distribution of political power, is that right?
| myself248 wrote:
| Or should correlate exactly with population.
|
| Unless some people are somehow worth less than others,
| which would be an interesting assertion to make.
| betwixthewires wrote:
| It's an interesting demand to claim that everyone should
| have exactly the same amount of money and if that's not
| the case there's some moral failure. Reframing it as
| people who don't believe this believe people aren't equal
| is dishonest.
| betwixthewires wrote:
| Ideally, yes.
|
| There are those that argue that correlation between
| economic and political power is natural, and in a world
| where you can buy guns, that's somewhat true. But the
| creation of an artificial peaceful political system
| occurs in part to decorrelate the two. Money should buy
| you trinkets, political power should be democratized, at
| least if you believe in governments.
| manquer wrote:
| Decentralizing "money" or "currency" cannot happen unless the
| ownership of the same is not less concentrated than what we
| already have.
|
| In the bitcoin world ownership is lot more concentrated than in
| the real world, which makes truly decentralizing anything else
| hard if not impossible.
| betwixthewires wrote:
| How do you figure? A currency no central authority has a
| monopoly on deciding supply is on it's face more
| decentralized, and an improvement on the social front,
| regardless who has what.
|
| A currency entirely owned by one person isn't a currency, and
| people actually using it causes dispersal to a naturally
| occurring Pareto distribution over time.
| darawk wrote:
| The only way you could possibly measure this is just to look at
| the distribution of coins among wallets. This is obviously going
| to count crypto exchanges as single entities, which is absurd.
|
| It'd be like counting JPMorgan as a single person when computing
| wealth inequality in the US. Analyses like these are a total
| joke.
| latchkey wrote:
| It also does not consider wrapped bitcoin... this is just on
| ETH... but it is on all the various L2's as well...
|
| https://wbtc.network/dashboard/order-book
| cuteboy19 wrote:
| It does consider it actually. WBTC is offchain but the btc it
| corresponds to is still on chain though it may be miscounted
| as the custodian wallet.
|
| From the perspective of btc, not your keys not your coins
| still applies and those coins belong to the custodian wallet,
| not to WBTC holders.
| id wrote:
| In the world of crypto, where people keep repeating the "not
| your keys, not your coins" mantra, crypto exchanges are very
| much the owners of all the coins they hold. But I agree, it's
| absurd.
| netsharc wrote:
| Ironically their customers trust them because just like other
| businesses around the world, the customers rely on the
| jurisdictions of where the exchanges are incorporated to
| uphold the law and make sure the exchanges don't rob them.
| The same jurisdictions many crypto-diehards think need to
| disappear...
|
| Would you trust an exchange name "Uncle Vlad's Russki Crypto
| Exchange"? Probably not, right? Because if they take your
| money, and you call the Russian version of the FBI, they'll
| just laugh at you. So you think your money is safer in a
| crypto exchange where the founders would be arrested if they
| blatantly stole your money...
| shuntress wrote:
| This is the main thing that has always seemed odd to my
| about much of enthusiasm for crypto.
|
| People seem to conflate "it works like physical cash but
| it's electronic" with "no banks no laws no regulation" when
| its very obvious that banks and governance are still
| necessary.
| krzyk wrote:
| Some (if not all) exchanges have normal addresses for bitcoin,
| each client has a bunch of them. For example coinbase has that.
| [deleted]
| bogota wrote:
| Not to mention how to determine what coins are lost forever. I
| know of several addresses that are mine but the keys are
| unfortunately lost forever.
|
| And additionally you might have coins that haven't moved in 8
| years that is considered lost but i just haven't had a reason
| to move them. Im sure someone could come up with a decent
| methodology for figuring this out but this isn't it.
| buzzdenver wrote:
| Not that much of a joke if you consider that crypto is supposed
| to be decentralized and permissionless in opposition to fiat
| that the banks hold.
| thevardanian wrote:
| I really don't understand why people don't get the idea of
| "digital native".
|
| Just because verbal agreements worked for thousands of years
| doesn't make written contracts pointless.
|
| Similarly the banking industry technically does "online
| banking" but they still have to process each transaction
| through archaic practices that mimic physical transactions.
| buzzdenver wrote:
| Sorry, I'm not following how what you posted related to my
| comment.
| rglullis wrote:
| Let me take a crack at interpreting it: your comment of
| "crypto is meant for decentralization, lots of people use
| exchanges, exchanges are centralized like banks, ergo
| crypto is just as bad as the legacy financial system"
| presents a false dichotomy.
|
| Crypto adoption does not need to be a binary decision,
| and crypto enthusiasts are not hypocrites if they still
| have a bank account or if they still use exchanges _when
| it suits them_.
|
| The important thing about crypto is _optionality_. Crypto
| /web3 gives us the _option_ (but not the obligation) of
| managing our own wealth. This is something that "digital
| natives" understand better than old timers.
| buzzdenver wrote:
| Gotcha. You have the option to manage your own NFT-s or
| BTC, but if 99% of the users are accessing the ecosystem
| thru centralized actors, then sooner than later you'll
| have issues interacting with those users. Think running
| your own mail server and trying to send an email to a
| friend on Gmail. Coinbase might put a hold on the BTC you
| send to a friend because it was coming from an untrusted
| source. We are back to web2.
| rglullis wrote:
| No, you missed the point. There is no divide between
| "those using an exchange" and "those using their own
| wallet". No one is forced to exclusively use one or
| other.
|
| The divide is along the line of "how much of each
| individual's portfolio is on a CEX?". I can have 10% of
| my crypto holdings (for occasional trading or on/off
| ramping) on an exchange and the rest on my own wallet
| (for DeFI).
|
| You can not do that on a bank. If you think a bank is in
| trouble, you can only move your funds _to another bank_.
| If one exchange starts acting up, its users will learn
| how to move more to their own wallet. It is not a random
| example: go to /r/loopringorg and see all the
| screenshots of the people who finally learn how to use
| the Loopring protocol/wallet and taking their holdings
| from Coinbase. Now imagine if there were rumors that an
| exchange would start unilaterally trying to control what
| users could do? They would lose their customers. They are
| centralized, but the balance of power is in favor of the
| us users because we have _options_.
| majormajor wrote:
| "If you think a bank is in trouble, you can only move
| your funds to another bank."
|
| or to land, or to gold, or to stocks, or to bonds, or to
| foreign assets, or to cash, or to guns, or to Pokemon
| cards... all sorts of "not in a bank" options are
| available. Banks have competition with not just other
| banks but the whole financial ecosystem. And if a
| government is after you, some of those are actually
| harder to trace than crypto.
| andsoitis wrote:
| > Crypto/web3 gives us the option (but not the
| obligation) of managing our own wealth. This is something
| that "digital natives" understand better than old timers.
|
| Before crypto/web3 one couldn't manage one's own wealth?
| C'mon.
| rglullis wrote:
| Simple exercise: go to your bank today and try to
| withdraw $100k.
|
| Alternatively: go apply for a mortgage if you have 80%
| for a down payment, a way to prove the legitimacy of the
| funds, but little-to-no credit history.
| majormajor wrote:
| Why would a lender want to do any less due diligence if
| your downpayment was in crypto vs cash or gold or bonds
| or similar?
| rglullis wrote:
| Because the risk of default (assuming contracts used are
| correct and safe) is smaller or zero
| majormajor wrote:
| What? Why?
|
| We're talking about taking out a loan where you don't
| have 100% of the amount in advance.
|
| You could lose your job, your business could go south,
| you could ditch for another country and never use
| whatever bank account or wallet you had your downpayment
| in again, all those things that are basically currency-
| independent. Breaking a contract is a people issue,
| turning paperwork into "smart" code doesn't actually tie
| a chain around someone's ankle, and it certainly doesn't
| guarantee their future income.
| rglullis wrote:
| > where you don't have 100% of the amount in advance.
|
| This is not what I said. Willing to put 80% on down
| payment does not mean not having ways to pay things in
| full.
|
| - You might have the cash, but not interested in becoming
| totally illiquid.
|
| - You might be interested in getting a mortgage for the
| tax deductions.
|
| - You might have only the cash the downpayment, but use
| another property that you _already own_ as collateral.
|
| - You might have only the cash for the downpayment, but
| you are going to buy the house to rent it.
|
| Point is, with "traditional" finance, you can only do
| these things if you are negotiating the whole package
| with the same bank, and this is how they "get" you. If
| people could actually manage their own wealth, there
| would be no strings attached.
|
| And let's not even get into the other kinds of issues
| such as bank's "rules" that seem totally reasonable but
| end up making the life of marginalized groups more
| difficult.
| majormajor wrote:
| Ok, so a secured loan? Those exist, sure. What does
| crypto get you in most of those cases?
|
| In the "all I've got is a million bucks in gold I stole
| from a vault and can't show a paper trail" case: _I don
| 't care_. Not a valuable use case for me. That reason
| alone doesn't move the needle on crypto for me.
|
| In other cases: seems like you're gonna have an easy time
| getting a loan. lending to people who don't need it is
| the easiest sort of loan to make.
|
| (In most of these cases, e.g. multiple properties or non-
| liquid assets, I'm not sure why I _want_ to put down more
| collateral anyway...)
|
| Edit: you added something about how with traditional
| banks you have to do it all-or-nothing with a single bank
| and that's how they "get" you. I'm not sure how anyone's
| being "gotten," especially in recent times where rate
| competition has resulted in cheaper money than ever
| before. But it's also _not true_ in most of the cases you
| outlined. If you have multiple sorts of assets that you
| want to _borrow against_ instead of securing the loan
| with the property itself, you can take out a bunch of
| other loans on those other assets and pay cash for the
| property.
|
| Then you bring up historically marginalized communities
| and such... If you could sell me on the benefits for most
| of the folks in the world, people who may only have 5%
| down compared to a traditional bank... that would be a
| different convo, but "additional ways for people with
| assets to borrow money" doesn't sound so interesting, as
| it is.
| rglullis wrote:
| Sorry, I was in the middle in the edit and I think I
| ended up sort-of responding to this comment.
|
| > What does crypto get you in most of those cases?
|
| Speed and reduced operational costs, for one. If I
| wanted, I could get a collaterized loan on DeFI and have
| the money on my bank account faster than it would take me
| to fill the bank load application form.
|
| Most importantly, it gets _disintermediation_ : a bank
| might be interested in selling a loan if it has some
| level of profitability. In DeFI, anyone can be a bank, so
| the market tends to be a lot more open and competitive.
|
| > In most of these cases, e.g. multiple properties or
| non-liquid assets, I'm not sure why I want to put down
| more collateral anyway...
|
| Because, e.g, you've done the math and you realized that
| you don't want to pay more interested that is needed?
|
| > If you could sell me on the benefits for most of the
| folks in the world, people who may only have 5% down
| compared to a traditional bank
|
| Sure: https://trustlines.network/ TL;DR: it's a system
| where people can create distributed credit lines, local
| currencies (for use in impoverished communities that have
| no money but still need to have a credit rating
| mechanism) and so on. People _could_ do this with
| community banks and credit co-ops, but it would be
| extremely difficult to have, e.g, such a system being
| capitalized by someone outside of the community. With
| Trustlines, you can have people in rich countries
| contributing for the system without middlemen like in a
| standard micro-credit alternative.
| puranjay wrote:
| Ser, there is really no such thing as a under-
| collateralized loan in crypto.
|
| The "ease of access" of crypto loans is not really as big
| as you think - any lender will happily give you an
| instant "loan" if you front 150% of the collateral.
|
| Its, infact, a wildly inefficient use of capital. Imagine
| if the rest of the lending industry worked on that
| premise - would you get a loan for your house if you had
| to first front 150% of the price of the house to your
| bank?
| majormajor wrote:
| So the main difference seems to be just claims about
| speed and cost. E.g. trading down payment/secured-vs-
| unsecured/etc for different rates is all perfectly
| possible by bank-shopping today in the US. Perhaps
| systems elsewhere are less open, I wouldn't know, but
| happy to say there could be value in developing countries
| with less infra, though the ceiling for the valuation of
| such a system seems much lower. But I'm skeptical that
| speed would hold up for a lot of these scenarios. Things
| like inspecting the property you claim to have that will
| be part of your collateral. The actual transfer of funds
| has never been the slow part of any loan I've gotten -
| even a bank wire in the US, slow as the US banking system
| is compared to what I've read about Europe, can go
| through in a day. All the due diligence to make sure I'm
| who I say I am and have what I say I am takes a lot
| longer. I don't see blockchains really changing that for
| the simple reason that whether or not a blockchain says I
| own a piece of property or the state government says I
| own a piece of property, neither of those guarantee that
| in the real world it's in good condition, currently
| possessed by me (vs trying to borrow against a stolen
| car, say), etc.
|
| Re: the Trustlines thing - from a scan of the website,
| what does crypto bring that one of the non-crypto
| implementations of "help do microlending in developing
| countries" from 10 years ago couldn't do? When I looked
| at that back then, reading people's stories, what they
| said they wanted to do with the money, etc, was all
| manual and, of course.
| rglullis wrote:
| It's not just the time to get the loan. It's also the
| time to settle disputes. Say that you wanted to _lend_
| money to someone who gives a collateral, and they
| default. How long would it take to go to the courts to
| make sure you can get what it is owed? On the blockchain,
| this is instant.
| majormajor wrote:
| Setting aside the potential values of the human element
| (e.g. the ability of a court to void a contract deemed
| illegal or done under duress), isn't that only true for
| digital assets?
|
| If you secured it against artwork, for instance, that
| might've already been shipped to another country.
|
| (As an aside, I would be all in favor of expanding the
| court system so stall tactics are less effective.)
| rglullis wrote:
| > isn't that only true for digital assets?
|
| _Currently_ , yes. But even if we stayed only in the
| digital realm, isn't that already a huge improvement over
| the status quo? I can borrow and lend money quickly,
| without leaving my home. If someone has artwork to use as
| collateral, they can go to a pawn shop (or call it
| whatever fancier term there is for it), get the cash and
| use _that_ to buy crypto tokens. No banks involved.
| buzzdenver wrote:
| Things might have changed since I bought property a few
| years ago, but back then I just took a screenshot of my
| bank account and tried to keep a straight face when
| giving it to my realtor.
| puranjay wrote:
| Try to get a loan in crypto with 80% collateral and then
| we can talk
|
| Crypto "loans" are just loans against existing assets and
| are all collateralized heavily - 150% is the standard.
|
| There is still absolutely no way to get a real loan with
| crypto so far - one where you actually borrow more than
| you have.
| mdoms wrote:
| asah wrote:
| Also, Satoshi's wallets
| FabHK wrote:
| > The only way you could possibly measure this ...
|
| > This is obviously going to ...
|
| > Analyses like these are a total joke.
|
| Why is this obviously so? Watching the video, one realises that
| they refer to a WSJ article that is based on a 2021 NBER paper
| [1].
|
| Do you think that the NBER, London School of Economics, and MIT
| harbour idiots that have not heard of exchanges?
|
| On page 5 of the paper:
|
| "Determining the concentration of ownership is more complicated
| than just tracking the holdings of the richest addresses, since
| many of the largest addresses belong to cold wallets of
| exchanges and online wallets, which hold Bitcoin on behalf of
| many investors. We develop a suite of algorithms based on graph
| analysis to classify addresses into those belonging to
| individual investors or those belonging to intermediaries.
| [...]
|
| We show that the balances held at intermediaries have been
| steadily increasing since 2014. By the end of 2020 it is equal
| to 5.5 million bitcoins, roughly one-third of Bitcoin in
| circulation. In contrast, individual investors collectively
| control 8.5 million bitcoins by the end of 2020. The individual
| holdings are still highly concentrated: the top 1000 investors
| control about 3 million BTC and the top 10,000 investors own
| around 5 million bitcoins."
|
| [1] https://www.nber.org/papers/w29396
|
| [meta note: had to revise this post several times before
| posting to comply with HN guidelines.]
| anothernewdude wrote:
| Oh come on, you don't think the parent poster didn't think
| about this and read the article? You think they only spent a
| couple of seconds thinking about it before posting "what they
| reckon"?
| darawk wrote:
| This is theoretically a fair criticism. But note that the 27%
| vs 0.01% never appears in the NBER paper. Further note the
| extreme limitations of any clustering based analysis. And
| finally, note that they do not actually identify individuals,
| they identify clusters, and they also treat mining pools as
| individuals.
|
| I see no support for the headline number in this paper. What
| it appears that the people making this video did was take
| "1000 individuals" (which the paper defines as _clusters_ of
| wallets) and divide by 68 million _wallets_ in existence.
| What you actually get here when you do this is 0.001% vs 16%,
| which is reasonably close to the figured cited in the video,
| so is likely essentialy the calculation they did.
|
| It should be obvious how absurd this is.
|
| EDIT: Hah, actually the exact calculation they did is
| 10k/68mm and 5mm/18mm. That gives you exactly 0.01% and 27%.
| Discrepancy resolved. This is the exact ludicrious
| calculation the people in this video did.
| FabHK wrote:
| You might well want to criticise the paper, but I think the
| video is a fair representation of the contents of the
| paper.
|
| Regarding the number of holders, the paper says: "While the
| original database has 896 million addresses, after we
| remove addresses in peeling chains we end up with 640
| million addresses. Theses addresses belong to 189 million
| clusters, of which 116 million clusters are single-address
| clusters."
|
| Not sure where the number of 68 million wallets comes from.
| Taking 189m as the number of holders, we'd have 0.005% of
| BTC holders holding 27% of all BTC. But even we take that
| 68m "wallet" number, and assume that each holder controlled
| multiple wallets, say 10 on average, we'd have 6.8m
| holders, and then 0.15% of holders controlling about 27% of
| BTC. Still enormous concentration.
|
| More from the paper: "It is also important to note that
| this measurement of concentration most likely is an
| understatement since we cannot rule out that some of the
| largest addresses are controlled by the same entity. In
| particular, in the above calculations, we do not assign the
| ownership of early bitcoins, which are held in about 20,000
| addresses, to one person (Satoshi Nakamoto) but consider
| them as belonging to 20,000 different individuals."
|
| Another interesting part of the paper: "To the best of our
| knowledge, we have the most complete information about
| crypto entities that have been used in academic research up
| to this point. Our data cover 1,043 different entities.
| These include 393 exchanges, 86 gambling sites, 39 on-line
| wallets, 33 payment processors, 63 mining pools, 35
| scammers, 227 ransomware attackers, 151 dark net market
| places and illegal services."
| darawk wrote:
| > You might well want to criticise the paper, but I think
| the video is a fair representation of the contents of the
| paper.
|
| I do have criticisms of the paper, but those are milder.
| They are inherent limitations of the methodology, which
| the authors seem to recognize. The headline in this HN
| post is not remotely a fair representation of anything
| whatsoever in the paper.
|
| > Not sure where the number of 68 million wallets comes
| from. Taking 189m as the number of holders, we'd have
| 0.005% of BTC holders holding 27% of all BTC. But even we
| take that 68m "wallet" number, and assume that each
| holder controlled multiple wallets, say 10 on average,
| we'd have 6.8m holders, and then 0.15% of holders
| controlling about 27% of BTC. Still enormous
| concentration.
|
| The 68 million number comes from here:
| https://www.statista.com/statistics/647374/worldwide-
| blockch... and when you use these figures with the ones
| from the paper, the results line up exactly with the
| headline here.
|
| If you do the divisions I think it's pretty clear that
| the video divided 10k/68m and 5m/18m, which is completely
| illegitimate, considering the paper is discussing
| "clusters" of wallets.
|
| As for your analysis, i'm not really sure what
| manipulation you're doing there. There is no coherent way
| to adjust for the number of wallets owned by an
| individual, because you don't know the composition of
| that ownership. Unless you can identify who owns which
| groups of wallets, you can't back out wealth inequality
| here under the assumption of multiple wallet ownership.
| That's exactly why the paper tries to do this clustering
| analysis that it does. Its purpose is to group wallets
| presumed to be owned by one person.
|
| > More from the paper: "It is also important to note that
| this measurement of concentration most likely is an
| understatement since we cannot rule out that some of the
| largest addresses are controlled by the same entity. In
| particular, in the above calculations, we do not assign
| the ownership of early bitcoins, which are held in about
| 20,000 addresses, to one person (Satoshi Nakamoto) but
| consider them as belonging to 20,000 different
| individuals."
|
| This cuts both ways, though. It may be that a huge number
| of the low balance wallets are duplicates controlled by
| individuals as well. People that programmatically created
| wallets, e.g. for the purpose of anonymization, and left
| tiny bits of dust in them. They aren't filtering by low
| balance in any way I can observe.
|
| > Another interesting part of the paper: "To the best of
| our knowledge, we have the most complete information
| about crypto entities that have been used in academic
| research up to this point. Our data cover 1,043 different
| entities. These include 393 exchanges, 86 gambling sites,
| 39 on-line wallets, 33 payment processors, 63 mining
| pools, 35 scammers, 227 ransomware attackers, 151 dark
| net market places and illegal services."
|
| I'm sure this is all true, and i'm sure it is the most
| complete academic dataset used to date. That doesn't
| really mean it is complete though. Note that they
| enumerate an impressive list of entities, but we have no
| idea how complete their coverage of those entity's
| wallets is. And as someone that has done this kind of
| analysis, I do not trust academic econometricians just
| trying to publish their next paper to do a good job of
| it. Chainalysis is hard and inherently quite fuzzy. It's
| also an adversarial environment, intermediaries often
| intentionally try to mask their activity, as do
| individuals.
|
| Let's look at the actual content of their methodology,
| though in the paragraph directly above:
|
| > To link address clusters to real entities we scrape
| cryptocurrency blogs and websites, such as Reddit,
| Blockchain.info, bitinfocharts.com, bitcointalk.org,
| walletexplorer.com, and Matbea.com for all publicly
| available addresses of prominent Bitcoin entities such as
| exchanges, payment processors, gambling sites, and
| others. We supplement this information with the state-of-
| the-art database of crypto entities from Bitfury Crystal
| Blockchain. Bitfury Crystal Blockchain is one of the
| leading providers of anti-moneylaundering tools and
| analytic solutions in the crypto space
|
| Does this sound comprehensive to you? The only wildcard
| here is this "Bitfury" thing which i've certainly never
| heard of, but we can quickly look at their customers page
| to get a gauge of how serious they are:
|
| https://crystalblockchain.com/due-diligence-tool-for-
| crypto-...
|
| Everyone on that list i've also never heard of. There is
| a company that dominates this space, and it's
| https://www.chainalysis.com/ Compare Chainalysis's
| customer list to Bitfury's. Every name on there is a
| serious entity that you've probably heard of.
|
| Why aren't they using data from Chainalysis? Or data from
| someone else reputable? We have no insight into what
| "Bitfury"s methodology is, so I can't explicitly critique
| it, but there are really good reasons to be very
| suspiciuos of its quality.
|
| Finally, I note that they make no mention of mixers or
| contracts like WBTC, which can hold enormous quantities
| of coins, and can also create tons of fragmentation in
| the address space, which is very likely to significantly
| frustrate any clustering based methodology or naive
| chainalysis attempt.
| numair wrote:
| > Does this sound comprehensive to you? The only wildcard
| here is this "Bitfury" thing which i've certainly never
| heard of
|
| If you operate in this industry and haven't heard of
| Bitfury, you may have less of a grasp of the landscape
| than you think. It was created by some of the main
| insiders and has employed many former government
| officials. I would have a rethink of my authoritative
| stance if I were you.
|
| From everything I know about crypto, the linked paper
| checks out. A lot of people discuss these issues -- I
| think Vitalik recently lamented that cryptocurrencies
| seem to devolve into feudal dollars.
| amelius wrote:
| The fact remains that cryptocurrencies are Ponzi schemes.
| Even the original inventor of Bitcoin said so.
|
| https://www.thetimes.co.uk/article/craig-wright-i-
| invented-b...
|
| Also, they are a way to fund criminal activity, of which
| ransomware is just one example.
|
| Cryptocurrencies are barely used for legitimate payments.
| They are mostly used for speculation (gambling).
|
| It's just bad news. Not the liberation we have been waiting
| for.
| ch4s3 wrote:
| I am 100% a crypto skeptic and don't own any coins, but
| it is incorrect to call them a Ponzi scheme[1], which is
| an investment fraud that uses funds from new investors to
| pay existing investors. You can make a very credible case
| that many coins were designed for pump and dump scams,
| but that is not a Ponzi scheme.
|
| The crux of Bitcoins is that its value is derived from
| people's belief in its value. Lot's of assets and to an
| extent fiat moneys work this way. The "magic" of bitcoin
| et.al. is that they are finite, have clear chain of
| custody, and can be traded peer to peer. Those features
| can and do inspire confidence, but at the end of the day
| these coins have limited real world utility outside of
| money transfers and holding wealth. Those uses are
| directly tied to the faith of the market for those coins.
|
| If someone asked me if they should buy and hold these
| coins, I would say no. However, speculation is somewhat
| in the eye of the beholder and turns on the risk of
| losing the investment. It's nearly impossible to predict
| future changes in asset prices, especially when an asset
| has been steadily increasing in value for years, but has
| a limited history.
|
| TL;DR you're misusing the phrase "Ponzi scheme" which
| means something else.
|
| [1] https://en.wikipedia.org/wiki/Ponzi_scheme
| FabHK wrote:
| I disagree. You are right that the characteristic of a
| ponzi is that funds from new investors are used to pay
| existing investors.
|
| But that is also a characteristic of crypto. You cannot
| buy anything for crypto without exchanging it for fiat,
| and for that you need a new investor to give you fiat for
| your cryptos. If all exchanges (incl. informal ones)
| close tomorrow, any crypto you hold is worthless.
|
| Now, you could say that the same holds true for shares or
| real estate. But that is wrong. You can hold shares you
| bought ad infinitum, even if all stock exchanges close
| tomorrow, and would still receive your money's worth
| (approximately) in the form of dividends of the
| underlying company, or proceeds from the sale of said
| company, without ever selling those shares. You can live
| in a house or rent it out, and get your money's worth,
| without ever selling the house to someone else.
|
| I don't see how you can get your money's worth with
| crypto without ever selling it to someone else.
| tomputer wrote:
| Bitcoin is more like holding a piece of gold. If all gold
| exchanges are closed you can still trade your gold with
| someone in person. You don't get your money without ever
| selling your piece of gold to someone else.
| FabHK wrote:
| You can also make jewellery and tooth fillings and
| platings for electric contacts with gold. Not with
| crypto.
| mlyle wrote:
| > I don't see how you can get your money's worth with
| crypto without ever selling it to someone else.
|
| Which is a characteristic it shares with fiat currency.
| Of course, fiat currency has people with guns making you
| accept it as payments for debts.
| FabHK wrote:
| Yes, and everyone must pay their taxes in fiat, which
| renders it valuable. Unlike crypto.
| mistrial9 wrote:
| > crux of Bitcoins is that its value is derived from
| people's belief in its value
|
| brave, but .. fail. The crux of BTC is that it is secure
| to attacks while moving assets that are represented
| digitally. In order to succeed in that, the integrity of
| the chain is required. Popularism is a "nice to have."
| mlyle wrote:
| > crux of Bitcoins is that its value is derived from
| people's belief in its value brave, but .. fail. The crux
| of BTC is that it is secure to attacks while moving
| assets that are represented digitally.
|
| Assets whose value is derived from peoples' belief in
| their future value.
|
| A perfectly secure chain moving around assets that no one
| values isn't very interesting.
| FPGAhacker wrote:
| gp > "belief in its value"
|
| p > "assets that are represented digitally"
|
| Those seem equivalent to me.
| amelius wrote:
| You're technically correct. But I think the label Ponzi
| scheme is colloquially used for a broader concept where
| initial players gain and later buyers lose. Buying stuff
| and investing in stuff is semantically very close. But
| you're right.
|
| Yes, most people (even kids!) now use cryptocurrencies
| for speculation. Which is just a lottery in disguise,
| except now it funds criminal activity and harms the
| climate. And the winners somehow have bragging rights
| which means more advertising. This is a very sad
| development.
| ch4s3 wrote:
| > But I think the label Ponzi scheme is colloquially used
| for a broader concept
|
| Yes, incorrectly. It does nothing to clarify the topic
| and obscures the risks of actual Ponzi schemes.
|
| > harms the climate
|
| This seems dubious at best. It seems like a lot of mining
| is happening on hydro and solar power, and only shifts to
| carbon intensive electricity when the price is booming.
| v0idzer0 wrote:
| By this definition of ponzi scheme, isn't USD also a
| ponzi scheme?
| darawk wrote:
| Whatever you think of them, it's extremely important to
| note that Craig Wright was absolutely not the inventor of
| Bitcoin.
| birthday wrote:
| "the inventor of bitcoin" hah. Don't believe everything
| you read, just like this post from OP.
| gjvc wrote:
| "hot potato" asset is possibly a better description. sell
| it while it's still hot before it goes cold and nobody
| wants to buy it.
| barnbuilder wrote:
| The Times is the newspaper whose headline Satoshi
| referenced in his genesis block: "Chancellor on brink of
| second bailout for banks". So I would have thought even
| though all newspapers do a terrible job of reporting on
| Bitcoin, they might be a little more inclined to do it
| well.
|
| And yet here they are uncritically repeating the claims
| of known plagiarist and con artist Craig Wright.
| chromatin wrote:
| Craig Wright is so obviously not the pseudonymous creator
| of Bitcoin ("satoshi") that the only people who maintain
| this typically have a financial interest, viz. the failed
| "BSV" fork.
| upsidesinclude wrote:
| Of course, as we all know, in crypto there's only one
| wallet per person and this is strictly enforced!
| jonas21 wrote:
| Which part do you think is absurd? It looks like they used
| the 10,000 number from the NBER paper as the numerator and
| the crypto.com estimate of 114M people with Bitcoin as the
| denominator to come up with the 0.01% figure [1].
|
| Do you find it hard to believe that ~100M people hold
| Bitcoin? This seems at least in the right ballpark when you
| cross-reference it with survey data [2].
|
| [1] https://www.wsj.com/articles/bitcoins-one-percent-
| controls-l...
|
| [2] https://www.pewresearch.org/fact-tank/2021/11/11/16-of-
| ameri...
| onlyrealcuzzo wrote:
| Are they counting that the first wallet owns ~5% of BTC?
|
| With this in mind - it's less surprising that the
| remaining 0.01% own 22%.
|
| This isn't TOO far off of regular inequality.
|
| IIUC, the top 0.01% globally own >12% of wealth:
| https://www.chicagobooth.edu/review/never-mind-1-percent-
| let...
|
| Given that crypto had such absurd hyper growth - I'm
| actually shocked inequality isn't far worse.
| v0idzer0 wrote:
| Yeah I mean the post is clickbait, but crypto (which can be
| bought with USD) unsurprisingly has similar inequality
| issues to USD. But the selling point of crypto was never
| curing inequality. It could have never done that. So the
| entire post is a bit of a straw man.
| TomSwirly wrote:
| > similar inequality issues to USD
|
| Actually, cryptocurrency is almost two orders of
| magnitude more unequal. The top 1% owns 38.5% of the
| wealth: https://en.wikipedia.org/wiki/Wealth_inequality_i
| n_the_Unite..., compared with the top 0.01% of bitcoin
| owners.
| numair wrote:
| > the selling point of crypto was never curing inequality
|
| The genesis block of Bitcoin disagrees with you
| completely.
| aeternum wrote:
| The genesis block includes a headline about bank bailouts
| not on inequality.
| numair wrote:
| Inequality is implicit. If you believe the banking system
| is a mechanism for enabling plutocracy, you don't want
| the banks bailed out. There's that, and also all of the
| writings on the forums in which Satoshi hung out.
| atweiden wrote:
| Government money is a tool nations can use to further
| their own national interests.
|
| While this isn't without its downsides (though see Yanis
| Varoufakis on CBDCs [1]), the gains from it are
| socialized.
|
| By contrast, an enormous percentage of bitcoin and all
| other major cryptocurrencies was mined (or worse,
| "premined") in the first few years after launch. What
| nation of people benefits from this form of inequity?
| Cryptocurrency is entirely nationless.
|
| [1]: https://the-crypto-syllabus.com/yanis-varoufakis-on-
| techno-f...
| twelve40 wrote:
| > the selling point of crypto was never curing inequality
|
| Sure it was. Definitely not the only selling point, but
| there is a ton of drivel out there about how it is
| supposed to liberate us from the big bad banks (banks are
| now replaced by Coinbase et al) How something that's
| supposed to be decentralized, consensus-based, not prone
| to manipulation by the greedy corporations, greedy
| individuals and governments is now actually turning out
| to be something else. And it even has some real equality-
| related use cases like wiring remittances to Argentina,
| or the failed El Salvador experiment. But overall
| trending in the opposite direction to equality.
| rschneid wrote:
| I think it's a bit of an oversimplification to define
| equality as 'current distribution of wealth.' A very
| important part of wealth is being able to actually use
| it, and there are many ways holders or would-be-
| recipients of USD are restricted in who they can transact
| with that are far from equal. Cryptocurrencies are not
| without restrictions of their own, but their restrictions
| are more objective/technical rather than the vaguely
| phrased, regularly changing, cultural nature of
| traditional 'laws' that govern USD transactions.
|
| Ultimately, I agree with your assessment of the research
| avenue as a straw man.
| MrPatan wrote:
| > Do you think that the NBER, London School of Economics, and
| MIT harbour idiots that have not heard of exchanges?
|
| Not idiots, just people who want to publish something that
| will turn into a juicy headline, and don't care much about
| how closely it aligns with reality.
| bigbillheck wrote:
| > Do you think that ... London School of Economics ...
| harbour[s] idiots
|
| I've seen a lot of dumb takes coming out of people from LSE,
| and as such will have to say "yes".
|
| (Haven't read the study but am not surprised by the
| conclusion)
| stjohnswarts wrote:
| Sounds like our traditional economy then.
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