Bitcoin Forum

I've been looking at bitcoin for a few days now and i think it really has potential because of the really solid decentralized protocol it uses. Clearly my understanding is limited at this point, but what has been bothering me is the following... I know that bitcoins are not a pyramid or ponzi scheme in the traditional sense of those words, but what I find really strange is that more than half of all possible bitcoins have been mined already. Of course nowadays a lot of people have heard about bitcoins, but looking at on how many websites you can actually use bitcoin to pay for something I think you can clearly say that it is still in the early adoption phase.
Now suppose bitcoin ever were to become mainstream, this small fraction of early adopters would still hold half of the total bitcoin wealth. Of course early adopters should get rewarded for their foresight/effort and luck, but this to me sounds rather excessive and unwanted.

Was the algorithm specifically designed to act in such a way or where unforseen events that caused this, like slower rate of adoption or too fast growth of mining power?

I think it was designed this way, because it's the best way to get people interested,
A lot of those early coins have been sold to someone else or are lost, but yes it's still a lot wealth in the hand of early adopters, if Bitcoin succeeds (also we are still kind of early adopters then).
Was the same with business like Google or Facebook, too though.

A lot of early folks have already sold. There are a lot held, and a lot of those are probably lost forever, because BTC was near-worthless for a good stretch of time. When Laszlo bought a pizza with BTC, it was a big deal -- not because he bought them for 10kBTC or whatever - but because someone actually accepted it for payment.

Very early adopters got lucky. A lot of people aren't finding the same luck with altcoins, but some are. Satoshi can't predict the future, and IIRC, he was envisioning a much more decentralized mining network, not a couple hundred big players once the GPU miners are pushed out. I think having a relatively high mining reward early was a necessary evil to encourage selfish individuals to hop on board, because they might think Bitcoin's a "good idea," but want some "exclusive deal" to get them on-board -- all the time, start-ups offer VCs too much equity for something like $50k. The company goes on to grab $500k net the next year and the VC makes his money back just in dividends, along with 49% of the company or whatever. And, a lot of the time, the VCs lose. I think early adopters could reasonably be compared to VCs. - Or just weirdo nerds, and giving a bunch of weirdo nerds a ton of cash is probably good long-term. Just look what Mark Cuban's become.  :D

ETA: Guess I just gave a wordier response to what Birdy wrote while I was writing, heh.

All transaction fees are back in the pot for the taking (from the miner, not some fat banker).

K.

Clearly a lot of people sold coins but they still are in the hands of other early adopters i guess :) Are ther any stats on how many coins have gotten lost?

What i would find interresting is to know, now that we have established the usefulness of such a decentralized currency, if there isnt a better way of distributing the initial coins.

Will the transaction fees alone be enough to spread the wealth?

There is no way to see, if a coin is really lost. But if you want me to give you a guess: at least 1 mio Coins are lost imo.

No, we as society have to do this.
When you are born wealth isn't spread equally either atm, you can be lucky or not.

Miners have to buy expensive equipment, there is no way the poor can afford this.

Premining has been one of the problems with the other cryptocurrencies, CHNCoin comes to mind most recently.  There were several thousand (correct me if I am wrong) blocks mined prior to the initial release.  This is an imperfect analogy to BTC early adopters but causes me to question to the stability/future of these currencies in general.  For example, if someone were holding on to 10,000 BTC when they were dirt cheap and decided to dump them one day, price fluctuations would lower trading value and build further skepticism about the future of BTC.

IF someone held 10,000 BTC for over 4 years through multiple bubbles and busts why would they just dump them on the market.  The price they got them at doesn't matter.  If your grandfather bought 100 oz of gold when it was only $50 would you sell it for $100 just because you got it cheap?

1000 BTC a day wouldn't even affect the market anymore.  Mr early adopter could sell a thousand BTC a day in 10 days without causing waves and thus maximize the price obtained.  Why would he do otherwise?

Still even if he did 10,000 BTC dumped on the market right now would only drop the exchange rate 7%.  There are only some many cluelessly stupid early adopters holding massive amounts of wealth in BTC that foolishly crash the market.  Once they do it is done and the coins move to smarter, stronger hands.

Yeah once there is enough liquidity in the market i don't think bitcoin dumping would be that big of a deal. Still i wonder though if this situation which is clearly very good for early adopters isn't bad for the adoption rate as a whole.

early adopters would not own half of the bitcoin market, because as they need to buy goods / services, they would likely be trading bitcoins and/or cashing them into their native currency regularly.  Some would hoard them, but I'd imagine most would not. 

I don't see any problem. First, the total value of all bitcoins is only $1 billion. You could own all the bitcoins in the world and Bill gates would still have more wealth than you. Second, bitcoins only have value when you spend them. The very early adopters will spend their coins eventually. There is no good reason to hold them forever.  


Btw you should change the title of the thread.

I think as the popularity (and hence price) grows, they will naturally spread out into more hands.  The early adopters will naturally become rich because they own something that others decide they want.  It's better than fiat currencies where new money is created through debt issued by banks out of thin air.  At least you can buy bitcoins off of an early adopter and completely own them with no counter-party risk.  Unlikely fiat dollars which you have to borrow from a bank and pay them back with interest, even though the bank was not an "early adopter" of dollars - they create debt out of nothing and make you pay for it!

It's kind of like the first people who would have started collecting gold.  Maybe others thought they were wasting their time at first.  Then later on everyone decides that gold is valuable, and they're late to the game because all of the easily pannable gold has been taken out of the river beds.  There's nothing unfair about collecting something that others *later* decide they want to buy off of you.

Something that probably continues to fuel the confusion is Luke Jr's wiki page regarding Litecoin that calls it a pyramid scheme.  That in itself helps discredit cryptocurrencies as a whole.  If someone calls Litecoin a pyramid scheme, it's equally valid to call Bitcoin a pyramid scheme.

Now, some of the alt coins released rapid-fire style lately could well by considered in this category.  Or at least much moreso than Bitcoin and Litecoin.