Bitcoin Forum

Hey folks, I just got an e-mail from a contrarian friend of mine.  He's a pretty bright guy--young, educated, tends to view things through an old-fashioned lens.

Some of these facts, I knew.  Some I didn't, and in fact, I'm still not sure if I buy them.  He linked me to a Forbes article from January 2014 that he was quoting, but the author of that article didn't cite her sources, so I'm not sure how to verify or debunk.  Maybe some of y'all can shed some light.

--There are (or were in January) approximately 12,000,000 bitcoins mined
--47 people own 29% of the coins. 
--930 people own 50% of the coins.
--approximately 10,000 people own 75% of the coins
--approximately 1,000,000 own the rest
--90% of bitcoins are currently hoarded and not circulated

IF this is all true (and I would REALLY love to find out that this is not the case), such a concentrated ownership is truly disconcerting.  It seems to violate some of the spirit of what I see on this board, suggesting a movement of the people by the people and for the people.  That is really wicked consolidation.  One could (and I would) easily argue that concentration of the distribution of wealth in our world leads to a lot of problems related to power, politics, and equality of even opportunities.  IF this is true, bitcoin is even more consolidated than other stores of value.  And the 90% hoarded figure is even more disconcerting.  Sure, some of the smaller players are buying strictly as a store of value.  But price manipulation by a mere 47 people could be really significant. 

By the way, if there are 12,000,000 mined coins and 9,000,000 are spoken for by 10,000 people, that means there are only 3,000,000 other coins owned by 1,000,000 people....an average of 3 btc per holder.  It's just interesting to note that of the people on this board or in the general population, odds are pretty strong that they are in the vast majority of 99% who own an average of 3 btc.  No wonder people seem so invested in justifying valuations in the stratosphere.  If you have 3 btc, it is going to take quite a spike to really change your world long-term. 

So...help?  Are these distribution stats true or not?  If so, I'm afraid it will be impossible to refute my contrarian friend, but what arguments would you make?  I'll probably hold my btc for a strategic exit point, knowing that the market is subject to really easy manipulation.  I wouldn't buy more than I could afford to ride down to zero, anyway, but I will definitely be more cautious.

Have a read here - https://bitcointalk.org/index.php?topic=316297.0

And here - http://letstalkbitcoin.com/blog/post/rise-of-the-zombie-bitcoins

It's very hard to tell who owns what in what numbers. We'll never know.

Some of the largest active wallets may be owned by groups. Many of the biggest wallets came from a time when it was relatively easy to mine huge numbers and the private keys are quite possibly lost.

In this day and age if you had a vast number it would be far safer to split them between multiple wallets.

Wealth tends to follow Pareto distributions and bitcoin is certainly no exception.  It is impossible to know the true wealth distribution for bitcoin (by individual, not by address), but the estimates from the article you referred to (and a bunch of other articles at the time) were taken from Risto's work here on our forum: https://bitcointalk.org/index.php?topic=316297.0

I'm not sure where the "90% currently hoarded" comes from, but using blockchain.info's estimated TX volume data, the velocity of money for bitcoin is approximately 3.  As this includes both payments for goods and services and transfers of funds (it's not possible to separate them based on blockchain data alone), most economists would consider this an upper bound to the "velocity of money" term from the Quantity Theory of Money perspective.  

https://i.imgur.com/YpO1t4K.png

If it bothers you that others have more money than you, then there is really nothing that can be done to help you.

I'm not sure we can help you refute your friend for the simple reason that I believe he is right.

Just look outside the Bitcoin economy. Distribution is less symmetrical there:

http://www.zerohedge.com/news/2013-06-02/its-1-world-who-owns-what-223-trillion-global-wealth

I would say to your contrarian friend that there are 8 billion people on this planet, that makes 2000 bits (or 0.002 bitcoins) per living person if distributed equally; if distributed how actual wealth always is (exponential falloff), he will see that the tail of people with 10 bits or less would be several billion people long. So he can either cut that long line while he still can, or take a place at the end with other contrarians, simple ;)

Yes, bitcoin maybe distributed less uniformly than traditional wealth at this point, but it is normal at the growth stage. From inception, when 1 man had 100% of wealth, to now, we travelled a long way.

Nice link - here's the pyramid image with the global breakdown of wealth from that article:

http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/06/CS%20wealth%207_0.jpg

Assume that the 1000 or so people who own 50% of all coins got together and decided to take control over the market. And assume they had the ability to do so. Do you really fear that they would conspire to destroy their investment? Or would they instead do everything in their power to protect the value of their investment? Like, for example, invest in the infrastructure that gives bitcoin its value in the first place?

Your friend would probably be SHOCKED to learn that once upon a time, one person (Satoshi) owned ONE HUNDRED PERCENT OF ALL COINS. (That was the instant after he mined the first block.)

So .... you could tell your friend that the distribution of coins is slowly diffusing throughout all of humanity, like a drop of ink in a bucket of water, like so:

At any given point in time, X number of people own Y% of all coins.

Once upon a time, one person (Satoshi) owned 100% of all coins.

Five years later, 930 people own 50% of all coins.

And so on. If you keep Y constant, X is going to increase, and increase, and increase as a function of time.

Why should this process of diffusion ever stop?

Just tell your friend he's right to be alarmed, and to not buy any bitcoin.  But you buy bitcoin.  A lot of it.  And hold it for 2 years or more.

Then revisit your supposedly smart friend in 2 years, and ask "Hey, remember that bitcoin that you didn't buy two years ago because you were too worried about the distribution?  Well it's now 60X the price of what it was then back then.  And btw, I did buy some then.  But you're so smart for not buying any, as the distribution is still not good.  Much better than it was then, but still not good."

 ;D

Also, I can guarantee you that unlike our current fiat world, the top bitcoin holders in the world are probably some of the truest, most deserving, most libertarian folks you'll likely to ever meet.  Well, until the greedy, corporate, banker, politician pig elite come along to buy up what bitcoin is available with their fiat millions.  Hopefully those top BTC holders won't sell out to the greedy pig elite.

Not true at all. (https://www.youtube.com/watch?v=3YR4CseY9pk)

if the 0,01% decide to wipe out the rest of the 99,99% and replace them with intelligent robots.

That's more likely under a fiat system than a bitcoin-based system. The fiat system assumes the existence of armed enforcers of the monetary system (army, police). Bitcoin does not.

A druggie with no concrete ideas. Not very interesting, back to watching Gantz. Never trust someone who doesn't allow comments.

gentlemand, thanks for the links!  The zombie link was fascinating.  Will read more in depth later and will also forward in my reply.

Peter R, great info.  One thing that immediately comes to mind is that in the T/M formula, I'm wondering if the mining counts as a T.  Just intuitively, I would suspect that BTC would have a much lower velocity than most currencies, but obviously, I could be completely wrong.  Definitely will do some further research and this helps.

ghdp, are you referring to rpitiella, who started the thread referenced by gentlemand?  That's my guess.

watchwoord and ThatDGuy, I'm so on board with what you're saying.  It's part of the appeal of BTC, for sure.  But I'm not sure the non-BTC community actually is less symmetrical at the top.  If 0.6% own 36% of the wealth, that's ugly, but we're talking about a similar number, 29%, possibly being owned by  0.03% of the BTC community, which is about 20 times more concentrated.  That, of course, may or may not be accurate, given some of the other info above.  Moving down, 43% of the wealth is owned by around 8% of the population (round numbers).  50% of BTC is owned by still a lot less than 1% of the BTC world.  I will definitely go back and read that entire thread, though, because there may be something I missed.

piramida, I actually agree with what you're saying, at least in theory, and at least to some degree.  That's why I hold some BTC.  

BTCTrader71, I don't suspect they would conspire to destroy the market, but there is a prisoners' dilemma type of issue.  At what point IS it worth it to them because the rewards are so great?  One could say they are relying on a "greater fool" theory.  So far it's working.  At some point, their calculus could change, and then what happens?  Of course, your point about dispersion over time is a good one, and well made.  It may look different in five more years, even if roughly half of the total coins are already mined.  

Torque, I am definitely holding.  Unlike many on the board, I am doing so without defined expectations of hitting 3000 or 10,000 or 1,000,000 USD.  I like the anonymity, the decentralization, and the utility.  I'm not completely sold on it as a store of value, but we'll see.  I'm 46, which is probably older than average on the board, and I'm guessing I probably have had time to accumulate more assets, as well.  I believe in diverse holdings, and BTC is part of that diversity for me.  I must admit, though, that I'm not so comfortable if part of the value is dependent on the human qualities of the big holders.  That ish can change in a hurry.  But like BCT71 indicates, the makeup of the distribution will change, too.  Eventually, I hope it won't matter who the people are.  

Great replies all, even if I didn't mention you!  Thank you for the being generous with your time to enlighten a new forum member!



 

As the price of bitcoin rises the holders of a lot of bitcoin will have an incentive to sell their bitcoin which will cause bitcoin to be more widely held.

It should also be noted that these numbers are distorted by Satochi's estimated 1 million bitcoin. If you were to back out these coins then bitcoin would show as being more distributed.

I'm familiar with prisoners' dilemma but I don't see how it applies in this case. I venture to guess that most early investors are strong believers in the technology behind bitcoin, and believe it is not a self-limited bubble -- otherwise, why invest in it? It would be too risky. They do not see bitcoin investors (or users) as a bunch of fools and do not envision some inevitable time when all the fools are going to jump ship. Bitcoin (or crypto in general) is a technology that has inherent uses that persist even if its value as a currency is zero. (There are a myriad of examples -- smart property, colored coins, voting systems, identification systems, proof of copyright, many more I have never even thought of). People pay money for other pieces of software because they are useful tools. Bitcoin is the same.

Suppose you owned 25% of all coins right now, personally. And suppose you were very persuasive and had the ears of the other ~1000 and together, you owned 50%. What conspiracy could you possibly dream up that would make you more money than HODLing some of your bitcoin, and growing the bitcoin ecosystem with the rest? That's exactly what a lot of the big investors are doing. (For the sake of argument, let's exclude from consideration buying an army and marching on everybody -- or buying a politician, which in my mind fits into the same category. IOW, let's exlude business as usual under the existing fiat system.)

This. We shouldn't treat addresses as individuals. Multiple addresses can belong to one person, or several individuals may stand behind just one address.
And boy, do we have plenty of addresses :).

Is it ugly that 36% of world records are made by 0.6% of athletes? (Real numbers may differ, but the principle stays).
Is it ugly that 36% of bestsellers are written by 0.6% of writers?
Is it ugly that 36% of greatest scientific discoveries are made by 0.6% of scientists?

Creating and maintaining wealth requires talents, just as sport or art or science. And distribution of talents in this area is just an uneven as it is in all other areas. Because of this if you let people keep wealth they created, some people will be much richer that others. You have to choose - you want freedom or equality. If you looking for equality, bitcoinland is not the place to look for it. Because bitcoin is all about letting people keep their money.

Actually 0.00001% of the population owns 90% of the world's wealth, they are just well hidden, through indirect holding thousands of companies. The Rothschild family alone owns about 50 trillion of wealth.

Your reasoning is good, and I'm not trying to argue, but there are other possibilities. 

They might be true believers.  They might just be "rational actors" as they say in the case studies.  

In a classic prisoner's dilemma, the "prisoners" (in this case, the 1000) could theoretically decide not to betray each other (in this case, sell BTC) for their mutual benefit.  But as the rewards for "betraying" (in this case, selling) get greater, a prisoner might decide to pursue his own benefit.

Obviously, this is quick and dirty, but look at it this way:
12MM BTC at 650 means 7,800,000,000 in total value
50% of that is 3,900,000,000
divided by 1000 holders is 3,900,000 each in value held.  Subtract out Satoshi's share and it's more like 3,575,000 for the other 999.
With 50% on the market, the selling pressure would be immense.  I looked at a number of models analyzing float manipulation, order imbalance, and the impact on stock prices.  If I read the models correctly, 50% of the shares on the market would likely cause MORE than a 50% drop in price, but even at a mere, say, 60% (and I think it would be higher),
So for the 999, with a price of 650, under price pressure from selling their shares, you're probably talking about maybe $1.4 million for each if they all cashed out now.  That is IF the 999 are more or less together on this.  And that's even assuming equal distribution among the 999, which isn't likely.  For most of them, it is likely less.  

So, you're absolutely correct when you say that their best move right now is HODLing their BTC and growing the total value...likely by growing the adoption rate and infrastructure.  And keep in mind, if they are doing it because they are believers or because they are just waiting to cash out, it all looks the same to you and me.  I mean, if it's worth $1.4 mil or maybe less to me now, that's pretty good, but I'm not ratting out my other prisoners.  And no way would I even consider "voting" for a mass liquidation by the 999 if I'm one of them.  I'm not sure I could even retire on that right now--damn sure couldn't if I'm in the bottom half of the 999.  It might be close, but vuduchyld ain't tryin' to outlive his money.  

What if BTC is $3250, though?  Now I'm probably up over $5mm in a pressured market and $10mm in an unpressured market.  Might be a little more pressure on some "prisoners" at that point.  What about BTC at $10,000?  Somewhere between $30mm and $60mm?  That is getting close to buy-an-island money.  

Again, I'm not saying they aren't true believers, but if they aren't, and if it's just the "greater fool" theory, this distribution could definitely impact BTC pricing.  As long as they think there are greater fools to buy in at higher prices (obviously true right now), you continue to maximize value.  But frankly, we've got people on this board who seem to think their 1 BTC is going to make them a dollar millionaire someday.  If you are one of the 1000 who have an average of SIX THOUSAND BTC right now, would you settle for $1.4MM?  

It would impact BTC pricing, in the short term, once.  Then the 1000 sellers would have sold their btc to 10,000 buyers and the distribution would improve.

Well, reasonable people could certainly agree to disagree on this, so I'm absolutely not trying to say that I'm right and you're wrong.

But I would say that wealth distribution is clearly not a meritocracy in the way that athletic competitions are.  Especially for the 0.6%, it is far more correlated to your "choice" of who your dear old mumsy and dadsy are.

And I agree with you regarding equality, but I think a little more equality of opportunity is worth working towards.  Impossible dream, I know, but it works as a concept.  

Creating wealth takes great talent, as does writing bestsellers, making scientific discoveries, and holding athletic records.  I would absolutely flat out NOT include maintaining wealth in that category.  It's not nothin', but it's also not nearly so active of a pursuit as anything else you mentioned.  Just MHO.

bitcoin goes to those who value it. Anyone who wants some is free to purchase as much as they want. We started at 1, then 2, then 5, 100, 1000, 1,000,0000

as the user base and value grows the coins get distributed. 

Distribution would likely improve, yes.  I think we could probably guess endlessly about the long term effects of the price.  Some would argue, persuasively, even, that the effect on price could be substantial and lengthy.  This isn't exactly like stocks that have underlying inherent assets and cash flows of which one is buying shares. I think it would be hard to find many examples of stocks with no underlying fundamental changes that had sell orders on 50% of the float, so when it happens, it's due to fundamentals and the impact is likely to be long-lasting.  This might be different.

1 person or 0.000000001% of the global population owns 29% of Facebook. Facebook is used by BILLIONS of people..OMG. Why wouldn't anyone want to use Facebook if 1 person controls 29% of it

But in the situation you described, there was not a change in fundamentals, only an overvaluation in the estimation of a few large holders that was corrected for through selling.

Exactly.  Which is why it would be hard to find studies that modeled this type of behavior.  I'd guess that if you found the closest analog in the stock market casino to the order imbalance caused by sell orders on 50% of the float, you'd probably see continuing price degradation.  That would probably be a result of a big change in fundamentals...probably re-stating earnings or something similarly dastardly. 

This situation would be different enough that there just aren't any similar cases, so it's hard to say what would happen.  Sorry I wasn't very clear.

Yes, dollar distribution is far from meritocracy. But you call "ugly" not dollar, but bitcoin distribution. Are you suspecting that Satoshi inherited his coins from his rich dad? Do you think Ulbricht got his coins because his mom had right connections? No, you are not and you don't. But you still call this distribution, which is as close to meritocracy as humanly possibly, "ugly". Therefore the "mumsy and dadsy" is not the reason for your indignation. It is just pretext.

Why do you need pretexts? Why don't you give us (and yourself) your real reasons? Why would anybody hide his real reasons even from himself? Probably because the reasons are ugly. For example, you may feel entitled to other people's money. Are you? You are not brave enough to rob people, so you would delegate the robbery, along with the risk, to state, while you would just vote for right robber.  And you would prefer to think of yourself as of honest person, rather than as of robber, so you are in search of an ideology that would repaint the robbery as an honest and even noble occupation. So comes "liberalism", i.e. socialism. And vuala! You are not robber, you are noble person! You take not for yourself, but only for the poor underprivileged kids! For just a bit more equality! You are fighting for the impossible dream! You are practically saint! And your opponents are practically devils.

Don't you see how hypocritical it is?

You are working for "a bit more equality". How much more do you want? Exactly? The fighters for "just more equality" started from 1% tax, and since then were pushing and pushing and pushing for "a little more". Now they are taking and redistributing about half of GNP, half of all what people of the whole country produce, and what? You dismiss it as it's nothing and ask for "little more". Do you people have any sense of shame? You are taking from people half of everything and you are still not satiated! You still demand "a little more"! You won't stop until you get everything. And when you'll get everything, the world economy will collapse. The collapse of the Soviet Union is nothing compared with it, because Russians had West to flee to and to receive help from. But when the world economy will collapse under your weight, whom would you ask for help, for "a bit more"? Where would you flee to? Nowhere to.

Don't you see how dangerous it is?

It's for protection from such well-meaning re-distributors bitcoin was created. Hopefully, it still has several years to mature and save the world from the catastrophe you are preparing for all of us.

(Nothing personal, I've no doubts that you personally are noble, altruistic and well-meaning guy. Which makes things even worse, since egoistic bastards can at least be held at bay by threat of punishment, while altruistic ones would happily sacrifice themselves for their noble world-destroying cause).

That is insanely optimistic. 10% of any commodity market, including shares, being dumped at one time would crash the price to 10% of the value, that is more like it :) So no, you can't just sell half of all bitcoins for 1.4 billion total, it just won't happen - 140 million, if you are very lucky.

That's a good example but I remember the ratio was 20% vs 80%. To bring more examples,
20% of men fuck 80% of women.
20% of women fuck 80% of men.
20% of programmers write 80% of code.

Circulation is irrelevant. It is the holders' supply (limited by design) and holders' demand to have coins in reserve.

I'm probably not as noble or altruistic as you would give me credit for.  My use of the word "ugly" was not very carefully deployed, but what I was referring to was that it is ugly from the perspective of somebody using bitcoin as a store of value or hoping that the price goes up relative to other currencies.  I didn't mean that the bitcoin distribution was philosophically, existentially ugly.  I do think that distribution could potentially impact value.  It might not, but it might.

The mumsy and dadsy comment was directed toward total global wealth distribution, which I consider haphazard and capricious--and potentially explosive and dangerous.  That doesn't mean I am an active redistribution advocate.  I wish it were different, but I'm not proposing steps to make it so. 

And when you quote my "a bit more equality" it is a little out of context, as you left out the next two words, which were italicized.  What I said was "a bit more equality of opportunity" and that is significantly different.  I'm not trying to minimize the fact that we probably have different views on the ideal distribution of wealth, because it seems as though we do.  We probably also have different views on tax policy, which I think is significantly different from wealth re-distribution.

But I did want to clarify that I don't consider the distribution of some specific small subset of $7.9 billion (er...now about $7.5 billion) as any kind of philosophical or policy issue.  I have no philosophical stance on it at all.  My only concern is that of an asset holder and how the distribution affects the value of what I hold.  That's not noble or altruistic at all.

Good discussion, though.  Thanks for sharing your thoughts!

I agree completely.  In reality, the 999 really don't have nearly enough incentive...yet...to test that dilemma.  There just isn't enough in it for them.  I'm concerned that if/when they do, it could have pretty serious ramifications on the value of all BTC holdings.

I mean, we've got people on this forum that think their 1-3 BTC will eventually bring them the purchasing power of hundreds of thousands, or even millions, of dollars.  And what you're saying (and I agree with) is that these early holders probably couldn't cash out right now for $150K each on average. 

My contrarian friend probably has it wrong, too.  The probability is likely somewhere in the middle.

Keep in mind that when the price eventually hits 6 or 7 digits there will be no more "cashing out", because bitcoin will be money. Walmart will pay its suppliers in bitcoin and they will both pay their wage slaves in bitcoin who will buy things in bitcoin. The fabled stability that a certain group of degenerates dream of. Non-issue.

I don't disagree with this at all, but it still makes me nervous.  It means the value of my holdings (not much in the grand scheme) is at least somewhat dependent on the 999 to behave some certain way.  I mean, I'm damn sure not putting my life savings all in, let's put it that way.

I think most early adopter bitcoin bulls agree with bitcoin as being (and becoming) of the people, by the people, and for the people. Between concentration of wealth and concentration of power, they might parse it like this: concentration of power is the main evil. Concentration of wealth can be evil, if the wealth is used to purchase power. Which it often is -- hence terms like "crony capitalism," "corporate welfare," "robber barons." The basic recipe here is that people in the so-called private sector pay off government officials to protect their monopoly or, even more brazenly, to give them money directly. Our current system of money and banking is a prime example of that, one that periodically siphons billions and even trillions in wealth from the poor to the rich, all the while saying that this is being done to protect the common people.

Bitcoin does not aim to change human nature. Bitcoin will not counter the above evil by stealing from the rich and giving to the poor. But bitcoin offers a way to remove and replace one of the greatest tools of theft (from the poor, to the rich) and deception of all time, central banking. That is the main reason why bitcoin early adopters are not troubled by the current, transient, concentration of ownership of bitcoin: it will counter the ability of the elite to maintain their concentration of power. (The second reason is the one I stated in an earlier post - bitcoin ownership is slowly diffusing throughout human society, like a drop of ink in a tub of water.)

On the question of whether the main owners will decide to dump their bitcoin for a quick profit: this all boils down to whether you view bitcoin more as a tulip-mania style bubble, or more as something of fundamental value, whose high prices are now, or will be in the future, justified by that fundamental value. (Technically, the question at hand is how do the 1000 people with half the bitcoins view that question. But what we really want to know is: what is the actual answer to that question. Because whoever owns most of the bitcoins will have invested the time and energy to figure out the real answer.) My belief is that bitcoin has fundamental value. However, it took me quite a while to appreciate how and why this can be the case. Most people have never heard of bitcoin. Of those who have, most do not understand what all the fuss is about. It is the small, but ever growing, group of people who do understand what all the fuss is about, who are building the bitcoin economy. And yes, they are investing in bitcoin. At the end of the day, it will be their prescience that will allow them to change the world for the better. I will not begrudge the profit they make. They will have deserved it.

Somewhere in the middle -- agreed. They will probably cash out their bitcoin (not just into fiat, but into other investments as well) gradually, rather than all at once. It is the rational thing to do. Think about it: if one day 5% of your wealth is in bitcoin, and a year later 50% of your wealth is in bitcoin (because the price has gone up), it makes sense from an investment standpoint to diversify your portfolio, which means taking some (not all) bitcoin and putting it into other investments. Some (smart, imho) investors advocate targeting a fixed percentage of your portfolio in bitcoin. By that strategy, you cash out incrementally as the price rises. 

And that is how the drop of ink diffuses through the tub of water.

People who got into bitcoin early for ethical reasons have no reason to feel guilty about getting rich off their efforts. One of the basic ethical tenets is to take human self-interest and harness it in a way that is constructive for all, rather than fight against it (which is always a losing battle). This is why the whole bitcoin movement will succeed.

I have heard some early investors advocate a 70 / 30 strategy -- invest 70% of bitcoin-related wealth in the form of bitcoin, invest 30% in bitcoin companies and startups. This makes the most sense to someone whose goal is to maximize their net wealth. Simultaneously, it builds the economy for everyone.

Individual needs and societal needs, being pursued in unison. Who woulda thunk it? (Answer: Satoshi, that's who.)

Oh, yeah...great thoughts, BTCTrader71!

The bitcoin / libertarian / Ron Paul / anarcho-capitalist crowd and the politically left-leaning / occupy Wall Street  crowd have more in common than either might think. It would be in everyone's best interest to focus more on how they agree, and focus less on how they disagree.

The former crowd emphasizes the evils of concentration of power; the latter emphasizes the evils of concentration of wealth. The distinction is not as clear-cut as we sometimes make it out to be.

I would doubt that bitcoin will ever be the only/primary currency in the US. I would think that small and medium sized businesses may pay suppliers in bitcoin and some larger ones may as well but all commerce will not be done exclusively in bitcoin. The US government is one of the biggest consumers and biggest employers and it would likely never pay their contractors and employees in bitcoin

It's cheaper and faster and easier for international payments to be done in bitcoin than fiat. It's the really big ones that have the most incentive to do it, and they are also the ones that pay the least tax. Only thing people would NEED dollars for is taxes, and the US has a low tax rate.

That 50 people own 1/3 of Bitcoins, just made Bitcoin less popular and have lover price as could have. Most of this 50 people got this coins cheap and fro them they have little real value.  It is one of reasons, some alt coin might catch Bitcoin in future, where ownership will be more decentralized, people will pay real value for coins and will widely spread it all over the world.

Don't forget all the flash crashed happen this year is due to whale liquidating their position.

Yeah, but not until someone creates a HippieCoin where every person on earth has one and they can't trade it or send it, or otherwise create inequality. That would be a happy world right, and it will be sure to takeover bitcoin and everything else because it's so equally distributed and peaceful and good.

It is generally cheaper to use bitcoin then it is to transact fiat payments at the consumer level.

It gets more complicated at the commercial level as corporations need to have the ability to "reverse" a transaction in the event of a mistake for example. Another problem with commercial international payments is the issue of being able to prove who funds were sent to. There are a couple of ways around this second issue but not so much with the first issue.

The reason why I would not be as encouraged with consumers using bitcoin for international payments is because the potential market for this is very small. There are very few transactions that go directly overseas in the US, it is probably more common in Europe but the Euro should make this just as efficient as sending a payment domestically

Interesting, in several ways.

First, I have not seen these numbers. But numbers on Bitcoin ownership do get thrown around quite frequently. They have so far always been completely fabricated. That may not mean that they are wrong, but they are unscientific and unrealiable and you should not make decisions based on them.

(Most numbers come from assumptions on how to map wallets to cryptographic addresses, something that the pseudonymity of Bitcoin does not easily let you do. The only analysis that will come close to correctness would be a statistical analysis of Bitcoin users, and even when it would come with a high uncertainty. The telling factor of such analysis is to tell you exactly what this uncertainty is and why.)

Second, given the pretty much standard description of Bitcoin as a global currency for the Internet with no fixed ties to neither nation states nor their currencies, why would you expect its ownership distribution to be different from gold, silver or dollars? It is a free floating currency in a capitalistic day and age, and if you can't buy it freely because of distribution limits how could you possibly use it as a currency?

About the numbers again, how could you bootstrap a currency out of thin air and not have the value be zero from the start? From the beginning you can not buy anything with it and therefore it does not have value in the economic sense. As the value accrues the distribution will change as early adopters are bought out. But we can never expect a free floating currency to deviate much from the ownership distribution of other currencies. We are still in the speculative phase of Bitcoin, most of the value is still speculation that it may find more use in the future as it gets easier to use and new products are invented. So it is not unreasonable that a large part (and I would say 90% is entirely reasonable) was held just in the hope for it to gain in value. So far that has worked out pretty well.

Will Bitcoins be widely used in the future? Nobody knows for certain (or the price would be even higher). Will it be used for commerce or to store value? Will the deflation cause trade to stop as some people seem to believe? Nobody knows. But I think we have a pretty good grasp of the current use and value, and it surprises me that you and your friend seemingly expected something very different.

Certainty is not binary.  That is why some of us will gain disproportionately. Our certainty is greater.

re the OP:

Coase's theorem suggests that distribution will approach optimality over time.  The defector in the dilemma, in this case, is not the dumper, but the hoarder.

Then it's not really called certainty. You're either certain or not.
Some will gain more than other because they see the odds as favorable/believe in cryptocurrency/ have money to risk.

As those with bitcoins use them they will own less. If they don't use them, then they are basically nulled.  Compare this with fiat where those with a lot can print more at will. The first system starts unequal but equals out over time. The other system also starts uneven and remains uneven. Which system do you prefer?