Adi Shamir's paper on bitcoin

[Akka]

Here is our first surprising discovery. The total number of BTC’s in the system is linear in the number of blocks. Each block is associated with the generation of 50 new BTC’s and thus there are 9,000,050 BTC’s in our graph of owners (generated from the 180,001 blocks between block number zero and block number 180,000). However, if we sum up the amounts accumulated at the 609,270 addresses which only receive and never send BTC’s, we see that their owners have actually put aside in some kind of “saving accounts” 7,019,100 BTC’s, which are almost 78% of all existing BTC’s. 59.7% of all the coins are “old coins” which were received more than three month before the cut off date (May 13th 2012),
Quantitative Analysis of the Full Bitcoin Transaction Graph 7
and still had not triggered any outgoing transactions. This means that there are much fewer BTC’s in circulation than previously presumed.

7M unused coins...where are the hoarders at?!

Wow, 7M sitting there (OK maybe minus a few thousand lost coins) and waiting to crash the market. That makes me feel unwell.

Also, this gives a new light to market capitalization so ca. 3M alive coins â 12$ --> 36M$.

That's how tiny BTC still is.

[1715075958]

1715075958

[Raoul Duke]

Had to lol at the html scraping stuff though.

At least I wasn't the only one.
The replies I got when I talked about that a few posts back where just

[hashman]

Here is our first surprising discovery. The total number of BTC’s in the system is linear in the number of blocks. Each block is associated with the generation of 50 new BTC’s and thus there are 9,000,050 BTC’s in our graph of owners (generated from the 180,001 blocks between block number zero and block number 180,000). However, if we sum up the amounts accumulated at the 609,270 addresses which only receive and never send BTC’s, we see that their owners have actually put aside in some kind of “saving accounts” 7,019,100 BTC’s, which are almost 78% of all existing BTC’s. 59.7% of all the coins are “old coins” which were received more than three month before the cut off date (May 13th 2012),
Quantitative Analysis of the Full Bitcoin Transaction Graph 7
and still had not triggered any outgoing transactions. This means that there are much fewer BTC’s in circulation than previously presumed.

7M unused coins...where are the hoarders at?!

Wow, 7M sitting there (OK maybe minus a few thousand lost coins) and waiting to crash the market. That makes me feel unwell.

Also, this gives a new light to market capitalization so ca. 3M alive coins â 12$ --> 36M$.

That's how tiny BTC still is.

Is this supposed to be news?   If we all heeded Satoshi's idea to always use a new address, 100% of the bitcoins would be in "savings" or unused wallets.  The fact that 22% of coins are sitting in addresses that have been used tells us what exactly?   

Even if the 78% is a valid estimate of the amount "put aside as savings", who cares?  We all know speculation on future value is a primary driver of today's bitcoin value.  Isn't one of the core functionalities of the systems as a store of value?  The fact that people are using it as such, though not exactly proven by the analysis, is hardly a surpirse. 
 

[Spekulatius]

Didnt read the paper,

But I wonder how they managed to determine the exact number of unique address owners:

They found there were about 3.12 million accounts, which are known as "addresses" in Bitcoin parlance. They belonged to about 1.5 different owners, on average, since there's no limit on how many addresses a single individual may possess.

quoted from this ars technica article

because I have read many times over that it is very hard if not impossible to determine with high probability the addresses that belong to one single entity, unless one uses outside information like web wallet login data or statements from the alleged owners that they own this or that address.

[lile]

Didnt read the paper,

But I wonder how they managed to determine the exact number of unique address owners:

They found there were about 3.12 million accounts, which are known as "addresses" in Bitcoin parlance. They belonged to about 1.5 different owners, on average, since there's no limit on how many addresses a single individual may possess.

quoted from this ars technica article

because I have read many times over that it is very hard if not impossible to determine with high probability the addresses that belong to one single entity, unless one uses outside information like web wallet login data or statements from the alleged owners that they own this or that address.

If coin X gets split to 100 different addresses, and then a high percentage of those eventually end up at address Y, there's a pretty high probability that the owner of address Y is the same as owner of address X.

[jgarzik]

But I wonder how they managed to determine the exact number of unique address owners:

Read the gist link (above).

Their paper includes assumptions about addresses that are obviously wrong:

A very important feature of the Bitcoin network is that a transaction involving multiple sending addresses can only be carried out by the common owner of all those addresses, as it is demanded by the Bitcoin system that "Whoever sent this transaction owns all of these addresses". This legal requirement is also technically ensured by the fact that each received amount must have a cryptographic digital signature that unlocks it from the prior transaction.

[niko]

Wow, 7M sitting there (OK maybe minus a few thousand lost coins) and waiting to crash the market. That makes me feel unwell.

Also, this gives a new light to market capitalization so ca. 3M alive coins â 12$ --> 36M$.

That's how tiny BTC still is.

What makes you think these coins are "waiting to crash the market"? Perhaps it's simply savings? You can cash out savings without crashing the market - sell slowly in different markets, etc. Also, keep in mind that many early coins were lost. I mined a block in late 2010, and never bothered to save them when reformatting the hdd. It was all very new and very complicated, and simply not worth the effort.

[DublinBrian]

Wow, 7M sitting there (OK maybe minus a few thousand lost coins) and waiting to crash the market. That makes me feel unwell.

When those 7 million BTC are spent, they will just as likely be spent on goods and services, as on USD exchanges.

Theres no reason to believe these coins will be sold for fiat and "crash the market".

[sunnankar]

If coin X gets split to 100 different addresses, and then a high percentage of those eventually end up at address Y, there's a pretty high probability that the owner of address Y is the same as owner of address X.

I do not accept the unreasoned legal conclusion that there are 'owners of addresses'. Please, show me some legal authority and then make the case for why there are 'owners of addresses'.

You may want to follow this thread where I started stirring the pot on this legal issue with this question: Whether 'bitcoins', the unit of account in the open source software governed under the MIT license, constitute property?

[lile]

If coin X gets split to 100 different addresses, and then a high percentage of those eventually end up at address Y, there's a pretty high probability that the owner of address Y is the same as owner of address X.

I do not accept the unreasoned legal conclusion that there are 'owners of addresses'. Please, show me some legal authority and then make the case for why there are 'owners of addresses'.

You may want to follow this thread where I started stirring the pot on this legal issue with this question: Whether 'bitcoins', the unit of account in the open source software governed under the MIT license, constitute property?

Fair enough, maybe it was poorly stated. I'll restate:

If coin X gets split to 100 different addresses, and then a high percentage of those eventually end up at address Y, there's a pretty high probability that the person (or a group of people) knowing the private key to address Y is the same as the person (or a group of people) knowing the private key to address X.

However, jgarzik made a good point, online wallets made this assumption incorrect.

[zby]

But I wonder how they managed to determine the exact number of unique address owners:

Read the gist link (above).

Their paper includes assumptions about addresses that are obviously wrong:

A very important feature of the Bitcoin network is that a transaction involving multiple sending addresses can only be carried out by the common owner of all those addresses, as it is demanded by the Bitcoin system that "Whoever sent this transaction owns all of these addresses". This legal requirement is also technically ensured by the fact that each received amount must have a cryptographic digital signature that unlocks it from the prior transaction.

Care to explain?  This is also how I think about the protocol - I am not sure if multi-sigs are switched on - but even if they have been recently these transactions would be easy to count and I am sure that they don't amount to much yet.  If we set aside muti-sigs - then each transaction is broadcasted from a single computer and then it is verified that the broadcaster had all the private keys for all the input addresses - so the sender is always one 'program', it is possible that this program is controlled by a group of people - but then I would not expect that to be very common.

[kjj]

But I wonder how they managed to determine the exact number of unique address owners:

Read the gist link (above).

Their paper includes assumptions about addresses that are obviously wrong:

A very important feature of the Bitcoin network is that a transaction involving multiple sending addresses can only be carried out by the common owner of all those addresses, as it is demanded by the Bitcoin system that "Whoever sent this transaction owns all of these addresses". This legal requirement is also technically ensured by the fact that each received amount must have a cryptographic digital signature that unlocks it from the prior transaction.

I would say that he is right for certain values of "all".  If you pick a transaction at random from the chain, the odds are overwhelmingly high that a single owner controlled all of the input.  Thus, he is "mostly right", and his conclusions are likely to be approximately correct.

Fortunately, that will change over time as we develop easier ways to do multi-party inputs, and as web services with shared wallets become more common.  I always try to discourage people from multiple wallet schemes because shared wallets obfuscate things in a good way.

Consider the Model T, an early car.  Conclusions drawn from study of that car are likely to be mostly right when most cars are like that, but they don't have to stay mostly right as cars diversify and grow ever more complex.

[mcdett]

Here is our first surprising discovery. The total number of BTC’s in the system is linear in the number of blocks. Each block is associated with the generation of 50 new BTC’s and thus there are 9,000,050 BTC’s in our graph of owners (generated from the 180,001 blocks between block number zero and block number 180,000). However, if we sum up the amounts accumulated at the 609,270 addresses which only receive and never send BTC’s, we see that their owners have actually put aside in some kind of “saving accounts” 7,019,100 BTC’s, which are almost 78% of all existing BTC’s. 59.7% of all the coins are “old coins” which were received more than three month before the cut off date (May 13th 2012),
Quantitative Analysis of the Full Bitcoin Transaction Graph 7
and still had not triggered any outgoing transactions. This means that there are much fewer BTC’s in circulation than previously presumed.

7M unused coins...where are the hoarders at?!

Wow, 7M sitting there (OK maybe minus a few thousand lost coins) and waiting to crash the market. That makes me feel unwell.

Also, this gives a new light to market capitalization so ca. 3M alive coins â 12$ --> 36M$.

That's how tiny BTC still is.

This goes way back to one of my root fears of bitcoin.  That a very large amount of them are held by a very small group of people in a stationary state.  This is not sour grapes in that I feel that I don't have enough and deserve more (I only deserve what I've worked for).

** START ASSUMPTION **

Assume: A very small group of people own almost 30% of all coins ever to be minted (almost 70% now)
Assume: Bitcoin becomes very large (1 btc == 50k usd, puts total market value of btc at 1 trillion usd (change this number to whatever dreams you may have for btc in the future of human kind))

This is being beholden to an unknown entity that could wage massive war, change society (for better or worse) implement controls to limit peoples ability to access btc (destroy it after they run the show) aka access they value of peoples work output.

This would probably be the largest concentration of wealth in the history of human kind.  At least when the king has all the money we know how to keep him happy.  When an anonymous group of people holds this, our futures are unknown.

I don't like the unknown.  I don't like that I don't know the intentions of the holders of the 7MM btc's are.

Can anyone name for me a small group of people that controls the world economy?  Do we like those names (if any)?  Do we want to repeat that?  Is there anything we can do about it... probably not.

** END ASSUMPTION **

[Raoul Duke]

Most of those stationary bitcoins are on the hands of Artforz lol

[Atlas]

Most of those stationary bitcoins are on the hands of Artforz lol

2027: Artforz is declared supreme ruler of Earth due to owning most of the world's wealth. Meanwhile, in London, the Rothschild family declares bankruptcy.

[jgarzik]

But I wonder how they managed to determine the exact number of unique address owners:

Read the gist link (above).

Their paper includes assumptions about addresses that are obviously wrong:

A very important feature of the Bitcoin network is that a transaction involving multiple sending addresses can only be carried out by the common owner of all those addresses, as it is demanded by the Bitcoin system that "Whoever sent this transaction owns all of these addresses". This legal requirement is also technically ensured by the fact that each received amount must have a cryptographic digital signature that unlocks it from the prior transaction.

I would say that he is right for certain values of "all".  If you pick a transaction at random from the chain, the odds are overwhelmingly high that a single owner controlled all of the input.  Thus, he is "mostly right", and his conclusions are likely to be approximately correct.

Not really.  For shared wallet sites, the shared wallet site controlled all of the input, but wouldn't necessarily be the "owner" of those funds.

[molecular]

hmm, either Shamir has gotten "old and ignorant" (like Stallman?) or someone else did this "study" and he just put the name.

The conclustion of "72% hoarding" doesn't sound high to me. My personal "hoarding percentage" is even higher.

On a side-note: I don't think it's likely that many coins got "lost" (as many seem to believe) at all. I'd be willing to bet it's <5% of all coins.

[mcdett]

When those 7 million BTC are spent, they will just as likely be spent on goods and services, as on USD exchanges.

Theres no reason to believe these coins will be sold for fiat and "crash the market".

There's no proof that they'll be used for goods and services.

When one person (small cabal of people) owns 30% of the worlds wealth, it is more powerful to yield that wealth in modifying society for your whims then it is to use it on goods and services.

If you look at the major finical players (soros, buffett, gross, etc (they combined control less then 1% of the economy)) they operate on another level.  They are found influencing government to enhance they're financial power (look at soros's hand in the eu).  They don't make stock bets, they make phone calls to presidents and talk policy.  They don't spend their wealth on goods and services (that won't grow their power/influence) they use their wealth to modify political structures which change society in making themselves largess.

When you own 30% you are THE political structure.

My simple fear is that I spend all of this time helping build btc out (on the bet my btc will be worth more), and it ends up being that the holders of the 30% are some quasi napoleonic dictators who think the world is best when they sit on top of it.... dictating it.

People would say, "why the f weren't you concerned about this lopsided wealth holding on something you were betting on, it was so obvious."

[benjamindees]

What happened November 2010? Anyone remember?

It seems the first Slashdot story was in July '10.  But I seem to recall one in October or November as well.

http://news.slashdot.org/story/10/07/11/1747245/Bitcoin-Releases-Version-03

[repentance]

People would say, "why the f weren't you concerned about this lopsided wealth holding on something you were betting on, it was so obvious."

Of course people are going to say that.  Why on earth would you think that a Bitcoin economy would be any different than a conventional economy in terms of wealth disparity?  Hell, you see people begging for the same kind of financial markets and products which lead to recessions in the real world and somehow expecting a different result.  People think that because they got in on the ground floor they are going to be part of the 1% (or 30%).  They seem to forget that everyone else is also trying to be part of the 1%, too.