2013-08-22 MIT Tech Review: Rich-Get-Richer Effect Observed in BitCoin

[BitGo]

http://www.technologyreview.com/view/518541/rich-get-richer-effect-observed-in-bitcoin-digital-currency-network/

"Kondor and pals recreated the network so that each node represents a BitCoin address and drew a link between two nodes if there was at least one transaction between them. They then analysed the way the network has evolved over time."

"Kondor and co say that the network grew by preferential attachment. In other words, a node with a large number of links is likely to attract more links than a node with only a few links."

"This is a well-known effect in network science. Economists call it the Matthew effect after the biblical observation that the rich get richer."

"The Matthew effect is thought to be the origin of the 80:20 distribution of wealth– that 20 per cent of the population own 80 per cent of the wealth."

"Kondor and co say a similar phenomenon is clearly observable in the BitCoin network. Not only are popular nodes likely to attract more links, their wealth is also likely to grow more quickly than less popular nodes."

[The Bitcoin Catalog]

Nice one.

Here the link for the complete analysis: http://arxiv.org/pdf/1308.3892v1.pdf

[Carlton Banks]

"Kondor and co say a similar phenomenon is clearly observable in the BitCoin network. Not only are popular nodes likely to attract more links, their wealth is also likely to grow more quickly than less popular nodes."

So they're saying that addresses with more payments to them are more likely to contain larger amounts of money? Astonishing insight, someone nominate them for the Satoshi Prize for Economics 

[DeathAndTaxes]

They also make the mistake of assuming that addresses are linked to identity.  The balance of some of MtGox's cold storage address(es) are large but they represent the wealth of who knows how many individuals. 

[marcus_of_augustus]

They also make the mistake of assuming that addresses are linked to identity.  The balance of some of MtGox's cold storage address(es) are large but they represent the wealth of who knows how many individuals. 

I'm glad you said represent there and not control .... MtGox's cold storage is controlled (possessed) by Mr. Karpeles and whoever else might be co-signing with those keys.

The graph does not show identities but addresses are directly synonymous with the private keys that control the wealth, so is there really a distinction when control is effectively ownership?