Distribution of bitcoin wealth by owner

[molecular]

It's pretty sure that Satoshi owns/owned 1M  ( http://bitslog.wordpress.com/2013/04/17/the-well-deserved-fortune-of-satoshi-nakamoto/ ). Whether he has lost the private keys or not is irrelevant. You should deduct this amount.

why would you want to deduct satoshis holdings? He's the top of the pyramid.

[1714900321]

1714900321

[1714900321]

1714900321

[Rassah]

Interesting deductions. I'll add more info, in case it helps you with the rest of your guesswork:

The logic is as follows:

Evidence

1. Your forum account is created in June-2011.

2. You have been forum active ever since and are Director in bitcoin-something.

3. You told you sold more than BTC1000 at $22 (Feb. 8, 2013)

Deduction


1. It is very rare to have a Jun-2011 account. This points to a person who has (with good probability) been able to mine/buy large amounts with
small cash outlay. (Hardly anyone creates an account without having the coins already.)

There are quite a few people with accounts that old who were big fans of bitcoin from a political/sociological standpoint, but who didn't actually have the money to buy any coins or mining equipment (the prodigal teenage bitcoiner basement dwellers). Personally, my mining operation consisted of two 300MHash/s GPUs, which I bought soon after joining the forum. Throughout their entire life (I stopped mining when reward halved to 25BTC), I think they mined me something like 100BTC. Probably less, since they weren't always working. Other than that, I have admitted to using Bitcoin as a long-term savings account for things I don't need to pay for right away, but have used those coins to pay for a few trips and vacations (including to Europe), and a few phones and tablets. I didn't actually have all that much cash to invest into bitcoin to begin with, either ($100 at $10/BTC exchange rate only nets you BTC10, and I couldn't put in more than a few hundred every month)

2. Being able to sell a significant amount at $22 points to me a long-term holding:

That entire amount actually came from a large purchase at about $10-$13 that was done using a large loan just a few month prior to the sale (borrowed over time during September and October, sold in January). So it wasn't from long-term holding at all. Actually, the story is that I wanted to buy a BFL ASIC rig, and needed $30,000 for it. I had a bit of my own money, but needed to borrow a significant amount to be able to afford that thing. However, due to $5,000 Dwolla balance limitations and 3 to 7 day bank transfer times, I was limited to converting USD to BTC at $5,000 a week, meaning it took me from late August to late October just to transfer enough money into BTC. By the time I had enough in BTC to afford to purchase that rig, BFL claimed that they will start shipping in 2 weeks or so. So I decided to hold off on preordering, and buy a rig when they are sold outright (this was around the end of October). Once January came around, and the price started to go way up (and BFL still wasn't shipping), I decided to sell off the borrowed bitcoin at $22, pay off the loan, and use the remaining profits to buy a new car instead (the Prius with the BITCOIN license place, to replace my old '99 civic had 250,000+ miles on it). Actually, I even had to go a bit out of pocket, since the profit didn't cover the entire cost of the car.
As for the director position, I'm the director of the Bitcoin100 charity fundraiser. All that means, really, is that I'm entrusted with the money, and am volunteering my time to doing accounting, somewhat-directing what charities we try to give that money to, and send the money. The actual Bitcoin100 account only has BTC149 in it, none of which are actually mine.

3. It is a lower bound that you would have BTC1,000 today. If you play wisely, you only sell a little at a time, and can earn BTC every year, so that your current holdings should be at least BTC3,000.

I'd like to think I have played wisely, since I didn't do any bitcoin loans, ponzies, gambling, or stocks (which ultimately couldn't get a bigger return than bitcoin itself). But I was forced to sell a lot at times, just because that's the only money I had to use to pay for travel and other large expenses. I *WISH* I had $3,000  

The upper bound is that you resort to borderline lying, where you downplay the amount sold, and forget to tell that you bought back, and sold after very tight analysis only 10% of your holdings, then you might have BTC10,000 or more.
I assume that anyone whose forum account is from 2011 or earlier, has BTC1,000-BTC10,000 unless proven otherwise.

Obviously we all buy back, but I only buy back with the money I have. If I have spent it, I no longer have it, and am right back to only buying with what I have earned while working at my job. Consider that some of us are only able to put, say, $200 into BTC every month, and have one or twice a year expenses of $500 to $1,500. I just ran this hypothetical using MtGox prices, and even if the person buys $200 a month worth since June 2011, and never spent any of those coins, they would only have about BTC650BTC at this point. If they had to spend, say, $1,000 twice a year, once in Spring and one in Autumn, they would only have at most about BTC200BTC. That's nowhere near BTC1,000, and definitely not BTC10,000. I think you need to really reduce your estimations for old members, since many of us aren't wealthy enough to dump thousands into bitcoin.

4. Yes I know that bitcoin is not life and life can go wrong and you lose most of your bitcoins to bad bets as you don't realize how precious they are. But even in this case, considering your position, I think here we have a 4-figure Countess.

I won't dispute, or confirm that (other than the Countess part   ) but hopefully my example shows that this isn't such a cut-and-dry conclusion.

[Peter R]

Interesting deductions.

I won't dispute, or confirm that (other than the Countess part   ) but hopefully my example shows that this isn't such a cut-and-dry conclusion.

That's because rpietila forgot point # 5:

5. The expression on the face of the sly feline he uses for an avatar gives it all away...  

[jl2012]

It's pretty sure that Satoshi owns/owned 1M  ( http://bitslog.wordpress.com/2013/04/17/the-well-deserved-fortune-of-satoshi-nakamoto/ ). Whether he has lost the private keys or not is irrelevant. You should deduct this amount.

why would you want to deduct satoshis holdings? He's the top of the pyramid.

What I mean is to deduct known big holdings before estimating the distribution

[AndrewWilliams]

rpietila, great posts, very informative.


I can't wait til the Bitcoin 500 or 1000 (like Forbes 500) comes out!

[rpietila]

It's pretty sure that Satoshi owns/owned 1M  ( http://bitslog.wordpress.com/2013/04/17/the-well-deserved-fortune-of-satoshi-nakamoto/ ). Whether he has lost the private keys or not is irrelevant. You should deduct this amount.

why would you want to deduct satoshis holdings? He's the top of the pyramid.

What I mean is to deduct known big holdings before estimating the distribution

Ah...

Deduct
Deduce

When saying "deduction" it is hard to distinguish

I suppose it is best to try to deduce the known large holdings, and use this information to estimate the top-heaviness of the distribution, then deduct the known lost coins. After this deduction and subsequent deduction, we have a better estimate. Right? 

[rpietila]

I can't wait til the Bitcoin 500 or 1000 (like Forbes 500) comes out!

This is not very difficult to compile, only 2 things that are needed:
- Make it somehow provable to disclose a bitcoin holding
- Make it somehow profitable to disclose a holding.

Due to concerns of privacy, it is likely that a large number of large holders wants to opt out (or downplay). Let them do it.

If you look at the Forbes' Billionaires, the highest echelons do not appear there. The people on this list do not have much power, the people who are claimed to have power do not have much money => the logical conclusion is that people who have both money and power (I even statistically estimated this cohort to be between 200-1000 people) do not appear on the list.

With bitcoin, it is all much easier. Total wealth or total power (or even total amount of fiat money) is hard to determine, also the money is debt -issue confuses matters. With bitcoin, you cannot have a large hall full of the richest holders hiding unaccountable. The absolutely known total number of bitcoins, public blockchain and statistical methods let you remain pseudonymous but not anonymous, by design.

Quoting OP: The intention of this thread is not to uncover any names who don't want to be uncovered.

[rpietila]

I rephrase the original question:

A Bitcoin holder is one who knowingly holds a positive balance of bitcoins. The bitcoins may be held in blockchain via wallet software or in paper wallets, or with a 3rd party if the business of the 3rd party is strictly to hold them for you. Bitcoin loans for use other than safekeeping are counted as bitcoin balances of the borrower, not of the lender. Bitcoin stocks or any other instruments denominated as bitcoins, are not bitcoins. Altcoins or anything else are not bitcoins.

And post a new estimate that takes into account the research I have done:

25. Oct 2013:

#People	#Bitcoins	#TotalBitcoins
73	BTC10k+	4.0M
1070	BTC1k-10k	3.0M
8600	BTC100-1k	2.4M
50k	BTC10-100	1.4M
147k	BTC1-10	0.5M
250k	BTC0.1-1	0.1M
133k	BTC0-0.1	0.0M

Total: 11.4M bitcoins, 590k owners
110,000 people own bitcoins that are valued at more than $1,000 (BTC5 or more).

[Inedible]

This is a really interesting thread with great detective work.

Hopefully Bitcoin doesn't end up with a 1%er problem but at the rate we're going at - I'm not sure how that would be avoided.

[rpietila]

25. Oct 2013:

#People	#Bitcoins	#TotalBitcoins
73	BTC10k+	4.0M
1070	BTC1k-10k	3.0M
8600	BTC100-1k	2.4M
50k	BTC10-100	1.4M
147k	BTC1-10	0.5M
250k	BTC0.1-1	0.1M
133k	BTC0-0.1	0.0M

Total: 11.4M bitcoins, 590k owners
110,000 people own bitcoins that are valued at more than $1,000 (BTC5 or more).

Here, the important parameters I used were:

- average investment in bitcoin is $1000 (buy outright, or mining equipment)

- estimated the percentage of holders whether they had invested at $100, $10, $1, $0.1 or $0.01

- Ones invested at $100/BTC still have their whole investment, others have sold 20%, 40%, 60% or 80%, respectively.

- Calculate weighted average, how much is the present value of an average remaining bitcoin investment (=$3,400, which is quite small for the reason that 80% were estimated to have bought in at about $100)

- Divide bitcoin market cap by the previous figure, obtaining number of holders (700,000).

- arrange the number of people in a certain log-bracket so that they approximately conform to bell curve (found out in other similar data that thy do) and satisfy the constraints of total bitcoins and the known stash of Satoshi and some idea of the top-heaviness of the distribution. <= it is essentially a parameter, how many coins to allocate to BTC10,000+ bracket. I think the realistic range is BTC3M to BTC7M, including Satoshi's 1M.

- almost nothing in the distribution changes if the number of holders is 200k instead of 600-700k. The bulk of the bitcoins is held by the top, and their number is inversely correlated to their average holding. The average holding must follow certain rules so there are not many parameters.

edit: Ah, as I was writing, I remembered that average remaining investment was calculated with bitcoin price of $100 instead of the current $200. This makes the total number of bitcoin users 350,000, which I think is very realistic considering other metrics.

[flagel8]

This is a really interesting thread with great detective work.

Hopefully Bitcoin doesn't end up with a 1%er problem but at the rate we're going at - I'm not sure how that would be avoided.

Yes. Thanks rpietila, for starting this thread. It's quite the eye opener. It is making me rethink whether I want to hold a currency with such a top heavy distribution. Disturbing to have your beliefs challenged, but useful.

I KNOW it's not a Ponzi pyramid scheme, but the shape of the adoption curve, and the growth pattern is similar enough that potential adopters might be thinking that, if it looks like a duck, and quacks like one too, then maybe...

That has to be a long term problem for mainstream take-up.

[Inedible]

This is a really interesting thread with great detective work.

Hopefully Bitcoin doesn't end up with a 1%er problem but at the rate we're going at - I'm not sure how that would be avoided.

Yes. Thanks rpietila, for starting this thread. It's quite the eye opener. It is making me rethink whether I want to hold a currency with such a top heavy distribution. Disturbing to have your beliefs challenged, but useful.

I KNOW it's not a Ponzi pyramid scheme, but the shape of the adoption curve, and the growth pattern is similar enough that potential adopters might be thinking that, if it looks like a duck, and quacks like one too, then maybe...

That has to be a long term problem for mainstream take-up.

I would disagree that Bitcoin looking like a ponzi will be the cause of low uptake.

I suspect it's too sophisticated for most people and will just need adoption to come via recommendation. At some point it'll reach critical mass and be accepted just like Paypal.

I still remember the time when if you mentioned Paypal, people would look at you like some sort of computer nerd. These days it's commonplace to find it at any online store.

No-one cares that I've used PayPal to pay, just that I did. That's where I see Bitcoin when it's finally adopted by the masses.

[flagel8]

This is a really interesting thread with great detective work.

Hopefully Bitcoin doesn't end up with a 1%er problem but at the rate we're going at - I'm not sure how that would be avoided.

Yes. Thanks rpietila, for starting this thread. It's quite the eye opener. It is making me rethink whether I want to hold a currency with such a top heavy distribution. Disturbing to have your beliefs challenged, but useful.

I KNOW it's not a Ponzi pyramid scheme, but the shape of the adoption curve, and the growth pattern is similar enough that potential adopters might be thinking that, if it looks like a duck, and quacks like one too, then maybe...

That has to be a long term problem for mainstream take-up.

I would disagree that Bitcoin looking like a ponzi will be the cause of low uptake.

I suspect it's too sophisticated for most people and will just need adoption to come via recommendation. At some point it'll reach critical mass and be accepted just like Paypal.

I still remember the time when if you mentioned Paypal, people would look at you like some sort of computer nerd. These days it's commonplace to find it at any online store.

No-one cares that I've used PayPal to pay, just that I did. That's where I see Bitcoin when it's finally adopted by the masses.

No argument from me. I agree with you. I think that looking Ponzi-like is A barrier, not THE barrier. I still feel that until my 8000 year old aunt can use and keep safe Bitcoin while using Windows at the library, it will remain marginal.

Here, the important parameters I used were:

- average investment in bitcoin is $1000 (buy outright, or mining equipment)

- estimated the percentage of holders whether they had invested at $100, $10, $1, $0.1 or $0.01

- Ones invested at $100/BTC still have their whole investment, others have sold 20%, 40%, 60% or 80%, respectively.

- Calculate weighted average, how much is the present value of an average remaining bitcoin investment (=$3,400, which is quite small for the reason that 80% were estimated to have bought in at about $100)

- Divide bitcoin market cap by the previous figure, obtaining number of holders (700,000).

- arrange the number of people in a certain log-bracket so that they approximately conform to bell curve (found out in other similar data that thy do) and satisfy the constraints of total bitcoins and the known stash of Satoshi and some idea of the top-heaviness of the distribution. <= it is essentially a parameter, how many coins to allocate to BTC10,000+ bracket. I think the realistic range is BTC3M to BTC7M, including Satoshi's 1M.

- almost nothing in the distribution changes if the number of holders is 200k instead of 600-700k. The bulk of the bitcoins is held by the top, and their number is inversely correlated to their average holding. The average holding must follow certain rules so there are not many parameters.

edit: Ah, as I was writing, I remembered that average remaining investment was calculated with bitcoin price of $100 instead of the current $200. This makes the total number of bitcoin users 350,000, which I think is very realistic considering other metrics.

Does this remind anyone of the Drake equation? LOL.

Rpietila, this is the most fascinating thread in a LONG while. Thanks. What happens if you change some of your assumption parameters?

“- average investment in bitcoin is $1000 (buy outright, or mining equipment)” I wonder about this assumption. Why that particular number? What if you change this to the maximum amount one can withdraw from an ATM in one day? Say, $400 - a guess(!). I know...

[Inedible]

Does this remind anyone of the Drake equation? LOL.

Rpietila, this is the most fascinating thread in a LONG while. Thanks. What happens if you change some of your assumption parameters?

“- average investment in bitcoin is $1000 (buy outright, or mining equipment)” I wonder about this assumption. Why that particular number? What if you change this to the maximum amount one can withdraw from an ATM in one day? Say, $400 - a guess(!). I know...

That $400 withdrawal model breaks down for Cyprus lol

The average investment is no longer assumed to be $1000. I believe it's now $3000 based on rpietila's silver purchase model (seems this comparison has a few faults but better than just guessing).

[balanghai]

I want to learn more how the equation came up?

[Rassah]

Yes. Thanks rpietila, for starting this thread. It's quite the eye opener. It is making me rethink whether I want to hold a currency with such a top heavy distribution.

Well, the nice thing is, all those top holders have an extreme interest in making sure bitcoin succeeds, and are pumping that money into bitcoin businesses and projects, AND they want someplace to actually spend those coins. And at the same time, all us poor plebes want to be able to get our hands on those coins, and have quite a few wealthy bitcoiners willing to give up their coins for our jobs and products, even if they are of questionable quality  

[Rassah]

What happens if you change some of your assumption parameters?

Seconded. When we do financial projections, we typically include best-guess scenario, and also include best-case and worst-case. Can you provide something like this with a list of parameters that would change? Also, did my explanation of my own situation help with the BTC1,000+ calculations any?

[C. Bergmann]

Let's see it from the other side. Could the distribution become fair?

Can you compare it with 2009 / 2010 / 2011 / 2012 Rptiela?

And: did you think of entities instead of persons? Gox, ex-SR, Miner-Guildes, Satoshi Dice, Just Dice, blockchain.info (and so on) - all entities with large volume.

[cryptoanarchist]

TL;DR:  At present only 80,000 people in the world (1 in every 20,000 people with the capability to do so) have a bitcoin holding valued at least $1,000.

That makes me feel warm and fuzzy.

[niothor]

When 400 people are just one :
https://blockchain.info/address/1FfmbHfnpaZjKFvyi1okTjJJusN455paPH