Distribution of bitcoin wealth by owner

[rpietila]

Now since we have the numbers, it is time to discuss the implications.

I am quite stoic myself. Bitcoin distribution is a product of a free market process built on top of a carefully thought-out mining model. For years already it has been possible to buy bitcoins in the exchanges as well as sell them, and (to some degree) to exchange them for goods and services. What results from individual liberty and free market is, by definition, good and right. (If it wasn't, the discontented one could buy or sell to adjust his balance.)

I have never mined any coins, or even had a bitcoin client. Still I am among the larger holders, even this is possible. Someone else may have mined 100,000 bitcoins and sold them all when the price went up 400x (to $1/BTC). Can't really blame him, many would do the same.

Large holders are important as power centers that can provide jobs and credit, promote culture, act as spokespeople, innovate, organize and take risks. When private equity is not allowed to be concentrated, poverty will result in many levels.

What we need now is that an increasing number of the large holders step up and increase their efforts in bitcoin real economy, and cooperation between each other.

[rpietila]

The fbi is near the top now after getting 144k more from dpr.

Yeah, this is something like 4th largest known stash (after Satoshi, DPR's remaining coins, and MagicalTux).

But it will not be credited to FBI before they own it. (I decided to employ the rule-of-the-law principle in accounting. Just having the key does not count if the coins are not yours.)

[johnyj]

How do you know which several addresses a person has?

[rpietila]

How do you know which several addresses a person has?

The methodology is dissected in the thread: number and size of addresses is not any part of the model itself, but it was used along other metrics in the estimation of parameters.

[molecular]

But it will not be credited to FBI before they own it. (I decided to employ the rule-of-the-law principle in accounting. Just having the key does not count if the coins are not yours.)

Of course you do, otherwise (assuming it's true you never "had a bitcoin wallet" and therefore don't hold any keys yourself), you wouldn't own any bitcoins .

One a side-note: it has been argued (I don't recall by who) that it's at least challenging to even be able to "own" bitcoins in a legal sense, since they're just ledger entries. In the end the crucial part is who has control over the spending of the coins (access to the key)? Should push come to shove, some notion of "ownership" expressed within some legal framework might provide less leverage than actually knowing the key and being able to move the money.

I wonder how the FBI controls access to the key to that one address they moved the DPR funds to. Did they subcontract some bitcoin-savvy lawyer-dude to or give that job to inhouse IT? Did they develop a process for this? How are they managing access to the key?

I also wonder why the put the whole stash into one address.

Anyway, not to nitpik: I think using rule-of-law-principle for ownership is applicable here.

Also, rpietila: I tremendously enjoy the results of the extremely productive state you seem to currently be in. Thanks for all your thought, it's pretty substantial!

[wachtwoord]

Just having the key does not count if the coins are not yours.)

If you have the key, the coins are yours aren't they? I think this will lead to some exciting court cases in the future

Anyway: Is the consensus now that only 1150 individuals own >1k BTC? (I'm not one of them btw ). This seems quite low to me. If this is true the Bitcoins holdings are already much less centralized than I suspected.

[User705]

I think if Bitcoin is to become what some hope will be some sort of new paradigm the transition away from the old understanding of legal ownership of money must occur.  All current legal money ownership implies an authorization from the government for you to own it.  That's the definition of legal ownership.  But that also must mean you don't really own it and only own it by permission from said government.  You can't really be free if your freedom is permitted by government.  Bitcoin exposes the true reality that governments attempt to obfuscate with fiat laws in that he who controls it owns it much like any fiat in your pocket isn't owned by you since you don't really control it.  It is much the same as real estate which comes from the word "real" as in "royal" permission to occupy said land.  Your ownership comes with a slip of paper authorizing you to own it by the government so who really owns it and who's just visiting?  In bitcoin the reality is brought forward.  There is no need to allow or even bother to define ownership since the natural world doesn't function that way anyways.  You control it and it needs nothing more.

[Johnny Bitcoinseed]

The large holders will eventually spend their coins (houses, cars, food, entertainment) or loose them etc.  This your opportunity to get more bitcoins by providing something of value to the world.  

Don't get bogged down with envy and wishing for wealth redistribution (we all know what the welfare state gets us by observing our current experience).  With bitcoin there is nobody with a gun or a club standing over the net producers and forcing them to give to the net consumers.

Did early adopters get alot of coins?  Yes, sometimes they did.  And they took the risks, made the efforts before anyone really knew it would take off.  You could have done so too, but you didn't.

If you want more bitcoin, don't go home crying to your momma...

Go out and get some using your own energies!  Invent, create - This makes the world a better place.

[molecular]

The large holders will eventually spend their coins (houses, cars, food, entertainment) or loose them etc.  This your opportunity to get more bitcoins by providing something of value to the world.  

Don't get bogged down with envy and wishing for wealth redistribution (we all know what the welfare state gets us by observing our current experience).  With bitcoin there is nobody with a gun or a club standing over the net producers and forcing them to give to the net consumers.

Did early adopters get alot of coins?  Yes, sometimes they did.  And they took the risks, made the efforts before anyone really knew it would take off.  You could have done so too, but you didn't.

If you want more bitcoin, don't go home crying to your momma...

Go out and get some using your own energies!  Invent, create - This makes the world a better place.

This is so true.

Current large holders will spend their coins, make bad investments, pass them on to descendants and thereby distribute the coins. Also don't make the mistake (as I did until some years ago) to think that charging interest is evil and will result in accumulation of wealth systemically over time. It doesn't because there can be defaults.

As long as investors are made to carry the risk and have to suffer the consequences of their actions when they make bad loans/investments, there is nothing evil or bad about charging interest.

In the current system of course, there is a lender of last resort (who, via money printing, just takes the wealth of all holders of the currency) and the governments will bail out certain investors (or gamblers) who fucked up their bets/loans/investments. (centralized profits, socialized risks).

This can't happen with sound money because of the inelastic supply.

So yes: some people got stinkin' rich by adopting bitcoin early (and taking HUGE risk), but that's not a bad thing per se.

If you envy early adopters, just get your fucking 2100 bits and wait a couple of years.

[BitchicksHusband]

Love this thread, it's fascinating and finally got me to register here instead of just lurking.  

How well is this holding up against the Pareto principle (the "80-20 rule")?

https://en.wikipedia.org/wiki/Pareto_principle

In your model, do you have 20% of the people with 80% of the wealth and vice versa?  Since the Pareto principle is so well-established, I would think that if your current model doesn't follow it, it is almost certainly wrong.

Based on this:

#People   #Bitcoins   #TotalBitcoins
50   BTC10k+   2.9M
1100   BTC1k-10k   3.1M
12k   BTC100-1k   3.3M
58k   BTC10-100   1.8M
110k   BTC1-10   0.4M
110k   BTC0.1-1   0.1M
57k   BTC0-0.1   0.0M

Total: 11.5M bitcoins, 350k owners

The top 4 rungs is almost exactly 70k users (20% of the people), so that means that their total coins must almost certainly be 80% of the wealth (9.2 million coins).  The bottom 80% of the users by Pareto principle (bottom 3 rungs), must have 20% of the coins, but you are currently showing them as having .5M, when they should have $2.3M.

So I think you need to move about BTC2m down from the top 4 rungs to the bottom 3.

The fact that you got so close to the Pareto principle without even trying proves that you are very accurate IMO.

[Hfleer]

Interesting to think about, could change pretty quick if we see a mass adpotion eventually.

[rpietila]

Love this thread, it's fascinating and finally got me to register here instead of just lurking. 

Hi, after having so many mentions of you, it is cool to have you here

How well is this holding up against the Pareto principle (the "80-20 rule")?
...
So I think you need to move about BTC2m down from the top 4 rungs to the bottom 3.

Pareto principle is not a magical formula, for example in the United States, 20% of people own 85% of wealth. Now we have 20% owning 95% which admittedly is quite top-heavy.

But bitcoin ownership is not universal yet, which makes it immature to run this kind of test yet. Ripple ownership would not pass

Since the distribution must keep its shape (you cannot add more coins to a lower bracket, because that would lift those people to the higher bracket, prompting an increase of coins where you wanted a decrease to happen), your suggestion can be achieved only by reducing the number of Bitcoin users significantly to 100-200k and making the distribution more equal and concentrated in BTC5-50, which I don't think agrees with the known largish number of larger holders.

[BitchicksHusband]

Well, I started looking because you appear to be too top-heavy.  Pareto analysis seems to say the same thing.  Just sayin'

[RationalSpeculator]

Well, I started looking because you appear to be too top-heavy.  Pareto analysis seems to say the same thing.  Just sayin'

wtf, bitchick has husband. the only chick in town  

you really like to smear it in our faces

get another name please, so I can continue dreaming

seriously though, I no like your name for some reason

[wachtwoord]

Well, I started looking because you appear to be too top-heavy.  Pareto analysis seems to say the same thing.  Just sayin'

wtf, bitchick has husband. the only chick in town  

you really like to smear it in our faces

get another name please, so I can continue dreaming

seriously though, I no like your name for some reason

Well we know who wears the pants. He's called Bitchickshusband and not the other way around. Did you assume her last name too?

[BitChick]

Well, I started looking because you appear to be too top-heavy.  Pareto analysis seems to say the same thing.  Just sayin'

wtf, bitchick has husband. the only chick in town  

you really like to smear it in our faces

get another name please, so I can continue dreaming

seriously though, I no like your name for some reason

Well we know who wears the pants. He's called Bitchickshusband and not the other way around. Did you assume her last name too?

If I was the type of girl that required he take my name then he would have never asked me to marry him!  Trust me on that one!

I guess he thought it would be a funny user name.  He just spends more time on Reddit and Slashdot but I found I liked this forum more.  Maybe I should go on Reddit and Slashdot and register as his wife there now? 

[revans]

It really does not matter if a few people are hoarding large amounts of bitcoin.

What is more important is commerce.
If someone only ever has 1 bitcoin in his wallet, but has bought clothes, jewelry and music online with bitcoin, and bitcoin flows in and out of his wallet, that is what is more important.

Bitcoin is not just a way to speculate and store wealth, but really is a medium of international, borderless exchange.

And yet 99.99% of Bitcoin transactions are speculative in nature.

[User705]

It really does not matter if a few people are hoarding large amounts of bitcoin.

What is more important is commerce.
If someone only ever has 1 bitcoin in his wallet, but has bought clothes, jewelry and music online with bitcoin, and bitcoin flows in and out of his wallet, that is what is more important.

Bitcoin is not just a way to speculate and store wealth, but really is a medium of international, borderless exchange.

And yet 99.99% of Bitcoin transactions are speculative in nature.

That can be said about fiat as well.  Look at forex, stock, bond, real estate etc... total fiat volumes.

[ErisDiscordia]

Thanks for the thought provoking thread, rpietila! Glad to see you're doing fine and continuing to bring interesting material to the forums!

Concerning the rather top-heavy distribution of btc today:

I don't see any big problem with that. As has been mentioned, the biggest stashes are controlled (mostly) by early adopters who took big risks and it is in big part thanks to them that btc has taken off. Even from a moral viewpoint, the reward seems fair enough.

Eventually these huge stashes will dissipate I reckon. Early adopters will cash out in order to retire, or alternatively just start living off their accumulated coins once the infrastructure of the btc economy is developed well enough. The further spreading out of coins among a greater number of individuals will bring greater (not only price) stability to the whole system.

Meanwhile we have an elite rich in btc, which consists of smart, tech-savvy individuals ready to take big risks with their wealth out of conviction that something will succeed...seems like a group much preferable to the group which represents the individuals most rich in fiat, which seems to consist mainly of generations old money acquired by colluding with the government to exploit various aspects of the insane monetary system we live under.

[molecular]

Meanwhile we have an elite rich in btc, which consists of smart, tech-savvy individuals ready to take big risks with their wealth out of conviction that something will succeed...seems like a group much preferable to the group which represents the individuals most rich in fiat, which seems to consist mainly of generations old money acquired by colluding with the government to exploit various aspects of the insane monetary system we live under.

Yeah... what happens when you transfer most of the wealth from psychopathic bankers and corporatocrats to a bunch of freedom-loving open-minded and somewhat rebellious cryptoanarchists?

I think it's a good change.