Distribution of bitcoin wealth by owner

[rpietila]

I really like that you point out the dramatic fall in purchasing power silver has experienced over the millennia. That separates you from the goldbugs.

I'm thinking the same will happen with gold now that bitcoin is here. And due to faster evolution it will probably not take hundreds of years but tens of years. What are your thoughts on that?

The purchasing power of the physical monetary stock of gold may actually go up. The paper gold charade will be destroyed along with dollar and all fiat currencies, which leaves only physical gold. At present, people think they collectively hold more gold that there is, which is one reason to gold's cheap price vs. the dollar, but the market cap (7T) is generally estimated using the actual stock. (Otherwise it would be maybe 70T which is not bad at all.)

If Bitcoin becomes uncontested, gold may experience a decline of value. Also silver may experience spikes. We continue to live in a world of uncertainty so the best bet is to distribute the bets in the ratio of your choosing.

Why do you think the market cap of altcoins will be on average 50:1 ratio?  

Currently the market cap of altcoins is 3% of bitcoin so that is not 50 times less but only 30 times less. Do you think altcoins are overvalued vs bitcoin right now?

If I remember correctly Litecoin succeeded in going to a market cap of 8% of bitcoin a few months back. Currently it is 2%. Do you think 8% will come back the coming 1/3 years?

50:1 is just my hunch and may be off. It is very hard to estimate these things and there is great fluctuation.

I would not buy altcoins just now, but the main reason is their short life. It is just not worth the hassle, also they are not bringing anything to the game. If litecoin dipped to 0.005 I might consider buying some but even then it would be a play, not a long-term investment in Litecoin's future, of which I know nothing.

Sure Litecoin will go up and down, XRP went to 100%+ of Bitcoin. It just tells that there is liquidity crunch and it is overvalued. I don't care about short-term moves.

[rpietila]

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.

Yes, this is the consensus. But actually this number has never been significantly higher. The thing is - there are certain properties of the distribution, and one of them is that if we take the average holding of people in a bracket, it is 2.8x the lower limit (if there are enough holders).

Therefore since we know that there are people with 100k+, we can estimate their number and multiply by 280,000.
For 10-100k, we also estimate the number and multiply by 28,000.
For 1-10k, multiply by 2,800.

The average number of coins of the people who have BTC1,000 or more is quite much higher than BTC1,000 and the number of people is commensurately lower.

When you slice and dice the numbers, you arrive at the conclusion that the number of 1kBTC+ holders has been about the same ever since. The number of 10k+ holders has decreased and smaller holders has increased.

In the nearest future, I expect the number of 1k-10k to suffer the most. I have also other predictions but first it would be nice to verify the current numbers. Help is still appreciated!

[oper128]

For comparison: a paper I've found some time ago
http://eprint.iacr.org/2012/584.pdf

[rpietila]

For comparison: a paper I've found some time ago
http://eprint.iacr.org/2012/584.pdf

Thank you. Heard about it before, now need to read carefully.

[tunafish]

I've been lurking on this thread for a while and the numbers seem to be getting closer to accurate---based on my own speculation of course---I'm not sure if this has been raised already but i think it's relevant to bring up how many bitcoins are lost. I wrote a post on reddit a while back talking about how, if bitcoin is widely adopted, it would be impossible for the value of a single bitcoin to be less than <$1000 a coin. See here if interested: http://www.reddit.com/r/Bitcoin/comments/1cta25/why_i_think_bitcoin_cant_survive_if_its_not_at/
Most in the bitcoin community have come to realize this idea already, if not long ago.
Annnyywayyy, i'm getting off topic. My point here is the need to add the variable of "lost" bitcoins. Not just the ones sitting on the FBI's wallet but those belonging to people who bought a bunch of bitcoins 6 months/1 year/2 years ago and can no longer access their wallet. I would be willing to bet a satoshi that many of these "super-rich" holders being discussed are actually "lost" bitcoins; someone that bought 100 bitcoins for $80 years ago and have long since formatted theyre hard drive, had it crap out, didn't know or think to back it up. Not even just those that bought 100 but those that bought or earned or traded 1 or 2 coins....these especially would be easy to forget or not make an effort to recover throughout 2011 and 2012 when bitcoin "died" at its $30 peak. I find it impossible to believe that ANYONE would buy say 5, 50 or 500 bitcoins at ~$1 and wouldn't cash at least some of them out at $50, $100, $200.(well at least 95% of people anyway)
If anyone knows how to analyze the wallets out there based on last transaction date that would be immensely helpful to determine this magic number.
This number of missing coins becomes especially relevant in the future. Let's say (hypothetically of course) in 2016 If there are only 12 million bitcoin, instead of 14 million, to go around between say a billion people with a total of $500bln they want to spend this means the average bitcoin is 15% higher in value(about $42k a coin instead of $35k/coin...i'd be happy with either though ) These are illustrative numbers of course but you get the picture.

Anybody good at analyzing the blockchain that can determine how many btc have been sitting for in the same wallet, say, 1 year or more?

[johnyj]

My point exactly. Given the economies of the world are replete with vehicles for financial speculation, why does Bitcoin need to exist? Quite clearly it isn't a currency, nor ever likely to become one, it's just the latest financial product sycking up real wealth into its zero sum game.

In fact, everything you do involve some kind of decision making, thus make it a speculation by default

The difference between speculation and investment maybe is that investment usually produce something that is beneficiary for other people. But that does not necessary to be a physical product (investment in gaming industry is also a good investment). And due to most of the demand has been fulfilled, the ultimate demand is a store of value, invest in a long term store of value system is also a good investment

You can directly invest in bitcoin network by buying mining equipments and run them

You can also investing in bitcoin if you just buy it, especially when there is a crash. Your purchasing support will raise its value and make this wealth store system more stable and popular

To the end, you are investing in something very big that will add to the world's stability, since currently there is almost nothing that can store value safely and most of the people are in debt

[User705]

My point exactly. Given the economies of the world are replete with vehicles for financial speculation, why does Bitcoin need to exist? Quite clearly it isn't a currency, nor ever likely to become one, it's just the latest financial product sycking up real wealth into its zero sum game.

Currently there are very few ways to store wealth that is non physical, resistant to theft or confiscation, somewhat anonymous, easily divisible and transportable.  There are ways that fulfill some of those things but bitcoin fits them all.

[600watt]

My point exactly. Given the economies of the world are replete with vehicles for financial speculation, why does Bitcoin need to exist? Quite clearly it isn't a currency, nor ever likely to become one, it's just the latest financial product sycking up real wealth into its zero sum game.

Currently there are very few ways to store wealth that is non physical, resistant to theft or confiscation, somewhat anonymous, easily divisible and transportable.  There are ways that fulfill some of those things but bitcoin fits them all.

Oh, but there are countless. There are tens of other crypto currencies, a handful with market caps running into millions of dollars, all offering the same thing as Bitcoin. These competing 'currencies' are generally derided by the Bitcoin cultists because they identify them as scams. Of course all they are doing is the same thing Bitcoin did; turning intrinsically worthless number crunching into a simulacrum of wealth.

if you don´t believe in the game we play, why bother players forum 

[Zephir]

You can find similarities to the distribution of wealth even in the investments of just-dice: https://docs.google.com/spreadsheet/ccc?key=0AipZG8vQw9AXdFdzZzVsc1BVSlQydWRhYnhDSllfbmc#gid=0

A guy just posted this: Zipf´s Law

btw nice thread.

[rpietila]

Minimum number of all users, or minimum number of users in the top brackets? Because we know we've had over 100,000 bitcoin users since Summer of 2011.

Sorry to bring up this question repeatedly:
What do we know concerning number of users (now or at any time in history)?
- Blockchain activity?
- Downloads of Bitcoin client and wallet software
- Forum accounts
- Number of users in exchanges
- Number of users in other services
- Other ways of receiving this info

[Rassah]

Minimum number of all users, or minimum number of users in the top brackets? Because we know we've had over 100,000 bitcoin users since Summer of 2011.

Sorry to bring up this question repeatedly:
What do we know concerning number of users (now or at any time in history)?
- Blockchain activity?
- Downloads of Bitcoin client and wallet software
- Forum accounts
- Number of users in exchanges
- Number of users in other services
- Other ways of receiving this info

We knew there were about 65,000 users on MtGox as far back as Summer of 2011. MtGox also claimed to have 25,000 new applications every month this past winter, and 50,000 new applications in March and April. Blockchain.info also recently mentioned reaching 300,000 wallets. The defunct instawaller boasted about having over 1 mil wallets, though many of those may have been throwaways. We also have a list of Bitcoin-QT downloads that  shows that this wallet has been downloaded 2.9mil times already (http://sourceforge.net/projects/bitcoin/files/stats/map?dates=2009-01-01+to+2013-04-30). Even if some of those were downloaded and abandoned, there are tons of users who used other services, like blockchain, electrum, multibit, or android wallets instead. So I would estimate the current number of bitcoin users at 1,500,000 at the bare minimum, and more likely closer to 2.9 to 3.25 mil.

[rpietila]

So I would estimate the current number of bitcoin users at 1,500,000 at the bare minimum, and more likely closer to 2.9 to 3.25 mil.

That was also my original estimate, but it is unrealistic because then most of the accounts would need to be too small to be bothered.

None who reads this has a small bitcoin balance, but do you even know of people who have, say, less than BTC1?

Edit: thanks for the info. I need to process it carefully.

[Rassah]

So I would estimate the current number of bitcoin users at 1,500,000 at the bare minimum, and more likely closer to 2.9 to 3.25 mil.

That was also my original estimate, but it is unrealistic because then most of the accounts would need to be too small to be bothered.

None who reads this has a small bitcoin balance, but do you even know of people who have, say, less than BTC1?

I knew at least 4 who have just BTC1. Some of them wanted to see what it was and just bought BTC1 to play around with, others got BTC1 on a paper wallet as a gift and still have it. Not sure about those who have less than 1BTC. I suspect there may be a few newbies with that amount, if they were only comfortable putting about $100 into it to start.

[rpietila]

Some points of interest should be researched :
- the time when difficulty reached a level where solo mining on CPU could no longer get you a block reward
- and the time when the "generate coins" was removed from the bitcoin client GUI
(probably around the same time - unfortunately I was not here)
Before this date we can imagine than a number of downloads ended up with wallets containing n x 50 BTC.
Probably a lot of these wallets are lost or almost lost (except for this norvegian guy who just bought a house)

Sourceforge shows 1,000 Bitcoin downloads in 2009, compared to 16,000 in 1-6/2010.

The first difficulty adjustment was in the turn of 2009-2010. By 6/2010, it had already risen to 20.

Then Mt.Gox was opened and coins immediately received much larger value than before.

I would think that there is a ratio of (successful installations:downloads).

[rpietila]

You can find similarities to the distribution of wealth even in the investments of just-dice: https://docs.google.com/spreadsheet/ccc?key=0AipZG8vQw9AXdFdzZzVsc1BVSlQydWRhYnhDSllfbmc#gid=0

A guy just posted this: Zipf´s Law

btw nice thread.

I applied the standard analysis to the Just-Dice data, trying to post it here.

Findings:
- Somewhat small total number of investors causes random variance.
- 95% of investments belong to 20% of investors, trumping Pareto distribution of 80/20, and giving credence to consensus (OP) estimate of 95/20.
- Mean investment is BTC82 but median is only BTC2.6!
- 55% invest less than what I think is sensible to invest (BTC5) - given that investing inevitably brings overhead and time is money
- The second derivative test shows values between 0.25-0.58 which is fairly good considering random factors, but in addition there is a clear outlier in 0.01-0.1, which bracket sees more investors than there should be (the most popular bracket by number of investors is 1-10, by investment 100-1000)

[BitchicksHusband]

You can find similarities to the distribution of wealth even in the investments of just-dice: https://docs.google.com/spreadsheet/ccc?key=0AipZG8vQw9AXdFdzZzVsc1BVSlQydWRhYnhDSllfbmc#gid=0

A guy just posted this: Zipf´s Law

btw nice thread.

I applied the standard analysis to the Just-Dice data, trying to post it here.

Findings:
- Somewhat small total number of investors causes random variance.
- 95% of investments belong to 20% of investors, trumping Pareto distribution of 80/20, and giving credence to consensus (OP) estimate of 95/20.
- Mean investment is BTC82 but median is only BTC2.6!
- 55% invest less than what I think is sensible to invest (BTC5) - given that investing inevitably brings overhead and time is money
- The second derivative test shows values between 0.25-0.58 which is fairly good considering random factors, but in addition there is a clear outlier in 0.01-0.1, which bracket sees more investors than there should be (the most popular bracket by number of investors is 1-10, by investment 100-1000)

Interesting on the Pareto distribution.  So are we saying that early adoption tends to be closer to 95/20 and then evens out over time to 80/20 once it become popular and universal?

[rpietila]

The Pizza happened in 22.5.2010. It is good to read the whole history.

I would be tempted to use 0.0025 (set by the pizza) as the exchange rate throughout 2009-2010 until end of June. In July Mt.Gox opened, and after that the volume-weighted price of Mt.Gox. At some point of time in mid-2013 a switch to Bitstamp.

Bitcoin has been operational for 1760 days, and in this period the price has risen by a factor of 80,000. This is 10.39x per year, or +21.5% per month.

[wachtwoord]

The Pizza happened in 22.5.2010. It is good to read the whole history.

I would be tempted to use 0.0025 (set by the pizza) as the exchange rate throughout 2009-2010 until end of June. In July Mt.Gox opened, and after that the volume-weighted price of Mt.Gox. At some point of time in mid-2013 a switch to Bitstamp.

Bitcoin has been operational for 1760 days, and in this period the price has risen by a factor of 80,000. This is 10.39x per year, or +21.5% per month.

The OTC Bitcoin exchange rate was actually a bit higher than but the one offering the pizza wanted to make sure someone would take him up on it.

Where can I find the time-series on the OTC rate?

Sorry, I have no accurate data. I remember when I joined the forum a year after the fact that in discussion threads this came forward. I don't know if anyone mentioned actual values. So my information is qualitative and anecdotal at best. Sorry I should have included this in my comment.

[600watt]

TL;DR:  At present only 120,000 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.

The intent of this thread is to find out and update the statistic on how bitcoins as investment/holdings are distributed according to the size of actual holding (note that this differs from the largest addresses -list).

The intent is not to try to identify individual holders or the size of their holdings.

Assumptions and conventions:
- Bitcoins are overwhelmingly controlled by individuals (ie. no significant corporate/public sector holdings exist); if bitcoins are held by an institution, they are credited to the beneficial owner(s)
- The brackets are logarithmic; the highest bracket is BTC10,000+, second highest is 1,000-10,000, etc.  

The consensus is as follows:

26. Oct 2013

#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
120,000 people own bitcoins that are valued at more than $1,000 (BTC5 or more).

compare this to the actual numbers of fiat-millionaires in the world:

A record-breaking 12 million people around the world were millionaires last year, with the US experiencing the biggest jump in super-rich residents.

bitcoin is strong but very very tiny. imagine it being strong and big/mainstream. every single bitcoin owner will have a blast.

http://www.telegraph.co.uk/finance/personalfinance/expat-money/10158420/A-record-breaking-number-of-millionaires-in-the-world.html

[impulse]

compare this to the actual numbers of fiat-millionaires in the world:

A record-breaking 12 million people around the world were millionaires last year, with the US experiencing the biggest jump in super-rich residents.

bitcoin is strong but very very tiny. imagine it being strong and big/mainstream. every single bitcoin owner will have a blast.

http://www.telegraph.co.uk/finance/personalfinance/expat-money/10158420/A-record-breaking-number-of-millionaires-in-the-world.html

What's more is that there are more billionaires in the world then there are likely people with more than 1000 bitcoins.