Distribution of bitcoin wealth by owner

[FenixRD]

So a few hundred people could crash bitcoin price?

If they all stupid, yes. Just like a few hundred people can crash USD price.

Crashing it to get the weak hands to sell and buying more wouldn't be stupid if one had an exit price where they think they can cash out for good or they think there is a never ending stream of buyers because they believe it will become a widespread currency.

I see I forgot to put you back on ignore. Rectified now.

While impossible to know for sure at present how many people this would need to be, I think that outside of major collusion (which should be equally impossible, for the same reason -- though I guess keysigning methods could allow an open invite to the top holders to be sent with holders able to prove ownership are admitted to some sort of fraternity...) between enough of the top holders to be at least half of all BTC in circulation, it would be unlikely for a single actor to permanently kill BTC by cashing out, even rapidly (which would be stupid). The precedent was set when BTC was much less widespread than now, during the Mt. Gox hack of 2011. You can't cash out that sort of amount without going through an exchange, and cashing out slowly enough to not mess up the price... is slow enough that it's tolerable to the economy, and will hence have no effect on the currency. Presumably a legitimate (but foolish and selfish) user cashing out that fast would be initially frozen as a probable compromised account, and I'd expect if you tried to contact the exchange and get them to allow it, they wouldn't, for obvious reasons.

While true that Bitcoins themselves must remain individually fungible, it's still a free market, and users and services are free to deny individual trades. We don't deny legitimate major market movements like flash crashes because it's aggregate behavior (inherent to markets anyway, see S&P 500 graphs and extend the timescale for identical patterns). And anyway, exchanges are all limited to some extend by their own cashflow and legislations -- Gox is limited to 3mil Euros per month, or something like that, IIRC. Getting around those limits is what cryptocurrencies are good at. Going in the opposite direction is not going to happen easily, and at the market cap of BTC, we're already well past the point where anyone who has enough BTC to kill it by cashing out, could do so, outside of a Joker attack, which just about every system in the world is susceptible to. Just wanting to watch the world burn, regardless of its effect on you, is basically the definition of suicidal terrorism.

Q.E.D. it would be reasonable and in the interests of the exchanges and the user base to conclude that such an act would be tantamount to economic terrorism, and to deny it. (All without redlisting coins!) See the current craziness regarding the disappearance of 96,000 BTC from Sheep. In addition to a couple redditors who think they'll be able to trail the coins enough to prevent much of it being spent anonymously (the thief retardedly sent it through coinfog all at once, and is supposedly using Multibit, so it seems likely he isn't super bright on BTC as a whole), and them thinking they may already have his dox, one thing you definitely can't do is dump 96kBTC on the exchanges and get much out of the deal.

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[AnonyMint]

As for an example why I put the dolt Rassah on ignore (another confirmation that IQ tests are indeed often wrong), the entire point of inciting the weak hands to sell, is that it only risks a small amount of your holdings in order to incite a larger flow of sales from weak hands. So even if there are others waiting to buy, you are also waiting to buy.

Presumably if you are that rich of an insider, you already own the exchange too. You created an exchange because it was insane not to.

So arguing that exchanges are not yet numerous enough to be a free market, is arguing the wrong direction.

[FenixRD]

As for an example why I put the dolt Rassah on ignore, the entire point of inciting the weak hands to sell, is that it only risks a small amount of your holdings in order to incite a larger flow of sales from weak hands. So even if there are others waiting to buy, you are also waiting to buy.

Presumably if you are that rich of an insider, you already own the exchange too. You created an exchange because it was insane not to.

So arguing that exchanges are not yet numerous enough to be a free market, is arguing the wrong direction.

The major exchanges have APIs, and I think you could easily spread your sale among all the exchanges with this functionality -- but the question was one of the "terrorist" intending to cash out, period. Definitely impossible, I estimate. Traders destabilizing and capitalizing on weak hands during the destabilization is a different phenomenon, which definitely occurs of course (as it does via collusion in major old-world exchanges). I have also gained a decent bit from selling some during an obvious flash crash (we've now had at least 3 that are statistically good enough to use as predictors) and rebuying at near-bottom.

Presumably the rebuy is subject to strong competition, and each flash crash seems to trend toward creating more confidence and stability, as each one so far has been successively less intense (in log scale).

[AnonyMint]

Bitcoin's only intrinsic value is confidence. So "weak hands" will mean strong hands, and vice versa at some point in the future if I am correct.

Flash crashes (and note this recent one was planned along with a DNS DoS against this forum) could serve two purposes at least if I am correct about who created Bitcoin and their ultimate objective:

1. Condition Bitcoiners to try to speculatively time a trade because they don't have more cash flow to buy more with on next flash crash then their BTC holdings decline as they sell lower than they rebuy.

2. Induce those with cash flow to become more fully invested in the ponzi bubble, i.e. less diversified. Log scale is not so meaningful because the cash flow is not increasing exponentially.

This will further the purpose of destroying the libertarian, free market resistance to the NWO.

Reality really depends on perspective. Ultimately we will have more data, i.e. the Bitcoin price in 2020.

[Rassah]

As for an example why I put the dolt Rassah on ignore (another confirmation that IQ tests are indeed often wrong)

Hmm, I wonder how AnonyMint knows that i did something to confirm such a thing, if he has me on ignore?  

the entire point of inciting the weak hands to sell, is that it only risks a small amount of your holdings in order to incite a larger flow of sales from weak hands. So even if there are others waiting to buy, you are also waiting to buy.

Sure, but to incite you first have to sell. And you'll need to sell/risk increasingly larger amounts to move the market as Bitcoin exchange volume grows. And there are a lot of strong hands waiting to buy who are waiting for such flash crashes, who may buy up quicker than you. Think it through: every time you sell and then buy again, a part of what you sell gets picked up by your competitors, and you don't have enough to buy everything you sold back. If continuously repeated in a competitive market, such action typically ends with you running out of money. You could argue that there are enough weaker hands to initiate a price momentum of continued selloffs once you start the sells, but, as has been pointed out by FenixRD, and with established Bitcoin precedent, each such crash only teaches people that these crashes aren't real, and makes people more resistant to such panics.

Presumably if you are that rich of an insider, you already own the exchange too. You created an exchange because it was insane not to.

What would prevent a competitor from buying coins from you on your own exchange. And if the answer is "the exchange owner trying to flash-crash the market," that action will be quickly found out and complained about loudly, likely causing the exchange to be accused of fraud and lose business. Sure, this rich insider will make a bit more money, but they will lose their echange business, and, since they would likely be publicly known (people tend to not trade through anonymous exchanges), they will become a real life parriah. Oh, also, a drop in the exchange they own not only creates a massive arbitrage opportunity with other exchages, one which trading bits will eat right up, but also makes other exchanges follow down, and allows competitors to buy up cheaper bitcoins on exchanged this wealthy insider doesn't even control.
Really, the only method for such a scheme is to create an exchange that is anonymous, does not allow API's and bit trading, and somehow still convinces enough people to join to make the trading volume actually affect the average global bitcoin price. Not likely.

[Rassah]

Bitcoin's only intrinsic value is confidence. So "weak hands" will mean strong hands, and vice versa at some point in the future if I am correct.

Flash crashes (and note this recent one was planned along with a DNS DoS against this forum) could serve two purposes at least if I am correct about who created Bitcoin and their ultimate objective:

1. Condition Bitcoiners to try to speculatively time a trade because they don't have more cash flow to buy more with on next flash crash then their BTC holdings decline as they sell lower than they rebuy.

2. Induce those with cash flow to become more fully invested in the ponzi bubble, i.e. less diversified. Log scale is not so meaningful because the cash flow is not increasing exponentially.

You forgot 3. Condition bitcoiners to ignore such flashcrashes, and just not trade on them.
Note that currencies move on the Forex all the time, too, but most currency users don't give a crap, and such movements (and in the future, bitcoin's flash-crashes) will only be something the active trader minority cares about.

[rpietila]

Bitcoin's only intrinsic value is confidence. So "weak hands" will mean strong hands, and vice versa at some point in the future if I am correct.

An interesting metric would be: what percentage of coins are in the hands of people, for whom the holding represents X% of portfolio.

This does not necessarily correlate with the weakness of hand though. If someone has near 100% in BTC, he is probably quite strong, otherwise he would not have so much. Those with over 100% are leveraged and weak. Those with quite much could be the weakest, since they sell periodically and give their coins to new entrants. Those with little should be strong, since it is not a big deal to them. On the other hand many of them are newbies and easy to scare, or are only after a quick double and then sell, or just have not developed their confidence yet.

But I see a great asset in the 930 (mBTC=USD) millionaires, me included. This number is up from only about 150 a month ago! We are in the position to continue the world-changing because money is not an issue any more. So in this sense the world-changing potential has gone up 6x when price increased only 5x. And there are many more to come in the BTC100-BTC1,000 category

I would say that the number of full-time bitcoiners is also growing fast. Where I live, the first million does not give economic freedom, but a paid-for house, and a million in the bank does.

[FenixRD]

Bitcoin's only intrinsic value is confidence.

Flash crashes (and note this recent one was planned along with a DNS DoS against this forum) could serve two purposes at least if I am correct about who created Bitcoin and their ultimate objective:

1. Condition Bitcoiners to try to trade because they don't have more cash flow to buy more with on next flash crash then their BTC declines as they sell lower than they rebuy.

2. Condition those with cash flow to become more fully invested in the ponzi bubble.

This will further the purpose of destroying the libertarian, free market resistance to the NWO.

This will be a problem as long as there are humans who do not make decisions in line with Perfect Rationality. (If we made decisions as a species that were Superrational, perhaps we wouldn't need exchanges at all.) Simply using past data and holding the currency prevents a flash crash from becoming more than a blip. Out of principle I wait to sell during a flash crash a decent bit past what could normally be considered normal trading blip, even in the event of obvious coordinated DDOS events across bitcoinland, but I cannot force users to behave superrationally, so at that point (having satisfied my morality) I will exercise my own attempt at Perfect Rationality and acquire more coins.

Even still, the events we have seen indicate a trend toward stability where this is less effective each successive time. Since my interpretation of the economic variables using game theory indicates that large holders cannot cash out back to fiat in less than perhaps several years, the only remaining thing to do will be to invest and participate in the Bitcoin economy. I also believe that the economy only grows less top-heavy as time progresses (asymptotically approaching what I expect will approximate a Pareto distribution), and even with some initial consolidation of wealth, which will naturally occur because of the adoption model during the bottom half of the adoption s-curve, the only option for these lucky few is for this to be held, or sold to those who want it.

Aside: A great study source for technology adoption models, since that was contested upthread, is here: http://personal.stevens.edu/~ysakamot/BIA658/man/week13/innovationdiffusion.pdf
Also here for thread posterity: https://mega.co.nz/#!5QsyELAQ!QPviZmp3MtOfppiYLmHreD7FtKAXfFmS-XJKDix1HFU

Since the creation of a wealthy elite in Bitcoin can only serve to dilute the buying power of the current wealthy elite (as it gains adoption, they will inevitably need some, but will be forced to buy at much closer to its realized value), this can hardly be said to be a worse situation than the one with which we started.

I don't believe there can be free market resistance to any attempt an an NWO-like entity without a cryptocurrency like Bitcoin. Perhaps it will not always be Bitcoin. Perhaps it is Anoncoin! We will never let "them" monopolize Bitcoin, because it was never about Bitcoin. There will never be a way for the elite to enjoy the fruits of their wealth monopolization, and prevent its erosion at the same time, outside of a major evolutionary split where the uberrace is an order of magnitude (or more) higher in intelligence. There will always be another Satoshi, until it is no longer necessary.

Bitcoin's only intrinsic value is confidence. So "weak hands" will mean strong hands, and vice versa at some point in the future if I am correct.

An interesting metric would be: what percentage of coins are in the hands of people, for whom the holding represents X% of portfolio.

This does not necessarily correlate with the weakness of hand though. If someone has near 100% in BTC, he is probably quite strong, otherwise he would not have so much. Those with over 100% are leveraged and weak. Those with quite much could be the weakest, since they sell periodically and give their coins to new entrants. Those with little should be strong, since it is not a big deal to them. On the other hand many of them are newbies and easy to scare, or are only after a quick double and then sell, or just have not developed their confidence yet.

But I see a great asset in the 930 (mBTC=USD) millionaires, me included. This number is up from only about 150 a month ago! We are in the position to continue the world-changing because money is not an issue any more. So in this sense the world-changing potential has gone up 6x when price increased only 5x. And there are many more to come in the BTC100-BTC1,000 category

I would say that the number of full-time bitcoiners is also growing fast. Where I live, the first million does not give economic freedom, but a paid-for house, and a million in the bank does.

I agree with this strongly. The "middle class" of Bitcoin will be its backbone, as it did was the US economy before greed and poor economic theory resulted in the extreme tampering which has made existing in that bubble improbable (you're driven above or below it). Currently probably the strongest of hands exist in the 10 - 100 BTC range, assuming that it is also around 50 - 90% of their fungible wealth. Extra points for each factor on a list that includes being young, single, or at least no kids, etc. They've got way too much invested to not be confident in where it is going, but not enough to panic that a short-term crash will deprive them of their ability to direct funds toward anything that matters (kid's unexpected hospital bill, or erasing a big part of the college fund, etc).

[Qoheleth]

Have you incorporated the Ron-Shamir Entities into this? The paper's a little dated and it's unclear whether the balances on pg. 11 are still accurate, but it'd mean at least two additional billionaires (Entities A and C) who have taken pains to make their large holdings non-obvious.

[rpietila]

Have you incorporated the Ron-Shamir Entities into this? The paper's a little dated and it's unclear whether the balances on pg. 11 are still accurate, but it'd mean at least two additional billionaires.

If I recall correctly, the paper is from the time when bitcoin was trading at about $10. With my rake model, these entities have since shed 70% of their holdings, on average. I have included 350k DPR hidden stash and 400k mystery owners + all that I believe beyond reasonable doubt have 100k or more. The rest is statistics. The difficult part is that we don't know if for example Winklevoss have sold a part of their coins or not. They are sitting on 10,000% gains and their price projections are conservative so they may not be über bull.

The possible existence of large hidden holders is something that cannot be ruled out, still. The 400k may be 1-2M if somebody has a masterplan. At any rate it does not affect the rest of the distribution, and due to bitcoin's crashy nature, even economically I don't think these pose a threat. They are in position to do wonderful things though upon coming public 

[FenixRD]

Have you incorporated the Ron-Shamir Entities into this? The paper's a little dated and it's unclear whether the balances on pg. 11 are still accurate, but it'd mean at least two additional billionaires (Entities A and C).

Their credibility is in question since they recently published the poorly-formed and dubious study positing Satoshi and DPR are perhaps either the same or at least linked personally (http://bits.blogs.nytimes.com/2013/11/23/study-suggests-link-between-dread-pirate-roberts-and-satoshi-nakamoto/), a study which was funded by the Citi Foundation. Citigroup, of course, being the first of the major banks to fire the first "real" shot into the realm of upstart currency and bank circumvention, in the coming cold war on cryptocurrency-fiat transfers (http://www.reddit.com/r/Bitcoin/comments/1h0fmb/citibank_will_no_longer_process_any_transfers_to/). There has been coverage also, at least, on CNN, among many other places. Hopefully it stays below the main consciousness, but the damage has been done because it is out there, and all you have to do is inadvertently search for DPR or SR and find it on the first page of google.

They have already retracted that aspect of their findings, too: http://www.businessinsider.com/silk-road-satoshi-paper-retraction-2013-11?op=1

Yes, apparently all it takes to convince these all-star mathematicians of their errors is some intense blog rebuttals. I don't buy it. The FUD was either bought or influenced.

[FenixRD]

Have you incorporated the Ron-Shamir Entities into this? The paper's a little dated and it's unclear whether the balances on pg. 11 are still accurate, but it'd mean at least two additional billionaires.

If I recall correctly, the paper is from the time when bitcoin was trading at about $10. With my rake model, these entities have since shed 70% of their holdings, on average. I have included 350k DPR hidden stash and 400k mystery owners + all that I believe beyond reasonable doubt have 100k or more. The rest is statistics. The difficult part is that we don't know if for example Winklevoss have sold a part of their coins or not. They are sitting on 10,000% gains and their price projections are conservative so they may not be über bull.

The possible existence of large hidden holders is something that cannot be ruled out, still. The 400k may be 1-2M if somebody has a masterplan. At any rate it does not affect the rest of the distribution, and due to bitcoin's crashy nature, even economically I don't think these pose a threat. They are in position to do wonderful things though upon coming public  

Tinfoil alternate theory I now posit (which should hold at least as much credibility as the above-referenced study): The Winklevii are Satoshi Nakamoto, but their over-trust in Zuckerberg taught them their lesson on how not to create and release virally-adopted technologies, so they played this one close to the vest, knowing in a few years they can parlay their influence within the elite to guide regulatory acceptance, as well as launch a spike in investor confidence when the stage is set. Then they will own not only the original Satoshi coins, but their own publicly known purchase amount (why so much by an elite??), and control massive amounts more with their ETF. In 2033 they will issue a royal mandate renaming the currency Winkles.

Only their benevolence will save us, but I fear a genetic purge of those below six feet in height...

[RAJSALLIN]

Rpietila, so you are saying that new made bitcoin millionaires have the power to do wonderful things for the world if I understand you correctly. What makes you think that these millionaires will be different than old school millionaires?

[Rampion]

Bitcoin's only intrinsic value is confidence. So "weak hands" will mean strong hands, and vice versa at some point in the future if I am correct.

The blockchain and it's many revolutionary uses (among which the possibility to transfer value in a trust less and decentralized fashion) gives Bitcoin a very definite, "real world" intrinsic value. The blockchain has multiple uses that have the potential to become more important than those of gold.

I kinda hoped you already understood that.

[Adrian-x]

Rpietila, so you are saying that new made bitcoin millionaires have the power to do wonderful things for the world if I understand you correctly. What makes you think that these millionaires will be different than old school millionaires?

They think differently, have different goals. If you are not from a wealthy family, and not an entertainment junky, what would you do with capital?  

[FenixRD]

Rpietila, so you are saying that new made bitcoin millionaires have the power to do wonderful things for the world if I understand you correctly. What makes you think that these millionaires will be different than old school millionaires?

Very loaded question, as the majority of old-world millionaires are pretty much regular people. I'd call this a false choice. (In addition to the obvious answers you will get from this forum, asking you to consider the demographic likely to have stumbled into large BTC holdings -- i.e. engineers, tech-minded folks, cryptonerds and others with strong libertarian tendencies on average.) Again, either the division of the monetary policy in the US pushed you above middle class, or below it. It's the banking cartels and conglomerates, controlled also largely by brainwashed and clueless but regular people who genuinely believe that things are as they are through the magic of capitalism and hard work. Very greedy few at the very top deliberately make the policies that have caused these problems. Everyone else is mostly guilty by not paying enough attention to stop it.

The beauty of a cryptocurrency such as Bitcoin, where the key attributes for this are no/negligible remission and transaction costs and a fixed-supply, is its ability to undermine a huge swath of the traditional tricks in the bankster playbook for siphoning the world's GDP delta. As the world GDP is around 4 or 5% annually, with a fixed currency you could expect holdings (literal holdings) to gain that amount in purchasing power. As it is, our inflation is pegged deliberately at 3%, and may be more since we can't verify this -- and it is more in many countries, and is almost never less (Japan is near the bottem, as they have chosen 1.5% in the recent depressing decision to go inflationary due increasing difficulty competing in trade with countries artificially-boosting their currencies).

Q.E.D., anyone in the US not making an average of at least perhaps 8%, maybe more, on their net worth, is invisibly bleeding money to this deliberate black hole. Ergo, I fully expect BTC to appreciate at a minimum of this amount vs. USD. This assumes the supply-demand ratio remains unchanged (currently demand increases are far outweighing supply increases, which themselves of course are an ever-decreasing function). This also ignores any actual devaluation of USD which may become a factor soon as well.

For these reasons, it is an astronomically poor and uninformed economic decision to not hold BTC as your store of value, and conduct the maximum possible amount of commerce in that currency. I hope we see an explosion of solutions like Coinkite and "reloadable" debit cards (working on the latter myself with the ol' think tank) to permit the ease of users only converting to fiat when necessary and at the last possible minute.

[Rassah]

Have you incorporated the Ron-Shamir Entities into this? The paper's a little dated and it's unclear whether the balances on pg. 11 are still accurate, but it'd mean at least two additional billionaires (Entities A and C) who have taken pains to make their large holdings non-obvious.

That study has very questionable assumptions about associations of addresses. For example, it was rather clear that some of the "wealthy holders" that they listed were actually hot wallet accounts held by major exchanges. Other thing I found sketchy was their assumption that if one address sent money to another, that the two were likely owned by the same person, which is true for change accounts when making transactions, but there is no way to tell whether the change address is the first or the second in the transaction.

Rpietila, so you are saying that new made bitcoin millionaires have the power to do wonderful things for the world if I understand you correctly. What makes you think that these millionaires will be different than old school millionaires?

[zimmah]

It looks from this like several million will be the correct figure.

I heard that only about 3 million bitcoin addresses are used. I would say that the number of addresses > number of users.

Myself, I have used dozens of addresses, and don't consider to be a heavy user of addresses.

http://bitcoinrichlist.com/charts/bitcoin-distribution-by-address
Total   11,462,007
10mils really don't matter so ......

The addresses above 0.001 threshold could almost directly be mapped to holders 1:1. But I know that holders use several addresses so that has to be accounted for.

What are the 10 million dust addresses anyway? Nobody buys with $0.10  

I know I'm gonna regret for saying this but..
People who heard about bitcoin , downloaded bitcoin-qt, tried to earn some satoshi with faucets and gave up.

lol this is what i did half a year ago, i have some dust scattered around on websites too low to even redeem

i might even have some dust on addresses i lost

but i'm much wiser now and my real bitcoins are much more secure.

[calian]

Bitcoin's only intrinsic value is confidence. So "weak hands" will mean strong hands, and vice versa at some point in the future if I am correct.

An interesting metric would be: what percentage of coins are in the hands of people, for whom the holding represents X% of portfolio.

This does not necessarily correlate with the weakness of hand though. If someone has near 100% in BTC, he is probably quite strong, otherwise he would not have so much. Those with over 100% are leveraged and weak. Those with quite much could be the weakest, since they sell periodically and give their coins to new entrants. Those with little should be strong, since it is not a big deal to them. On the other hand many of them are newbies and easy to scare, or are only after a quick double and then sell, or just have not developed their confidence yet.

But I see a great asset in the 930 (mBTC=USD) millionaires, me included. This number is up from only about 150 a month ago! We are in the position to continue the world-changing because money is not an issue any more. So in this sense the world-changing potential has gone up 6x when price increased only 5x. And there are many more to come in the BTC100-BTC1,000 category

I would say that the number of full-time bitcoiners is also growing fast. Where I live, the first million does not give economic freedom, but a paid-for house, and a million in the bank does.

I would be interested to see the ratio of bitcoiners who use their new wealth to start businesses (usually bitcoin related) versus those who buy new cars. Casascius did both of course.

[sflicht]

Have you incorporated the Ron-Shamir Entities into this? The paper's a little dated and it's unclear whether the balances on pg. 11 are still accurate, but it'd mean at least two additional billionaires.

If I recall correctly, the paper is from the time when bitcoin was trading at about $10. With my rake model, these entities have since shed 70% of their holdings, on average. I have included 350k DPR hidden stash and 400k mystery owners + all that I believe beyond reasonable doubt have 100k or more. The rest is statistics. The difficult part is that we don't know if for example Winklevoss have sold a part of their coins or not. They are sitting on 10,000% gains and their price projections are conservative so they may not be über bull.

The possible existence of large hidden holders is something that cannot be ruled out, still. The 400k may be 1-2M if somebody has a masterplan. At any rate it does not affect the rest of the distribution, and due to bitcoin's crashy nature, even economically I don't think these pose a threat. They are in position to do wonderful things though upon coming public 

Risto, what's your best unbiased estimate of the number of bitcoin holders who use something approximating your rake model?