Distribution of bitcoin wealth by owner

[I_bitcoin]

Uh-oh, you're in the news! http://www.businessinsider.com/927-people-own-half-of-the-bitcoins-2013-12 

Yay Risto, boo business insider for making things sound scary.

[Brunic]

Uh-oh, you're in the news! http://www.businessinsider.com/927-people-own-half-of-the-bitcoins-2013-12 

I found that interesting thread because of that article on r/litecoin 

I have some questions for you guys.
- What are the pros and cons of that situation?
- Is there any similar economic situation in history?
- Can the market be tricked by owning such a vast amount of volume?

[User705]

Anyone interested in running a similar breakdown for litecoin?  It's probably even more lopsided.

[asciicat]

(0.5M bitcoins assumed lost)

Heh, five of those are mine.

[TooDumbForBitcoin]

Sad thing is that most people don't understand the basics of BTC.

Here comes bitcoin. Bitcoin is nothing of all these.  No creation of money out of thin air. No THEFT!

The air gets pretty thin every 8 or 9 minutes. 

No BTC ever stolen?  Hmmm.

[rpietila]

Anyone interested in running a similar breakdown for litecoin?  It's probably even more lopsided.

I'm all interested in seeing the distribution for LTC and scamcoins. Because my new article (under construction) will attempt to prove why Bitcoin has something that they don't, and it is related to the dynamics of having owners in different categories. A total refutation of the spirit behind the BI article "it is bad, that there are large and small holders", whereas it is not only good, but absolutely crucial!

[jmw74]

In order to see why the concentration of bitcoins in a few hands today is not a problem, you need only look at a simple example and extrapolate.

Take any person.  Look at his income and net worth and his bitcoin holdings.  When his holdings become so valuable, that it makes his income and net worth look small in comparison, he will sell. 
Let's do an example:

Joe: 
income: $50,000 per year
net worth (excluding bitcoin):  $200,000
bitcoin holdings:  BTC1,000

Let's say Joe paid a trivial amount for his bitcoins, so we can ignore the cost.  His holdings are worth today close to $1,000,000.

If he hasn't sold many of them by now, he will be highly motivated to begin doing so.  Why?  Because it will increase his net worth by a factor of 5.  It will enable him to quit working (if he so chooses) for at least a decade, possibly two.  By holding he could get richer, but compared to his original standard of living he is already "rich".  By holding he stands to gain very little in real terms.

You can apply this to very early adopters as well.  The only difference is the market is still too small for them to sell off significant amounts of their holdings all at once.

Very few early adopters have reinvested in bitcoin infrastructure, which seems contradictory.  I can only guess that the reason we haven't seen more movement is a) the market is too small to support such a large selloff, b) each early adopter is waiting for the others to invest in bitcoin infrastructure - they can only lose if no one does it.  This is a dangerous game of chicken, which I would expect to end in the near future, but who knows.

If I had BTC50,000 that I paid almost nothing for, I wouldn't hesitate at all to spend a significant portion of them investing in a hardware wallet business.

[Rassah]

Article was repeated here, too: http://www.ahametals.com/927-people-own-bitcoins/

As I pointed out in the comments, when bitcoin started out, it has a total of 1 person holding 100% of the bitcoins. I think it may be very valuable to track the trend of this distribution, too. Obviously going from 1 owning 100% to 927(?) holding 50% is a vast improvement. I'm wondering if it's continuing to improve, and how quickly.
My guess is it's following pretty well established distribution curves with long tails.

[BitChick]

Article was repeated here, too: http://www.ahametals.com/927-people-own-bitcoins/

As I pointed out in the comments, when bitcoin started out, it has a total of 1 person holding 100% of the bitcoins. I think it may be very valuable to track the trend of this distribution, too. Obviously going from 1 owning 100% to 927(?) holding 50% is a vast improvement. I'm wondering if it's continuing to improve, and how quickly.
My guess is it's following pretty well established distribution curves with long tails.

I read the comments and saw you there.  FYI, I always imagined you with dark hair for some reason.  Perhaps it is your black cat icon?   But I digress.  Sometimes the comment section is the most amusing part of these articles!  You did a great job of defending it and the logic is hard to argue with but it is amazing how many people just can't seem to "get it." 

[wachtwoord]

If he hasn't sold many of them by now, he will be highly motivated to begin doing so.  Why?  Because it will increase his net worth by a factor of 5.  It will enable him to quit working (if he so chooses) for at least a decade, possibly two. 

Who the hell wants to stop working for a decade? I plan to live longer than a decade.

[skyhigh]

I would love to see rpietila re-do this whole list in January 2014. 

[rpietila]

I would love to see rpietila re-do this whole list in January 2014. 

Yes, the intention is to update it monthly.

[AnonyMint]

also you have no power if you don't have many or any coins.

Coins are worth very little relative to innovation. Software innovation requires 1 man, not many men, and very low capital.

Edit: removed the mild profanity. Apologies. I am bit stressed not sleeping much. No food in the house. Pushing hard.

[FenixRD]

also you have no power if you don't have many or any coins.

Coins are worth very little relative to innovation. Software innovation requires 1 man, not many men, and very low capital.

Edit: removed the mild profanity. Apologies. I am bit stressed not sleeping much. No food in the house. Pushing hard.

But food does fuel innovation (innovatORS, anyway), and you can buy food with XBT, ergo... Haha.

Get some rest and some food! And back to work with ya. The Fed "taper" starts soon, we need as much innovation as we can get. More and better crypto technologies is always a win.

I know we're all (most of us anyway) pretty partial to Bitcoin, but as last night showed as good as anything I've seen, the existence of even LTC is clearly a non-threat. I have realized that, in the absence of the ability to properly short (which I don't particularly think is all that good a thing), one thing of monumental importance to limiting these bubble-pops range of pain is the ability to easily conduct arbitrate.

Last night near the bottom, value on the Chinese exchanges basically become largely uncoupled from the rest of Bitcoin. Right now, they's still at less than the "normal" parity, but at one point, it was off by like 20%. With OKCoin and BTC-E, I was able to conduct efficient arbitrage. This not only got me (and others doing similar) cheaper coins, which we brought with us into the global market, but it also allowed some panicky Chinese fellow somewhere the ability to get a more market-fair price for his coins.

And LTC tanked right along with Bitcoin -- amplified, in fact. As LTC is known to move similar to but with greater amplitude than Bitcoin, so even though Bitcoin was crashing, people were actually abandoning LTC in favor of fiat, and then Bitcoin.

Hard digression vector there... sorry. I haven't slept. Cheers guys.

[AnonyMint]

Litecoin doesn't do anything which Bitcoin can't. Even ASICs are coming for Litecoin.

An altcoin that can run roughshod over the AML, KYC, and taxes will do something Bitcoin can't. And a CPU-only coin will bypass the exchanges so that the billions of Chinese can get coins, simply by running their computer. And buying more readily accessible hardware.

A radical shift is coming. But unfortunately not before Christmas, because someone expended too much time arguing in this forum and distributing relief to typhoon victims.

[Rassah]

And a CPU-only coin will bypass the exchanges so that the billions of Chinese can get coins, simply by running their computer. And buying more readily accessible hardware.

You still need exchanged. Shop owners who sell goods for that currency aren't going to get the money they need to pay their suppliers by mining more of the same currency, and if everyone can just make it by running their computers, at a profit, then it's not really scarce, and may not be valued.

[rpietila]

There is again time to update the figures. The methodology in OP is quite good, and this time I think we could actually quantify how many users the different channels bring and how large is the overlap.

- Count the number of users from all exchanges and subtract the overlap
- Count the number of addresses used and their balances
- Compare the figures and estimate number of users
- Check known large holders and add their holdings, add other 10k+ holdings according to power law model
- Fit the cohorts according to the distribution model

[User705]

I'd be curious to understand your methodology of calculating lost coins. 

[Praeconium]

tl;dr - except first page, and wanna give comparison

I think this Credit Suisse report on wealth distribution is good starting point of comparison because on the first glance it looks that top1% of Bitcoin owns considerably more than 1% of real world, while when You put top10%, smaller spread but considerably scary results as 10% own literally everything in both cases

[rpietila]

tl;dr - except first page, and wanna give comparison

I think this Credit Suisse report on wealth distribution is good starting point of comparison because on the first glance it looks that top1% of Bitcoin owns considerably more than 1% of real world, while when You put top10%, smaller spread but considerably scary results as 10% own literally everything in both cases

I don't know what is so scary about it. Some people just manage the wealth better. Consider a family of 10 people - the father manages the wealth for the benefit of all.

To achieve a flatter distribution, you should restrict the very poor from buying, because it creates the excessive differences in bitcoin balances.

Meh, this is discussed to the death. To all readers: buy your way to the level that you want to, taking into account that you need to sell minimum 70% of the coins before it's all over.

I still need help for the user figures of the relevant services discussed in this thread! Cannot update without this info.