Bitcoin distribution vs Bitcoin adoption

[Kouye]

Simple version:  you either believe in free markets and voluntary association or you don't. 

I got an even simplier version. I wanna see fiat die and be wiped out by BTC, and am trying to forsee the issues getting there.

Yesterday, with 1000$, you could get 10k BTC
Today, with 1000$, you can get 4BTC
Tomorrow, with 1000$, you'll get 0.01BTC
The day after tomorrow, with 1000$, you'll just be a laughing stock.

See my point for the 90% of people that will come tomorrow or the day after?

Or did you actually just admit bitcoin is and always will be just a speculation tool to earn fiat and keep the whole banking fuckfest on?

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[DeathAndTaxes]

Your timeline is silly short.  I don't think Bitcoin will end all fiats.  Nations have too much of a vested interest to keep that shell game going.  My guess is the day we both die there will be plenty of national fiat currencies.  The power of Bitcoin is that it (possibly for the first time) gives people the OPTION to choose an alternative system.   The reality is many won't, many never will, and for many it will take decades before they are convinced in the utility of an alternative.    Neither Bitcoin's price growth nor its adoption curve will be that short.  The 90% aren't going to suddenly all show up one day (all one the same day) and the price isn't going to be 10x what is was yesterday.  Mainstream adoption is measured in decades and will be gradual with setbacks in adoption, technology, and legislation.

Still if you are right then all cryptocurrencies are doomed to failure (as they all need a decentralized mechanism to bootstrap) so sell now while you still can or pick the point you think it can get before it fails.

[d'aniel]

There will always be a strong tendency for early adopters to diversify out of bitcoins as they grow to dominate the portfolio.  People tend not to be comfortable putting all their eggs in one basket.  Even Gavin mentioned doing this during the last run up.

But lets assume wild success - Bitcoin grows to a total value of $10T (roughly gold's, or M2 in the US).  Say a quarter of the bitcoins ($2.5T worth) remain held by 500 die-hards, roughly evenly distributed, who refuse to ever sell.  As of March 2013 there were 1426 billionaires holding onto a total of $5.4T.  So Bitcoin will have grown the billionaire population by ~35%, and increased their overall net worth by just less than 50%.

Meh.  With a world GDP of ~$70T, a 2% annual savings (rough guess) on transaction fees, cash handling fees, bypassing of forex fees, lack of need for options to hedge FX risk, etc. due to Bitcoin adoption would pay this same $2.5T out to "society" in the form of savings every two years.

Note that this rough analysis ignores the fact that this rise of Bitcoin would probably bump some billionaires like Charlie Munger off the list

[Kouye]

Thanks for the input, D&T and others, I'm still unsure if my concern was fully grasped, but I got your point.
I'm being too impatient, and bitcoin will remain a toy for rich people to get richer long before it becomes a real alternative for people to quit using fiat.
I'll just do my best to prove you wrong.

[Etlase2]

But lets assume wild success - Bitcoin grows to a total value of $10T (roughly gold's, or M2 in the US).  Say a quarter of the bitcoins ($2.5T worth) remain held by 500 die-hards, roughly evenly distributed, who refuse to ever sell.  As of March 2013 there were 1426 billionaires holding onto a total of $5.4T.  So Bitcoin will have grown the billionaire population by ~35%, and increased their overall net worth by just less than 50%.

Meh.  With a world GDP of ~$70T, a 2% annual savings (rough guess) on transaction fees, cash handling fees, bypassing of forex fees, lack of need for options to hedge FX risk, etc. due to Bitcoin adoption would pay this same $2.5T out to "society" in the form of savings every two years.

Argument appears to be thus:

1) Create a new monetary/banking system
2) Give a small group of people vast amounts of control
3)
4) World is saved by innovative idea completely unlike FRB/fiat.

(I know you did not make the point 4 implication, but it is certainly a common theme.)

[d'aniel]

But lets assume wild success - Bitcoin grows to a total value of $10T (roughly gold's, or M2 in the US).  Say a quarter of the bitcoins ($2.5T worth) remain held by 500 die-hards, roughly evenly distributed, who refuse to ever sell.  As of March 2013 there were 1426 billionaires holding onto a total of $5.4T.  So Bitcoin will have grown the billionaire population by ~35%, and increased their overall net worth by just less than 50%.

Meh.  With a world GDP of ~$70T, a 2% annual savings (rough guess) on transaction fees, cash handling fees, bypassing of forex fees, lack of need for options to hedge FX risk, etc. due to Bitcoin adoption would pay this same $2.5T out to "society" in the form of savings every two years.

Argument appears to be thus:

1) Create a new monetary/banking system
2) Give a small group of people vast amounts of control
3)
4) World is saved by innovative idea completely unlike FRB/fiat.

(I know you did not make the point 4 implication, but it is certainly a common theme.)

The reason I introduced some numbers was to show that (2) is hyperbole.

[Etlase2]

The reason I introduced some numbers was to show that (2) is hyperbole.

I don't know if we're from different planets or if you have the blinders on for the sake bitcoin argument, but you stated under your own presumptions that 500 people now control value equal to a quarter of the world's gold supply--and you call "a small group of people having vast amounts of control" a hyperbole under this scenario? Is based on the caveat you added that they "refuse to ever sell"? Because that is pretty meaningless. Wall Street doesn't "sell" their dollars, they use them to make more dollars.

Does the dramatic draw to bitcoin essentially boil down to "you save visa/mc/forex fees"? It's fine if that is enough for you, but it most definitely does not address the topic--I would almost say it is a red herring.

[N12]

The problem with the distribution is that the block generation curve started out at 100% speed in the beginning even though there were hardly any miners at all. Compare it to gold. You don't get to search for gold without a pickaxe and carry home 1% of all the gold reserves on earth. What would have been more natural is a sigmoid curve. First, the production rate is curbed, and as new people come, it is increased until it's 100% and begins to decrease again.

[DeathAndTaxes]

One could argue that curve is superior on the other hand it is possible Bitcoin would have never got off the ground without a benefit to early adopters.  So technically superior but dead on arrival still loses out to "good enough" Bitcoin.

[N12]

One could argue that curve is superior on the other hand it is possible Bitcoin would have never got off the ground without a benefit to early adopters.  So technically superior but dead on arrival still loses out to "good enough" Bitcoin.

I know of that argument, but consider for a moment the profile of people who were here in 2009-2010 and why they were interested. They would've come anyway and built stuff just because it's awesome tech.

But yes, who knows what it would have been like. I do wonder about Satoshi's motives to not introduce a curve of natural resource depletion.

[DeathAndTaxes]

One could argue that curve is superior on the other hand it is possible Bitcoin would have never got off the ground without a benefit to early adopters.  So technically superior but dead on arrival still loses out to "good enough" Bitcoin.

I know of that argument, but consider for a moment the profile of people who were here in 2009-2010 and why they were interested. They would've come anyway and built stuff just because it's awesome tech.

But yes, who knows what it would have been like. I do wonder about Satoshi's motives to not introduce a curve of natural resource depletion.

Bitcoin was a proof of concept.  It had never been done and the subsidy was only one tiny part.  My guess was simplicity.  One school of thinking is that the initial distribution matters very little.  Miners sell coins, trade them, lose them to thieves, buy goods with them.  All of that is secondary distribution.   

Bitcoin =/= Mining

Hell even with a perfect distribution, give every single human on the planet 1 BTC (as if this could be done decentralized) you would see disparity of Bitcoin wealth within a decade.   It just is human nature.  Some people can't hold only to money, others have a talent (either honestly or dishonestly) of aggregating fortunes in a small period of time.

[N12]

I agree that wealth inquality as a result of trade is only natural.

Yet I completely understand whoever is left with a foul taste at the thought that 50% of all BTC were mined while barely anyone heard of it, all the while proclaiming this is the global digital currency. It does leave the impression that our goal is at least in part to simply become the new elite. Let's call it an aesthetic or a marketing issue.

[d'aniel]

I don't know if we're from different planets or if you have the blinders on for the sake bitcoin argument, but you stated under your own presumptions that 500 people now control value equal to a quarter of the world's gold supply--and you call "a small group of people having vast amounts of control" a hyperbole under this scenario? Is based on the caveat you added that they "refuse to ever sell"? Because that is pretty meaningless. Wall Street doesn't "sell" their dollars, they use them to make more dollars.

If you reread my post you'll notice that my comparison was with our very own world and its current pool of billionaires.  As I said, wealth is already centralized to the extent that wild success of Bitcoin would just be a perturbation of the existing paradigm.  That Bitcoin might spawn a few more billionaires just doesn't keep me up at night.

[BitchicksHusband]

I agree that wealth inquality as a result of trade is only natural.

Yet I completely understand whoever is left with a foul taste at the thought that 50% of all BTC were mined while barely anyone heard of it, all the while proclaiming this is the global digital currency. It does leave the impression that our goal is at least in part to simply become the new elite. Let's call it an aesthetic or a marketing issue.

I'm OK with becoming the new elite.  I'd like to retire in 2 years, pay for college for my kids, some nice weddings, travel the world, have the freedom to try some ideas that I've been thinking of without the pressure of having to "make money" for somebody else, etc.

[N12]

I agree that wealth inquality as a result of trade is only natural.

Yet I completely understand whoever is left with a foul taste at the thought that 50% of all BTC were mined while barely anyone heard of it, all the while proclaiming this is the global digital currency. It does leave the impression that our goal is at least in part to simply become the new elite. Let's call it an aesthetic or a marketing issue.

I'm OK with becoming the new elite.  I'd like to retire in 2 years, pay for college for my kids, some nice weddings, travel the world, have the freedom to try some ideas that I've been thinking of without the pressure of having to "make money" for somebody else, etc.

I am glad you are frank about it.

[revans]

One could argue that curve is superior on the other hand it is possible Bitcoin would have never got off the ground without a benefit to early adopters.  So technically superior but dead on arrival still loses out to "good enough" Bitcoin.

In the early stages Bitcoins were worth so little I don't see how it would have been an issue.

[KawalGrover]

I have a feeling that if you look at the entire ecosystem, then its not so much about the 'BitCoin' itself, but the BlockChain, then slowly the beauty reveals itself.

First is the confusion of the fungibility of BitCoin, and although for most transactions right now a BitCoin is a BitCoin is a BitCoin (Just like an oz of gold). That is about to change soon. Look at ColoredCoin, BitShares, MasterCoin.

When you couple this with the idea of a Distributed Identity (like KeyHoteeID, NameCoin) etc and all the other services being developed on top of it, you soon realize... its not so much about the Bit"Coin".

[knight22]

Maybe we should take about how banks and governments distribute fiat?
The rules of mining bitcoin are known by everybody and open to anyone willing to take part of it (in a competitive but fair environment).

[Kouye]

Maybe we should take about how banks and governments distribute fiat?
The rules of mining bitcoin are known by everybody and open to anyone willing to take part of it (in a competitive but fair environment).

I agree with this. Now try to put yourself in a different character, that would hear about bitcoin for the first time tomorrow
That is 99% of the population.
Can you really beleive they will say "ok, 60% of the coins are already gone, but I'll be happy with 0.6x0.01"

[knight22]

Maybe we should take about how banks and governments distribute fiat?
The rules of mining bitcoin are known by everybody and open to anyone willing to take part of it (in a competitive but fair environment).

I agree with this. Now try to put yourself in a different character, that would hear about bitcoin for the first time tomorrow
That is 99% of the population.
Can you really beleive they will say "ok, 60% of the coins are already gone, but I'll be happy with 0.6x0.01"

Bitcoins need to be distributed somehow and it comes with a lot of risk for the early adopers just like all new technologies. High risk / High reward. I don't see any problem with this. Tons of people are still not ready to jump in the bitcoin bandwagon just because they don't want to take any risk and are simply waiting for the system to proves that it works in the long run. Low risk / low return. It's a choice that anybody is free to take.