Vilfredo Pareto (1848 – 1923) observed that 20% of the population controlled 80% of the wealth. Similar distributions have been discovered in a many fields, and as a consequence, the Pareto principle has become popular among economists. Here's a list of Pareto distributions, copied from Wikipedia:
- The sizes of human settlements (few cities, many hamlets/villages)
File size distribution of Internet traffic which uses the TCP protocol (many smaller files, few larger ones)
Hard disk drive error rates
Clusters of Bose–Einstein condensate near absolute zero
The values of oil reserves in oil fields (a few large fields, many small fields)
The length distribution in jobs assigned supercomputers (a few large ones, many small ones)
The standardized price returns on individual stocks
Bitcoin is many times larger than the most popular altcoin, Litecoin. At the time of writing it is about 20 times larger than LTC.
If digital currencies were to be pareto distributed, then the top fifth of coins should have 80% of the market cap, or with a more relaxed interpretation, one could say that BTC should have 80% of the total market cap. I did a quick rough adding of all altcoins at coinmarketcap.com and came to ~ $700 million.
Bitcoin's market cap is $7,500 million, which means it has more than 90% of the total market. If the Pareto principle were to apply, BTC should halve in size or altcoins should double.
My questions; do you see any reason the Pareto law apply here at all? May bitcoin rather gravitate to a ~100% natural monopoly due to the network effect?
