[XMR] rpietila Monero Economics thread

[rpietila]

Dear sirs,

The thread is intended for analytical discussion on Monero distribution and other economics. Please do not use it for chat. There are other threads about Monero, for cross reference they will be listed here when brought to my attention.

Many thanks to cAPSLOCK for taking the responsibility to update the Monero Community Hall of Fame thread, which leaves my time available for these analyses.

Originally my intention was to buy only as much XMR as I hold BTC. (The XMR:BTC ratio of 1:1, which means that no matter which one goes to zero, as long as the other one captures all its value, you don't lose or gain anything). Then after realizing that I spend about as much time thinking about Monero than I think about Bitcoin, the 0.3% holding did not seem justified any more. Either I should stop thinking about XMR (did not work - try it!) or buy more of it. A lot more

After hearing that many are positioning such that they hold 100:1 (XMR:BTC), which is about 25% in XMR, or even 400:1, which is more than half in XMR, I also set myself up to acquire a larger position. That was a contributing factor in the rise last week but I am not even nearly done. It just does not feel right to sell XMR to receive BTC when you are already as loaded with BTC as I am. All the other coins are shitcoins, so not worth buying. The expectation that others realize Monero's beauty after me, is just a repetition of how bitcoin started rising when I had already positioned myself.

Next post will be all about Monero's coin distribution between holdings of different size. I went deeper than with BTC, and the results are interesting

[1714077980]

1714077980

[1714077980]

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[rpietila]

It is always good to see how you rank compared to others in owning a coin. But how?

With Monero, the blockchain provides no help in determining balances. So the distribution of holdings must be constructed purely theoretically. What we use in the analysis of this post is just the following information:

- Number of XMR (about 2.2 million when this was done);
- Assumption that the distribution follows power law for the highest 3% of the holders (it does if we are talking about general wealth) - the power law distribution has the property that the owners of 100-200 coins collectively own the same number of coins as the ones owning 200-400 coins etc. But their number is 2x higher (because the other group was 2x richer), and the density is 4x more (because not only there was 2x the number of people, but also the bracket is in absolute terms only half the size);
- Below that, the distribution forms a nice bulge centered around the median holding and drops quickly towards insignificant holdings;

I have calculated 2 possibilities that give the result for both 5,200 and 13,200 holders. The results are presented in logarithmic brackets that are 0.333 log10 units wide (unlike my usual precision of 1 log unit, this gives 3 times more information). The exact form of the very top (holdings of the top-5 or so holders) affects the distribution somewhat, but with XMR it cannot be deduced either directly or statistically. I have assumed that the Case A scenario has a large outlier but Case B does not have it.


Case A - 5,200 holders:

Code:

	min		max	avg	#ppl	tot.xmr
17				280 000	1	280 000
16	100 000	-	215 443	142 600	1	171 034
15	46 416	-	100 000	66 189	3	171 034
14	21 544	-	46 416	30 722	6	171 034
13	10 000	-	21 544	14 260	12	171 034
12	4 642	-	10 000	6 619	26	171 034
11	2 154	-	4 642	3 072	56	171 034
10	1 000	-	2 154	1 426	120	171 034
9	464	-	1 000	662	300	198 468
8	215	-	464	307	750	230 301
7	100	-	215	143	1 349	192 413
6	46	-	100	66	1 349	89 310
5	22	-	46	31	750	23 030
4	10	-	22	14	300	4 276
3	5	-	10	7	120	794
2	2	-	5	3	36	111
1	1	-	2	1	11	15

Largest holdings:
1. 280,000 XMR
2. 147,000 XMR
3. 80,000 XMR
4. 65,000 XMR
5. 50,000 XMR

top holding:  280,000 XMR
top 10:  22,500 XMR
top 100:  2,200   XMR
top 1000:  285 XMR
      
# of holders: 5,188   
avg holding:  427 XMR
==  1.92 BTC
==  1,211   USD
median holding: 100 XMR   
half of the coins belong to 43 people


Case B - 13,200 holders:

Code:

	min		max	avg	#ppl	tot.xmr
17						
16	100 000	-	215 443	142 600	1,2	165 745
15	46 416	-	100 000	66 189	2,5	165 745
14	21 544	-	46 416	30 722	5,4	165 745
13	10 000	-	21 544	14 260	12	165 745
12	4 642	-	10 000	6 619	25	165 745
11	2 154	-	4 642	3 072	54	165 745
10	1 000	-	2 154	1 426	116	165 745
9	464	-	1 000	662	291	192 329
8	215	-	464	307	726	223 179
7	100	-	215	143	1 816	258 976
6	46	-	100	66	3 632	240 412
5	22	-	46	31	3 632	111 589
4	10	-	22	14	1 816	25 898
3	4,6	-	10,0	6,6	726	4 808
2	2,2	-	4,6	3,1	291	893
1	1,0	-	2,2	1,4	87	124

Largest holdings:
1. 137,000 XMR
2. 80,000 XMR
3. 65,000 XMR
4. 50,000 XMR

top holding:  137,000 XMR
top 10:  20,500 XMR
top 100:  2,150   XMR
top 1000:  270 XMR
      
# of holders: 13,234   
avg holding:  167 XMR
==  0.75 BTC
==  473   USD
median holding: 46 XMR   
half of the coins belong to 150 people.

[rpietila]

There are already 2 Economics threads, why do we need a third one?

Be kind and list all the Monero threads with links and short introduction as to why I/anyone should be following them in your next post or stop cluttering this one!

(Which is the reason altcoin threads are a pain to read)

[GTO911]

There are already 2 Economics threads, why do we need a third one?

Be kind and list all the Monero threads with links and short introduction as to why I/anyone should be following them in your next post or stop cluttering this one!

(Which is the reason altcoin threads are a pain to read)

https://bitcointalk.org/index.php?topic=597878

https://bitcointalk.org/index.php?topic=622708.0

Go check the official Monero thread and then have a look at the sister threads

And why should people follow your thread instead?

[onemorebtc]

- Assumption that the distribution follows power law for the highest 3% of the holders (it does if we are talking about general wealth) - the power law distribution has the property that the owners of 100-200 coins collectively own the same number of coins as the ones owning 200-400 coins etc. But their number is 2x higher (because the other group was 2x richer), and the density is 4x more (because not only there was 2x the number of people, but also the bracket is in absolute terms only half the size);

i dont know if this assumption is right, because nobody knows how much others are holding.
have you something to read for me about the power law?

[rpietila]

Go check the official Monero thread and then have a look at the sister threads

And why should people follow your thread instead?

Don't be so aggressive - if you followed those threads yourself, you would have seen me there many times

(I am not compelling anyone to follow my threads, people do it voluntarily!)

[GTO911]

@rpietila

Yes, have seen you many times there. But you seem to be trying to control the Monero economy by opening new moderated threads where you control who talks what

I have nothing against anyone, but deep down looks like rpietila is trying to pump Monero

[David Latapie]

Reminder for everyone: on top of OP of each "officially sanctionned" sister thread, there is a banner linking to other threads.

Soon, a Monero subforum will be necessary

[rpietila]

- Assumption that the distribution follows power law for the highest 3% of the holders (it does if we are talking about general wealth) - the power law distribution has the property that the owners of 100-200 coins collectively own the same number of coins as the ones owning 200-400 coins etc. But their number is 2x higher (because the other group was 2x richer), and the density is 4x more (because not only there was 2x the number of people, but also the bracket is in absolute terms only half the size);

i dont know if this assumption is right, because nobody knows how much others are holding.
have you something to read for me about the power law?

When talking about wealth distribution in general, it has been found that the wealth of the highest 3% conforms to the power law, so that there are 1/2 the number of people that are twice as rich, until at the top there is a single person.

In the world this holds true until we get to the 10-billionaires. There the trail ends, even though according to the power law, 100 times richer people should exist. It is most plausible that they have hidden the wealth.

If the number of people went to less than half when doubling the wealth, most of the wealth would belong to average people.

If the number of people were more than half when doubling the wealth, most of the wealth would belong to the ultra-rich.

Wikipedia:"power law"

For it to be realistic to apply power law to coin holdings, we need to assume that there has been enough time and liquidity for everyone to balance their holdings to exactly the amount that they wish. I think this assumption is realistic, since the exchanges have been available almost since the beginning, and there has been lots of liquidity and price action there.

What is more difficult for me to estimate is the number of holders. But as long as the power law distribution in the higher end holds true, even doubling the number of users has no large effect on the top, as evidenced by the example distributions.

[rpietila]

Yes, have seen you many times there. But you seem to be trying to control the Monero economy by opening new moderated threads where you control who talks what

I have nothing against anyone, but deep down looks like rpietila is trying to pump Monero

1. I know what place in Monero holdings I am most likely occupying. And the ones above me are not economists, so it is only my responsibility to speak out concerning topics that I find interesting and beneficial.

2. It is true that since I own only BTC and Monero, these are the only two coins I have incentive to pump. I know it is hard to swallow for shitcoiners 

[rpietila]

Reminder for everyone: on top of OP of each "officially sanctionned" sister thread, there is a banner linking to other threads.

Soon, a Monero subforum will be necessary

The banner looks nice, but like the intruder said, I would like to keep this one a little personal to me, like I have had several threads before.

[altsay]

Yes, have seen you many times there. But you seem to be trying to control the Monero economy by opening new moderated threads where you control who talks what

I have nothing against anyone, but deep down looks like rpietila is trying to pump Monero

1. I know what place in Monero holdings I am most likely occupying. And the ones above me are not economists, so it is only my responsibility to speak out concerning topics that I find interesting and beneficial.

2. It is true that since I own only BTC and Monero, these are the only two coins I have incentive to pump. I know it is hard to swallow for shitcoiners 

Not all of the altcoins that you dont own are shit, even though most of 'em are.

[rpietila]

Code:

100 000	-	215 443	142 600	1	165 745
46 416	-	100 000	66 189	3	165 745
21 544	-	46 416	30 722	5	165 745
10 000	-	21 544	14 260	12	165 745
4 642	-	10 000	6 619	25	165 745
2 154	-	4 642	3 072	54	165 745
1 000	-	2 154	1 426	116	165 745
464	-	1 000	662	291	192 329
215	-	464	307	726	223 179
100	-	215	143	1 816	258 976
46	-	100	66	3 632	240 412
22	-	46	31	3 632	111 589
10	-	22	14	1 816	25 898
5	-	10	7	726	4 808
2	-	5	3	291	893
1	-	2	1	87	124

[ManFromJupiter]

So, what the Monero economics thread will tell us about fall in price. Uh?

[rpietila]

Case B - 13,200 holders:

Code:

	min		max	avg	#ppl	tot.xmr
17						
16	100 000	-	215 443	142 600	1,2	165 745
15	46 416	-	100 000	66 189	2,5	165 745
14	21 544	-	46 416	30 722	5,4	165 745
13	10 000	-	21 544	14 260	12	165 745
12	4 642	-	10 000	6 619	25	165 745
11	2 154	-	4 642	3 072	54	165 745
10	1 000	-	2 154	1 426	116	165 745
9	464	-	1 000	662	291	192 329
8	215	-	464	307	726	223 179
7	100	-	215	143	1 816	258 976
6	46	-	100	66	3 632	240 412
5	22	-	46	31	3 632	111 589
4	10	-	22	14	1 816	25 898
3	4,6	-	10,0	6,6	726	4 808
2	2,2	-	4,6	3,1	291	893
1	1,0	-	2,2	1,4	87	124

Largest holdings:
1. 137,000 XMR
2. 80,000 XMR
3. 65,000 XMR
4. 50,000 XMR

top holding:  137,000 XMR
top 10:  20,500 XMR
top 100:  2,150   XMR
top 1000:  270 XMR
      
# of holders: 13,234   
avg holding:  167 XMR
==  0.75 BTC
==  473   USD
median holding: 46 XMR   
half of the coins belong to 150 people.

The big differences in the scenarios are:
- possible presence of a megaholder
- total number of holders

I lean towards the interpretation that this scenario is more realistic. It is already possible to buy XMR from several exchanges, and the $500 average holding seems realistic for an altcoin. (Bitcoin's average holding is about $8000). Also for somebody to have been amassed 280,000 coins, that could only have happened as a rather static percentage of the new inflation (there has been no way to generate or buy them for cheaper in such a quantity - Bitcoin did have this window open for Satoshi but Monero hasn't had it, and will not have it). This means that his stash would have been bought at the average price of at least 0.0025, and would have cost him at least BTC700, probably even BTC1,000 or more. I don't say that it's impossible that someone has done it, I just find it more likely that there is only 1 six-figure holding, about 10 holdings that are between 20k-100k and 10 more holdings in the 10k-20k range.

So truly, now it is possible to make up if you were late from Bitcoin. Just take the 100:1 leverage (or more) I will write about the XMR:BTC ratio concept more soon!

[Conurtrol]

The presumed reason for the lengthy Monero emission process is to ensure a wide and fair distribution. Won't 20% of Monero owners end up with 80% of the currency, as per the Pareto principle, regardless of how long the emission process lasts? If so, then why not speed it up and get it over with? Have there been any studies of length of distribution and volume of emission that would validate the current Monero plan?

[LAstar]

Monero seems to be quite unstable. What's wrong with the price?

[nakaone]

I cannot directly help you with this analysis and appreciate what you are doing, but I have a few concerns:

I followed monero from the otc time and probably the first ten pages of the thread. AFAIK there were little to no buys over the counter with more than 10000 xmr volume. Even otc it was very hard to aquire reasonable amounts of xmr. I cannot speak for the OTC in freenode (?)/ IIRC. Maybe some powerful miners would have the possibility to get a six digit amount of xmr - but to buy them would be quite complicated.

It is probably just an educated guess but I think the group of 1000 to 10000 is underrepresentated to the cost of the group above and below. My idea is that you probably cannot use the normal distribution which is neccessary for power law, because altcoiners are probably not the perfect representative group for that - I assume this group is capped at the top.

[rpietila]

The presumed reason for the lengthy Monero emission process is to ensure a wide and fair distribution. Won't 20% of Monero owners end up with 80% of the currency, as per the Pareto principle, regardless of how long the emission process lasts? If so, then why not speed it up and get it over with? Have there been any studies of length of distribution and volume of emission that would validate the current Monero plan?

Actually the likely result is 1% owning 50% of it, as is the case in both the Case A and Case B in this thread (!). And with Bitcoin (!).

This to me is the proof that the plan is working. With <insert your favorite shitcoin here>, it is not so. And the reason is that they have wanted to do it quickly, to get all the coins, and be able to soon conduct a pump&dump. With Monero, you cannot do it.

[HardwarePal]

Estimates based on % hodlings of various addresses of BTC-LTC +  2 anon coins DRK-XC

XMR :
0-0.1              45%
0.1-1              4%
1-10               25%
10-100           15%
100-1K           8%
1K-10K           2%
10K-100K       1%
100K+            ~

These are rough numbers from the graph but this is address based not individual based.

I think 1-1K XMR will be the heaviest range in the future