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Bitcoin is largely controlled by a small group of investors and miners

techspot.com

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Re: Bitcoin is largely controlled by a small group of investors and miners

#231

Post by SergeAx »

Hermel wrote: post #109
YossarianFrPrez wrote: post #102

Earlier quoted context omitted.

Interesting quotes from the first section of the paper: "We first document that 90% of transaction volume on the Bitcoin blockchain is not tied to economically meaningful activities but is the byproduct of the Bitcoin protocol design as well as the preference of many participants for anonymity." "We show that the Bitcoin mining capacity is highly concentrated and has been for the last five years. The top 10% of miner…

The top 1000 investors hold 15% of the supply? That’s not “highly centralized” if you compare to the stock market. For Tesla, one single shareholder holds 17% of the whole company.

Do you mean Elon Musk? Because data available for me says that top shareholders are Vanguard and Blackrock funds with ~6% and ~5%.

Re: Bitcoin is largely controlled by a small group of investors and miners

#232

Post by krageon »

qeternity wrote: post #217
krageon wrote: post #209

Earlier quoted context omitted.

> highly regulated Regulated by them, so in practice not all that regulated

Please elaborate. Which regulations do you think are missing?

I'm not rich, so my opinion isn't relevant. That's the problem, not any specific detail (which your question is focusing on).

Re: Bitcoin is largely controlled by a small group of investors and miners

#233

Post by SergeAx »

danbruc wrote: post #220
peskysamurai wrote: post #207

Earlier quoted context omitted.

According to the article below, it seems like there’s a similar level of inequality in the stock market as well. https://awealthofcommonsense.com/2021/10/ownership-inequalit...

But are stocks the the appropriate thing to compare Bitcoin with? Why stocks and not money supply? And do you pick a national stock market or money supply or do you sum across the globe? But maybe it also does not really matter and all those things have similar distributions.

I believe that currently Bitcoin is much more investment vehicle than payment matter.

Re: Bitcoin is largely controlled by a small group of investors and miners

#234

Post by rini17 »

mudlus wrote: post #226

How was, or is, this avoidable even now, and in existing monetary systems? One caveat is that though there are a few major actors, no one can be sure where they are physically. It is detached from political jurisdictions, which is the unique goal of Bitcoin.

There's confluence of factors that naturally results in power law (or pareto's law) distribution. The direct consequence is "stuff largely controlled by small group".

How to mitigate that? It is IMO understudied area of economics because economists prefer thinking of "value" of anything as a scalar, not as random variable. In cases where it isn't possible they just conveniently assume normal/gaussian random distribution. (See @nntaleb)

Re: Bitcoin is largely controlled by a small group of investors and miners

#235

Post by FabHK »

YossarianFrPrez wrote: post #102
jonas21 wrote: post #25

The Techspot article is a summary of this Bloomberg piece: https://www.bloomberg.com/news/articles/2021-10-25/bitcoin-s... which is itself reporting on this paper from the NBER: https://www.nber.org/system/files/working_papers/w29396/w293...

Interesting quotes from the first section of the paper: "We first document that 90% of transaction volume on the Bitcoin blockchain is not tied to economically meaningful activities but is the byproduct of the Bitcoin protocol design as well as the preference of many participants for anonymity." "We show that the Bitcoin mining capacity is highly concentrated and has been for the last five years. The top 10% of miner…

> just 0.1% (about 50 miners) control close to 50% of mining capacity

So, the much-vaunted "mathematical guarantee" that only 21m BTC will ever be mined depends on the benevolence of those 50 miners not to fiddle with the code base. Makes perfect sense to trust those honourable individuals more than the central bankers in control of fiat. /s

Re: Bitcoin is largely controlled by a small group of investors and miners

#236

Post by olalonde »

That's a pretty misleading headline. Miners and investors do not control Bitcoin regardless of their hash power or amount of BTC owned. 50+ miners is also well enough to prevent any 51% attack. Finally, the ownership estimate is flawed given that it relies on blockchain analysis. The existence and popularity of custodial wallets (e.g. exchanges) makes this sort of analysis extremely unreliable.

Re: Bitcoin is largely controlled by a small group of investors and miners

#237

Post by FabHK »

fsflover wrote: post #219
TeMPOraL wrote: post #178

Earlier quoted context omitted.

If Bitcoin is comparable to USD, then there's nothing justifying its use over USD, with its associated ludicrous waste of energy and environmental impact.

The government can print USD for themselves, effectively stealing money from everyone through inflation. With bitcoin, even "small group controlling 90%" can't do that.

Sure they can. There's a line in the code halving the codebase mining reward every 210,000 blocks. Just comment that line out (or replace halving with doubling). Done.

Re: Bitcoin is largely controlled by a small group of investors and miners

#238

Post by timeon »

bradwood wrote: post #163
anonporridge wrote: post #100

Earlier quoted context omitted.

There seems to be a weird perception that decentralization means that there won't be inequality of power in the system. That's not what it means. Decentralization simply means that there is no central power that can make unilateral decisions about the system like a government can with its currency. This explicit decentralization of power is what people are excited about, because it means any change to the system requ…

You nailed it. Bitcoin is not some kind of panacea that will make everyone rich. It's just money that cannot be fucked with by central bankers, governments, dictators or anyone else for that matter. That's it.

Isn't the article arguing otherwise?

Re: Bitcoin is largely controlled by a small group of investors and miners

#239

Post by leesalminen »

hnbad wrote: post #214
nuerow wrote: post #176

Earlier quoted context omitted.

> Orrrrr.... because its value is backed by the world's largest economy? There's also the fact that oil is quoted in US dollars, and about 65 countries, about a third of all the countries in the world, peg their currency to the US dollar[1]. [1] https://www.investopedia.com/articles/forex/040915/countries...

Sure but why do you think that is. What currency oil is quoted in has more to do with foreign policy than economics. Regardless of what reasons the US may have had to invade Iraq in 2001, Saddam Hussein was literally on record in 2000 for planning to switch away from quoting Iraqi oil in US dollars to the Euro[0]. There was a ton of talk about the 2001 invasions being about the US oil reserves for itself but that's b…

Just to be clear, the US invaded Iraq in 2003, not 2001.

https://en.m.wikipedia.org/wiki/Iraq_War

Re: Bitcoin is largely controlled by a small group of investors and miners

#240

Post by FabHK »

ildon wrote: post #137
anonporridge wrote: post #108

Earlier quoted context omitted.

> magical pseudo-currency that solves all problems and unexplainably makes everyone richer and richer That's not what's exciting about bitcoin. What's exciting is that it is the first digital, global money that isn't protected by the proof of violence of the state. The US dollar is the world reserve currency because the United States is the best in the world at deploying destructive power, and the British and French…

> The only thing it requires is that you have hash power and internet connectivity. Your argument is a bit naive and this sentence I quoted is the one that shows the reason. Proof of Work is a energy intensive activity, not to mention the specialized tech it requires. Access to energy today is more than ever a sign of the power (including military power) of a nation, so much that energy itself could be regarded as th…

And, like deployment of military power ("proof of violence by the state"), proof of work has significant harmful externalities.
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