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

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

#441

Earlier quoted context omitted.

The Dollar isn't money, it doesn't function as such. It can't store value very well. Its a federal instrument, and its value is adjusted by the Federal Reserve, which pretty much everyone agrees is incredibly fraudulent.

Let's play a game. You get one bitcoin and I get the dollar value. Let's see who can obtain more goods in 1 hours with it.

Let's play a game. You get one dollar and I get the bitcoin value. Let's see who can obtain more goods in 20 years with it.

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

#442

Earlier quoted context omitted.

Where do you think the original capital came from? When you buy shares of AAPL, you paid ordinary rates on income which you used to buy the shares.

And? You don't pay capital gains on that. You pay it on the increase relative to the original cost to you (which you payed with already-taxed money). Why shouldn't the increase be taxed same as any other income? Or more, actually, since it's not earned by productive labor?

Capital gains arises (on average) when a company grows and thus makes more money. Corporations pay corporate tax on those profits. Why should my share of those profits be taxed again at the individual level?

Additionally, the higher the capital gains tax, the higher the expected returns have to be. Lower capital gains incentivizes riskier investment, which, within reason, is a net positive for society.

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

#443

Earlier quoted context omitted.

Let's play a game. You get one bitcoin and I get the dollar value. Let's see who can obtain more goods in 1 hours with it.

Let's play a game. You get one dollar and I get the bitcoin value. Let's see who can obtain more goods in 20 years with it.

Let's play a different game. I get a dollar and you get the bitcoin value. Then each year, a random number is generated between 0 and 1, and if the number is more than e^(-1.5t), then each of us spends the dollar on a basket of goods and the game stops. We compare, after fees, who ends up getting more goods to decide the winner.

Average velocity of money is 1.5.

https://www.thebalance.com/velocity-of-money-3306130

If you want to compare the usefulness of a bitcoin as an investment locked up for 20 years, then don't compare it to cash, which is used for day to day expenses. The whole point of cash is to spend it whenever you want.

It's fine if you view bitcoin as an investment. But then your alternatives are other investments.

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

#444
This is a good article, that hopefully can lead to some insightful discussions.

One thing the article or some people interpreting the article miss is that miners actually don't control the future of bitcoin as much as they think. From 2017 we actually know that the people running the nodes have more power then the big miners - because the biggest miners back then were not able to push the protocol changes (like block size) through - because nodes just didnt validate/accept those new blocks. So in the end the end user decides.

This is true for changes to the protocol or code, it is not true for doing fraudulent transactions within the current protocol version. So colluding miners can have impact in that realm I'd say.

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

#445

yup, this has been the way since the beginning. in fact most of the alt coins are the same way. and its super obvious that its being manipulated by those with the largest amounts. the market is too immature. the financial gene pool is too shallow.

Can you explain how someone that owns an altcoin is manipulating it?

If they only have the altcoin then all they can do is sell. Its not like they can manipulate the price upwards unless they have additional assets.

For some market participants they have multiple pools of capital. But the mere existence of consolidated ownership doesn't mean its manipulated because that alone doesn't make sense?

Curious if you could articulate the process you imagined. I've seen your version of events mentioned alot on twitter, discord, telegram and similar threads, but its just like the reductive "must be money laundering" comment also often seen, how does that work exactly?

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

#446

Earlier quoted context omitted.

Miners have known since day one that PoS was the goal. I find no fault in bootstrapping with PoW.

You're rewriting history here (ironic, in a discussion on blockchains, isn't it). It was “ likely ”[1] to happen in the long run. And the change wasn't part of the protocol itself, its development and schedule where done behind close doors in a centralized way. And it's not even the biggest example of centralized decision to override what the protocol guaranteed: after the DAO “hack”, they tampered with the blockchai…

What I said is not rewriting history at all. It literally says it in the document you quote:

"Note that in the future, it is likely that Ethereum will switch to a proof-of-stake model for security"

It doesn't get more clear than that.

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

#448
post #394

Earlier quoted context omitted.

The people of El Salvador would appear to disagree.

I'm not so sure about that but it would be interesting to see a poll. Pretty ironic to bring up a major example of state control of currency as good example of Bitcoin adoption.

The post I replied to was about the viability of Bitcoin being a currency

I made the point that it being used as a currency, right now

Discussion about the morality of legal tender laws is another matter

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

#449
post #440

Earlier quoted context omitted.

People who have little, have little to lose in an inflationary environment. People who have any meaningful quantity of means invest them, and any investment other than holding a fist full of cold hard dollars isn't affected by inflation, although its real return may vary depending on how the underlying performs. Further lower income folks tend to have a disproportionate amount of their net worth in debt instruments,…

Actually, no, that's exactly what causes hyperinflation, _by definition_ - a drastic increase in money supply, done to mask the fact that the economy is contracting. You don't go from this [1] to this [2] without the use of a printer. And there are only so many "assets" you'll be able to buy if there's a run on assets - their prices launch into the stratosphere immediately in this situation, and then they just disapp…

That's not an accepted definition anymore. An increase in the money supply is just that - an increase in the money supply. Inflation is a measured increase in prices of a basket of goods. Those two are not the same thing - although the former can contribute to the latter. It does not have to, though, and certainly not 1:1. There's many reason prices go up: supply chain disruptions, for instance, and change in tastes/demand profile - or externalities like taxes, zoning and regulation. The idea that a supply increase alone represents inflation is a long-discarded Austrian economics principle.

In part because what you do with that money matters. Personal saving rates are near all-time highs, and velocity near all-time lows, meaning that new money? It's not actually moving through the economy and therefore not contributing to a secular increase in prices, or a reduction in purchasing power. This is why measurement matters. [1, 2]

The money supply wasn't increased to "mask" a contraction in the economy, it was done to avoid a deflationary spiral thereby preventing the economy from contracting further and allowing it to recover. The economy did in fact recover in part as a result of the influx of capital. You can see this in reduced unemployment rates and increased GDP in real dollar terms.

The money supply today is controlled via fractional reserve lending wherein a loan creates both new money in circulation and an obligation to repay that debt. That means all new money that's created is fully backed by demand for that same money. As that loan is repaid the money blinks out of existence. The Fed has the capability therefore to reduce the money supply by simply increasing interest rates. This in turn decreases demand for new loans, and causes a net reduction in outstanding supply as the existing loans are repaid.

What you're describing isn't a bet that an increase in the supply will lead to hyperinflation but rather a bet against the Fed's tool chest. That's not one I'd personally take, but to each their own.

What you saw in your [1] and [2] isn't an isolated increase in supply leading to massive inflation - after all, they'd just, you know stop - but rather political instability causing the population to reject the currency as I described in the post to which you responded. It's far more nuanced than you're making it out to be as you can see for yourself. The M2 supply doubled in 2020 but prices are up, what, 5% YoY - even after massive supply chain disruptions and tons of re-opening demand chasing limited supply? The M2 supply exploded after 2008 but inflation once again did not. The M2 supply is something like 30X now what it was in the 1970s but prices are 8X higher. Your model cannot account for this, and is such, it is broadly no longer accepted as it is obviously, observably incomplete.

> What will happen to the stocks (which most people on this site feel "protected" by owning) I don't even know.

You can research this, as there are countless examples in other world economies. Companies that provide necessities will continue to exist, as they do in Venezuela, and they will retain some value - or even grow in real dollar terms, depending on the industry. Some will collapse. Venezuela has a stock exchange, after all.

However, at the end of the day, it's incredibly, incredibly unlikely that hyperinflation will occur in any primary reserve currency anywhere in the world due to demand for that currency both at home and abroad. If it did, guns, ammo, canned food and potentially gold would the be the currency of choice. Requiring an internet connection and all the world's power and semiconductors to transact? Not so much, in a Mad Max-esque dystopia. You can't use Bitcoin in NK right? What makes you think you'd be able to use it in post-apocalyptic Kansas?

[1] https://fred.stlouisfed.org/series/PSAVERT

[2] https://fred.stlouisfed.org/series/M2V

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

#450
post #291

Earlier quoted context omitted.

> The top 10% of miners control 90% and just 0.1% (about 50 miners) control close to 50% of mining capacity This is incorrect. Replace "miners" with "mining pools" and they're closer to the mark. What's happened is that the block construction (done by the pool operator) and the PoW (done by miners) are mostly decoupled. Some miners will run everything themselves, but they're not represented in those numbers. (There a…

> This is incorrect. Replace "miners" with "mining pools" and they're closer to the mark. It is correct. They are talking about miners not mining pools.

Thanks for pointing that out and unfortunate that I misrepresented it, granted I didn’t read the article properly. As they note themselves it is a best-effort estimation based on publicly available data. Without digging into the data and methodology further, I’m assuming that they are probably at least in the right order of magnitude.

One thing I’m noting is that they exclude ~70% of miners and assign ~30% as exchange miners (note that those two figures only coincidentally add up to 100%). One possible methodology error I can see (and again, further digging would have to be done to verify) is that exchanges often pool their user wallets together; it could be that for some exchange(s), they mistakenly lump together several users as one. Since their claimed concentration is very high, it should be feasible to look at the top 50-100 to cross-check.

Would be awesome to get more research like this.

Overall it’s an insightful article and the authors show great understanding.

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