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It's time for an inequality index for cryptocurrencies distribution

news.ycombinator.com

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Re: It's time for an inequality index for cryptocurrencies distribution

#11

Post by chrisco255 »

smoldesu wrote: post #5

> This concentration not only risks to threaten blockchain's own premises, but also exposes minor investors to risk of whales who lead the market and can easily speculate on prices since they can influence the price trends The problem is that you can only associate value with a wallet, not an individual, and even that doesn't really make the market any safer; it just further exposes how terrible cryptocurrency is as…

Price is a function of supply and demand, so trying to isolate one or the other doesn't make sense.

Why does it matter how many people are associated with a particular wallet? The wallet with $150 worth of Bitcoin has the same amount of security as the wallet with $15M, and it's considerable. The protocol itself has never been hacked, despite holding nearly $1 trillion of value.

Re: It's time for an inequality index for cryptocurrencies distribution

#12

Post by PeterisP »

Meh, since there's no hard registry of identities of owners, if someone would make and popularize an inequality index, that index would simply be gamed (e.g. by artificial splitting of accounts) to show whatever is most beneficial to show, as soon as a gameable metric is used for a practical purpose (e.g. making better investment choices), it ceases to be useful for that purpose as it gets manipulated, see Goodhart's law https://en.wikipedia.org/wiki/Goodhart%27s_law .

Re: It's time for an inequality index for cryptocurrencies distribution

#13

Post by atmosx »

> This concentration not only risks to threaten blockchain's own premises [...]

BTC was designed specifically to avoid any kind of _state control_ and by _state control_ I mean something along the lines of a central bank. Adding protections here and there will inevitably lead to a system that is similar to current financial system with all the bells and whistles.

I think you're missing the point: BTC tries to sell lack of any kind of control (or protection, however you want to call it) as a _feature_.

Re: It's time for an inequality index for cryptocurrencies distribution

#14

Post by RichardHeart »

You're describing the Gini coefficient. Here's an article on why you shouldn't overuse that: https://vitalik.ca/general/2021/07/29/gini.html That being said, 42% of all Bitcoin sits in 2100 addresses. Google "Bitcoin rich list" and you'll also be able to look on that site at other coins as well. People will point out that those are exchanges representing users. And I'll point out, crypt was invented to remove middlemen and exchanges are middlemen.

Re: It's time for an inequality index for cryptocurrencies distribution

#15

Post by EGreg »

chrisco255 wrote: post #7
nbaksalyar wrote: post #2

> 95% of Bitcoin is owned by 2% of accounts The problem is, how do you measure this reliably? I'd wager that a large chunk of 95% of Bitcoin is either irrevocably lost or owned by Satoshi (estimate is at "between 750,000 and 1,100,000 bitcoin" -- and arguably these TXs will never be spent). Simply put, there's no way to differentiate between coins that are just sitting there unspent and coins which no one can access…

The bigger problem is that addresses are not measures of people. A lot of addresses are purposely generated as throwaway accounts, never to be used again. A single person may have or use dozens of wallets. Or a single wallet may be used by a large exchange which represents thousands of depositors.

So much for Bitcoin’s vaunted decentralization. In fact the inequality is probably far more pronounced. Since multiple accounts can belong to one organizatipn - but not the other way around :)

PS: if a bitcoin wallet belongs to one centralized exchange, it’s still under centralized control!

Re: It's time for an inequality index for cryptocurrencies distribution

#16

Post by micromacrofoot »

atmosx wrote: post #13

> This concentration not only risks to threaten blockchain's own premises [...] BTC was designed specifically to avoid any kind of _state control_ and by _state control_ I mean something along the lines of a central bank. Adding protections here and there will inevitably lead to a system that is similar to current financial system with all the bells and whistles. I think you're missing the point: BTC tries to sell la…

so instead we have “not banks” that are less accountable?

Re: It's time for an inequality index for cryptocurrencies distribution

#17

Post by [deleted] »

nbaksalyar wrote: post #2

> 95% of Bitcoin is owned by 2% of accounts The problem is, how do you measure this reliably? I'd wager that a large chunk of 95% of Bitcoin is either irrevocably lost or owned by Satoshi (estimate is at "between 750,000 and 1,100,000 bitcoin" -- and arguably these TXs will never be spent). Simply put, there's no way to differentiate between coins that are just sitting there unspent and coins which no one can access…

[deleted]

Re: It's time for an inequality index for cryptocurrencies distribution

#18

Post by maxwell86 »

micromacrofoot wrote: post #16
atmosx wrote: post #13

> This concentration not only risks to threaten blockchain's own premises [...] BTC was designed specifically to avoid any kind of _state control_ and by _state control_ I mean something along the lines of a central bank. Adding protections here and there will inevitably lead to a system that is similar to current financial system with all the bells and whistles. I think you're missing the point: BTC tries to sell la…

so instead we have “not banks” that are less accountable?

bitcoin has no banks, period.

Re: It's time for an inequality index for cryptocurrencies distribution

#19

Post by howdydoo »

Many BTC addresses are owned by companies (e.g. exchanges, trusts, etc) and not by individuals. The Gini coefficient only looks at individuals, not companies. In other words, it doesn't treat Google as a person and compare its wealth directly to yours. So you can't directly compare those numbers.

Re: It's time for an inequality index for cryptocurrencies distribution

#20

Post by howdydoo »

RichardHeart wrote: post #14

You're describing the Gini coefficient. Here's an article on why you shouldn't overuse that: https://vitalik.ca/general/2021/07/29/gini.html That being said, 42% of all Bitcoin sits in 2100 addresses. Google "Bitcoin rich list" and you'll also be able to look on that site at other coins as well. People will point out that those are exchanges representing users. And I'll point out, crypt was invented to remove middlem…

Crypto isn't intented to remove middlemen. It's intended to give people the choice of who to trust. People can choose to trust an exchange, or to self-custody, and deal with the consequences in either direction.

If I choose to self-custody, it's much safer to memorize a seed phrase than to store cash in my mattress. Most people don't bother and use banks. But I think it's good that people now have a choice in the matter.

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