>People .. ridicule cryptocurrencies, dismissing bitcoin as a scam, a Ponzi scheme or a bubble.
>Wealth disparity is at record levels and the ultrarich have cornered the market on every asset class, but with bitcoin, an entirely new economy has sprung into existence. That's the pitch for decentralized cryptocurrencies: They offer hope that there might be another, fairer way of doing things.
The irony here is Bitcoin, like most other cryptocurrencies are structured similar to a pyramid scheme and highly favor existing capital to control the supply and exploiting users who join the network past a certain date where barrier to entry increases.
They tell the story of acquiring this digital asset for a small capital sum, and simply passing it off to someone else for a greater sum. The intention is not utility but psychological exploitation of greater fools.
Best estimates (2014) are that there are
about one million holders of
Bitcoin; 47 individuals hold about
30 percent, another 900 hold a
further 20 percent, the next
10,000 about 25% and another
million about 20%, with 5% being
lost. So 1/10th of one percent
represent about half the holdings
of Bitcoin and 1 percent close to
80 percent
Part of the irony around bitcoin is that some of the early users of Bitcoin are from the Occupy Wall Street movement. We all remember hearing them request donations via btc, people giving thousands of btc for them to buy pizzas.
I think (entirely without proof) it's likely that many of these organisers were/are holding large quantities of bitcoins themselves and have become unwitting millionaires.
I haven't heard anybody mention this before, but I'm very curious to know if this bears any grain of truth. If the people who led rallies against the top 1% suddenly find themselves deep inside that 1% tail.
> I think (entirely without proof) it's likely that many of these organisers were/are holding large quantities of bitcoins themselves and have become unwitting millionaires.
I suspect (no proof either) many early bitcoin adopters sold most of their bitcoins long ago. They cashed out when their capital reached a significant amount, long before becoming millionnaire. For instance, I suppose that if today my BC portfolio were worth $5000, I'd sell them (because I certainly would not buy $5000 worth of BC today if I had none).
Maybe, but does it matter? If you made a few million, should you be sad because you missed out on a few more?
The first (few) million are life changing. But the difference between 20 and 100m is flying private and owning a yacht vs flying first and chartering one for the week.
Another way to look at it, especially for someone who got into bitcoin early because of their politics, is that the difference between 20 and 100m is the difference between being able to make enough donations to influence a politician, and buying the New Republic and influencing the conversation (though such plans don't always go so well [1]). At billions, you can think about buying the Washington Post.
Not really. It wholly fulfills being financially responsible through this basic tenet -- buy low, sell high. Few asset classes can appreciate in value as astronomically as BTC and it would be prudent to overcome sellers' remorse.
Some may regard "going long" as the bedrock of strategic investment and realizing short-term gains is erroneous, but few will put it towards their retirement. There's absolutely nothing wrong with liquidating assets for life purchases (or even vanity projects (within reason)) rather than dutifully drawing down for one's twilight years.
The question is, can you actually cash out thousands of bitcoins these days? Would any exchange support that and then would you be able to get your money into your actual bank account.
You still have to pay your taxes but cashing out a few thousand BTC on one of the large exchanges can be easily done. 24 hour volume at bitfinex is $781MM so you would have to dump a lot of coin to move the needle. A multi-thousand coin sell all at once can cause a brief flash crash though. If you have tens of thousands of coins you go to the OTC market.
I mentioned this before, but one of my former colleagues quit to trade BTC and claimed he could account on some days for 10% of exchange volume.
No idea which exchange.
But his trading activity as far as I understand were on-average neutral (not net long or short). Though I think he also kept a bunch himself too.
So volume alone does not imply the exchange could absorb a large one-sided addition of sell orders without significant move in spot.
Also it's unclear if any of this volume is 'churning', by those with significant quantities of BTC happy to pay transaction fees to create a sense of false liquidity.
Definitely. I did see someone dump 1000 BTC on finex the other day though, and while it did cause a ~$1000 dip they were bought up in a few minutes. Like you say though, there's no way of knowing if the buyers were third parties or the seller rigging the order book (although I don't know how one could have much control over a transaction like that without having control of the exchange itself, but exchanges faking volume and manipulating the price is par for the course in bitcoin land).
> We all remember [...] people giving thousands of btc for them to buy pizzas.
I've heard a story of one individual on a forum ordering someone two Papa John's online in return for another forum member sending them 10,000 bitcoin (or something like that) but I've never heard of people sending thousands of bitcoins to "occupy wall street" (who, exactly?) so they could buy pizzas. Where do you remember hearing that?
> I've heard a story of one individual on a forum ordering someone two Papa John's online
That was the famous bitcoin pizza[1][2] (worth $120,000,000 as of this writing), and it is believed to be the first real-world purchase using bitcoins.
I'm not one for all that "if you bought $100 of bitcoin in 2013..." stuff, but wow, that first sentence...
Though I guess if he had 10,000 to blow like that, he probably had a lot more, and probably isn't short of a few now. (Hopefully anyway.)
I think I'd rather be someone who paid 10,000 for two pizzas though (which I assume was more or less the going rate in 2010), than being one of the people who didn't or couldn't take him up on the offer - two days later and nobody had done it.
I don't know about Occupy Wall Street specifically. But I do suspect that many of the Bitcoin 1% have cryptoanarchist roots. The smart ones have diversified, of course. Maybe they'll do some good. Whatever that is. It's hard to tell, anymore.
It's also very ironic if you think that in the bitcoin based economy you have to pay more than half of your groceries cost to the transaction itself. Bitcoin is inferior, it is for speculators, no longer for the idealists I count myself among.
Yesterday I wanted to install bitcoin core... the blockchain is 153 GB and will eat CPU for days to validate everything. It's crazy. If I look at my early transaction history, I transferred mere euros around and they arrived and were confirmed in seconds/minutes. Unthinkable now. We need something else.
> Yesterday I wanted to install bitcoin core... the blockchain is 153 GB and will eat CPU for days to validate everything. It's crazy.
It's not crazy when you realize that you've verified that you own your coins and that the money supply is correct without having to trust anyone. And all you had to do was commit some disk space and CPU cycles.
> Unthinkable now. We need something else.
As soon as that "something else" becomes as popular as Bitcoin, it will suffer the same issues.
It was my understanding that doing this contributes to the decentralized character of Bitcoin and helps confirm transactions (I may be wrong). If so, this is now nolonger something mortals can do. Yeah, perhaps, call it altruism. I contribute some CPU cycles on my server to balance the power of the network. Or am I misunderstanding? Is it all about the miners?
Bitcoin mining is dominated by ASIC farms. You'd make more of a difference running a node for an ASIC-resistant coin. (Or by saving energy and not mining at all.)
Your source uses poor methodology to calculate inequality, and is really outdated.
The 2014 article you're citing uses this 2013 article [1] as a source. This uses data from bitcoinrichlist.com, which contains balances for all active bitcoin addresses at the time.
This sort of blockchain analysis isn't super useful, especially in 2017, because some extremely-rich people have funds in multiple addresses and some extremely-rich addresses contain funds for multiple people.
The richest bitcoin address in 2017 has 1.8B worth of bitcoin, but it's the cold storage address for hundreds of thousands of bitfinex users [2]. It's possible that many of the other addresses on the richlist are coinbase vault addresses or cold storage addresses for other custodial wallets. The important part is that, with some publicly disclosed exceptions, we don't know if a rich address belongs to a single person or an organization.
Meanwhile, the poorest addresses contain UTXOs worth pennies that cost more in fees to send than they're worth. These addresses have been completely abandoned by their users and have no practical owner.
Even addresses with a spendable balance don't correspond to one user ever since Hierarchical Deterministic address generation has become the standard. HD wallets generate a new address for every incoming transaction for greater privacy [3]. A typical user may have their funds spread over dozens of addresses.
That being said, I'm sure wealth is highly concentrated in the bitcoin ecosystem: it's just very hard to quantify to what degree it is.
Disclaimer: I hold bitcoin and some other cryptocurrencies.
One public key contains 1.8B USD, but take a look at the address again:
3D2oetdNuZUqQHPJmcMDDHYoqkyNVsFk9r
See how it starts with a 3? Most normal bitcoin addresses start with a 1. The 3 means that it's a pay to script hash address, which means that its likely a multisignature address.
Multisig addresses require multiple signatures to send funds. This could be two out of three possible signatures, seven out of seven possible signatures, fifty out of one hundred possible signatures, it all depends how it is configured.
In short though it kind of works like nuclear weapons where you need multiple keys help by different people to authenticate a transaction.
Instead of the speculative market, why hasn't any of the coins been pegged to a currency like USD or Swiss franc so that it can actually be used more as a currency?
I've read a little about Tether, and that some of the others in this category have failed. Is it a difficult space because it needs some sort of regulation / management vs the decentralization that is promised by cryptocurrencies?
Well, that's why I was posing the question to you since you seemed more knowledgeable about all this. I've only started to take time to catch up on this since the past weekend. Not to invest/speculate in the currencies but I figured it was time to learn more about the blockchain technology itself.
Re: Tether - I had only came across that they were 'hacked'. Didn't know anything about fraud. Thanks for the link.
That maybe true of Bitcoin Core today but that isn't the vision expressed in the original Bitcoin. The true spirit of Bitcoin lives on today in Bitcoin Cash.
All versions of Bitcoin share the exploitative inverse log curve for distribution and work input.
Bitcoin cash further changed the difficulty algorithm to benefit ASIC miners during a very brief window of time. Fees are reduced, and bandwidth has increased but the same design flaws are shared from Satoshi's algorithm.
That’s not what it’s about now. Obviously these digital tokens are a great medium for speculative gambling.
Among the many problems of bitcoin as money, is the speculative aspect increases price volatility, which reduces utility as currency.
The bizarre thing to me is that bitcoin is a (less than) zero sum game. Meaning the funds for someone’s new Lambo came from others, who instead of having a new Lambo, or shirt, or food, now have “ownership” rights to a digital token.
I have a hard time believing that non-owners are going to be happy just handing over real wealth to those prescient enough to buy bitcoin.
On the other hand, the mania of speculative bubbles can drive insane valuations, ultimately resulting between transfers of wealth.
In the mortgage backed securities, the losses to the losers were so catastrophic, that they were socialized to a degree, and taxpayers wound up footing part of the bill.
If you think about that, that every loss for someone, is a win for someone else, the winners in the MBS game truly made out like bandits.
This bitcoin mania can run a long time, but the higher the price goes, the less likely it will be adopted for its ostensible purpose.
The hash power that left BTC for BCC momentarily around early November was conveniently 60%.
One can imagine the ability of China to mobilize capital infrastructure to dominate mining space, especially when they're manufacturing all the bitcoin ASIC hardware.
It seemed like there were grave concerns once ASIC hardware hit BTC, locking normal people out and introducing an attack vector disproportionately favoring existing capital to take over the network.
I have run into AnCaps whose opinions I respected, but I've never quite been convinced that their version of the world is sufficiently selective for compassion.
The contending decentralized consensus algorithm is called Proof of Stake, and it works by giving you lottery tickets based on how much wealth you already have.
PoS coin supplies should be avoided, as the production cost or input work is not worth the speculative asset produced.
XRP is a case study in how they've created artificial scarcity and can flood the market with sell orders from their reserves.
They could also just have a centralised service validating transactions. No need to mine, no need for stake. Not exactly a traditional cryptocurrency at that point, but in day-to-day use no different (and rather more attractive to political regimes like Maduro's.)
Funny how this sort of subsidy is how Ponzi schemes were partially inspired by
onzi received a letter from a company in Spain asking about the advertising catalog. Inside the envelope was an international reply coupon (IRC), something which he had never seen before. He asked about the IRC and found a weakness in the system which would, in theory, allow him to make money.
The purpose of the postal reply coupon was to allow someone in one country to send it to a correspondent in another country, who could use it to pay the postage of a reply. IRCs were priced at the cost of postage in the country of purchase, but could be exchanged for stamps to cover the cost of postage in the country where redeemed; if these values were different, there was a potential profit. Inflation after World War I had greatly decreased the cost of postage in Italy expressed in U.S. dollars, so that an IRC could be bought cheaply in Italy and exchanged for U.S. stamps of higher value, which could then be sold. Ponzi claimed that the net profit on these transactions, after expenses and exchange rates, was in excess of 400%. This was a form of arbitrage, or profiting by buying an asset at a lower price in one market and immediately selling it in a market where the price is higher, which is completely legal.[8]
>Wealth disparity is at record levels and the ultrarich have cornered the market on every asset class, but with bitcoin, an entirely new economy has sprung into existence. That's the pitch for decentralized cryptocurrencies: They offer hope that there might be another, fairer way of doing things.
The irony here is Bitcoin, like most other cryptocurrencies are structured similar to a pyramid scheme and highly favor existing capital to control the supply and exploiting users who join the network past a certain date where barrier to entry increases.
They tell the story of acquiring this digital asset for a small capital sum, and simply passing it off to someone else for a greater sum. The intention is not utility but psychological exploitation of greater fools.
http://bitcoin.stackexchange.com/questions/86/is-it-possible...
http://www.businessinsider.com/bitcoin-inequality-2014-1