It will be interesting to see Bitcoin sentiment shift as newcomers realize that the bulk of Bitcoin value is held by a small handful of early adopters, and that the bulk of Bitcoin mining capacity is held by a small handful of large mining companies.
Cryptocurrency proponents are trying to get ahead of this by reframing Bitcoin as the people's currency, or an opportunity for average people to get rich while sticking it to evil governments. It's interesting to watch people with $1000 of Bitcoin in their Robinhood accounts feel like they're on the winning end of this deal when they see their $1000 investment go to $1300 in the span of a week.
So much of the investment frenzy is driven by "what if" scenarios where Bitcoin takes over the world and that $1000 investment eventually makes early adopters millionaires in the new Bitcoin world order. The problem with that hypothetical endgame is that reallocating the world's wealth according to how early someone went all-in on a cryptocurrency gamble (and how much capital they had to invest at the time) would create inequality at unimaginable scale, not to mention completely disconnecting wealth from societal value creation. Our current market-based system isn't perfect, but a hypothetical Bitcoin economy would be downright absurd. If we end up with a crypto economy, it won't be underpinned by a currency where people switched over at values ranging from $0.01 to $1,000,000 per coin.
Comparing the Gamestop fiasco to Bitcoin, Gamestop just looks like normal market activity, where Bitcoin looks like criminal pump and dump activity... in my opinion.
But bitcoin has been "pumped and dumped" so many times now that most of the people who were early investors have already cashed out long ago.
What you are left with now is all the people who bought the bitcoin after it had already been pumped and dumped, and they aren't willing to sell it for less than they bought it for.
This means that the perceived value of the asset is now based on the notions held by millions of people who are holding and don't want to sell.
So I as a parent from the fruit of my labors have no right to help my children through life?
Also please note most millionaires in the world are self made, with over 80%. Of the other 20% most made it to millionaire status before receiving an inheritance. Also note the people you most worry about, the ones who get money young, usually plow through it and leave nothing for their children.
I am aware that they are two separate thoughts but they don't, to me, conflict with each other. The main theme of both of them was to not worry about what others get from their parents.
The first was recognizing that that inheritance mostly came from the labors of someone and they have a right to do with their money as they see fit. The second is acknowledging that the person who didn't work for their wealth usually squanders it so don't waste time being jealous of them.
So focus on being the person who creates wealth for themselves and try to educate your children so they will have good money habits later on in life and will squander less of what you leave them.
I want to put this out as a thought experiment. Given that current taxation policy is primarily derived from incomes, and an inheritance is by strict definition an income, then wouldn't it make sense for all incomes to be taxed equally?
I'd be more sympathetic to inheritance if the primary source of taxation was wealth.
The notion that over 80% of millionaires in the world are self made is completely ridiculous. Just because you didn't receive large swathes of money doesn't make you self made. Growing up in a secure environment, where you don't have to worry about having a job while you finish high school, where you don't have to worry about not being able to go to college. Where you don't have to worry much at all about anything aside from your future. With a good education brought by your parents. Hell, just being taught financial literacy.
Unless someone was born into poverty and fought their way out, I don't count them as self made. No doubt these people exist, but it would never be 80%.
That sounds like a classic "no true Scotsman". By poverty, do you mean under the United State poverty threshold over ~$12k/year? Because that's an average middle-class income in much of Eastern Europe. There the poverty threshold is much lower, but would also be considered middle-class in India.
There's also a stronger social safety net in many countries that are poorer than the US, where you certainly don't have to worry about not getting to college (if you have good enough grades) due to family income.
Binary categories such as "self-made" vs "not-self made" fit poorly in the real world and suffer due to each individual having a different threshold of self-madeness. For some people it means not having directly inherited a lump sum, for others it means having made every single cent without outside help.
> Because that's an average middle-class income in much of Eastern Europe. There the poverty threshold is much lower, but would also be considered middle-class in India.
I honestly wanted to believe you were making an off the cuff uninformed remark, so I did a little digging and found this gem:
Holy Christ it is worse than I imagined. Wow I never realized there was such a STARK difference between Western Europe and Eastern Europe with regard to wages. WOW.
You're defining "self made" to fit a very narrow definition. All the things you say are true to an extent, but it's not black-and-white. Would you consider Bill Gates self made, considering the magnitude of his achievements, etc?
Not only did he have the advantages that access to a computer in the 70s had, his dad's lawyer helped him with a good contract, and his mom set him up with the chairman of IBM
But the key thing is if he'd failed, he had a cushion to fall back on. Had Microsoft gone the same way as many other computer companies, he could be confident he wouldn't end up on the streets.
But he succeeded... and created something worth many orders of magnitude in value compared to what he started with... I think that still counts as self made.
Who lamented making $400 instead of $13k back in 2011. Those coins would today be worth about $95m, but there's no way he'd have kept them -- same as the buy who bought the pizzas (or the guy who sold them)
> Bitcoin value is held by a small handful of early adopters, and that the bulk of Bitcoin mining capacity is held by a small handful of large mining companies.
Yes. So what? I don't think the typical Bitcoin proponent is the kind of person to get outraged at Pareto distributions. They are against governments, they don't hate wealthy people just for being wealthy.
> The problem with that hypothetical endgame is that reallocating the world's wealth according to how early someone went all-in on a cryptocurrency gamble (and how much capital they had to invest at the time) would create inequality at unimaginable scale, not to mention completely disconnecting wealth from societal value creation.
How is that different from having invested in Amazon, Google or Apple in the early 00's?
Bitcoin (and other cryptocurrencies) does bring value to our society as a store of wealth that's not easy for governments to control.
It's funny how people keep saying this as if it's true. 99% of the market isn't buying crypto to "store value". This along with the idea that somehow it's a great currency bcs "no gov't" etc. is also a lie no one believes. Most of the market isn't actually making real-world transactions or storing value but somehow other people will start doing it in the future for some reason so gainz etc.
> Bitcoin (and other cryptocurrencies) does bring value to our society as a store of wealth that's not easy for governments to control.
My personal take on this is that it's a temporary state of affairs. You might draw an analogy to the wild west of the Internet in the past, or e-mail. As Bitcoin goes mainstream, if it does, you will see familiar institutions built on it including fractional reserve banking that honor all the comfortable consumer things if you remain within their system.
>Yes. So what? I don't think the typical Bitcoin proponent is the kind of person to get outraged at Pareto distributions. They are against governments..
The problem here is equality. People invented and see bitcoin as a "store value" because they want to protect themselves from the inequality being forced upon them from governments printing fiat. As so, your idea that people:
>don't get outraged at Pareto distributions
is in contradiction to
>Bitcoin (and other cryptocurrencies) does bring value to our society as a store of wealth
After all, if people weren't outraged at Pareto distributions why would it matter to them to store their wealth?
To reiterate, the greater point being made is that bitcoin ultimately won't solve anything regarding inequality. Adopting bitcoin isn't going against the man, it's just shifting who the man is from being "the government/FED" to "crypto exchanges/peddlers/other earlier hoarding crypto entities". With time people will come to hate such authorities just as they've come to hate the government. I mean just look at how people hate on mature big corps like Google these days, when many gave it fonder thoughts during it's earlier days... Bitcoin will be no different.
Your problem with this hypothetical endgame is an appeal to fairness.
I understand why you'd want that, fairness is a strong human instinct, but I don't see where it has any bearing on the likelihood of this future occurring.
People don't enjoy having a high number in their accounting system, they enjoy being wealthy. If, say, African central banks start purchasing BTC, and India joins them, early adopters will cash out at whatever value makes them feel like they got their money's worth. Some people will only trade for real property. Some are in a position to hodl until they can buy a whole cruise ship or whatever.
Or they could lose it all when BTC crashes to the natural value of any completely hypothetical asset, which is zero. This still seems more likely to me than central banks taking up a position in BTC, but sadly, I lack the ability to predict the future.
Is it really that different from buying the first iPod, and thinking to yourself, "y'know this is a brand new Apple, I'm putting a few thousand bucks into their stock"?
"Or they could lose it all when BTC crashes to the natural value of any completely hypothetical asset, which is zero."
It'll be interesting who's left "holding the bag" once its the end of the MLM-ponzi scheme of who you can convince to buy into it - save regulatory capture somehow forcing the rest of society to buy into it.
> save regulatory capture somehow forcing the rest of society to buy into it.
That's what happens, some little scheme gets too big to fail, so the taxpayer bails it out. Those that are in the schemes win, those that felt the scheme was stupid lose.
I remember seeing adverts on the London underground for icelandic banks offer 5% more than any other savings account. I chuckled and thought "surely nobody's that gullible".
There were many. Both individuals, who got bailed out by me (the taxpayer), and many councils (who lost money which belonged to the taxpayer)
For 20 years I laughed at these various get quick schemes. Then I realised that they don't fail. Profits are privitised, losses are socialised, and they taxpayer always loses.
When you realise that, you have to look at dodgy schemes in a whole separate light. Sure bitcoin is stupid, but as it gets larger and larger the chance of it failing without bailing out large institutions reduces, meaning the chance of me riding on the coattails increases.
And this is exactly the attitude I have encountered before that's disgusting. Two wrongs don't make a right, you're happy to take advantage of a system that's broken instead of fixing the actual problems - because that takes actual work - instead of just buying Bitcoin which then aligns a whole bunch of financially incentivized MLM propagandists.
> Is it really that different from buying the first iPod, and thinking to yourself, "y'know this is a brand new Apple, I'm putting a few thousand bucks into their stock"?
Yes, the former is just straight up gambling, the latter is investing in a company that makes good products.
Based on the fairness argument of OP, this seems even more dystopian:
1. Buy a 'good product' which only wealthy people can afford
2. Buy stock because exposure to 'good product' implies you could improve your fortune
3. ... hodl
4. Profit
40% of the US can't afford a 400$ emergency. Someone who had arguably more than that has improved their position from hodling... by 400x.
Same thing with stocks. It kills me to hear of people talk about how they "lost money" when a stock they own comes down from a temporary high price. No, you only lost money relative to your hypothetical self who sold at the top of the stock's price.
All the "what if" is always pegged to another currency.
I don't know anyone that prices anything in just BTC (it's all BTC converted from USD or whatever, because anything else would be madness) - and I don't know anyone that doesn't peg their bitcoin to what they'd get if they sold it for "real money".
Which makes me think any endgame isn't going to be the utopian, governmentless, money-freedom future I keep hearing promised.
Not sure if it means anything, but the first thing I do when reading about the price of say some huge tunnel built in Europe is mentally convert the quoted Euro price to USD. Doesn't make the Euro any less real as a currency.
The fact that a European project was priced in Euros suggests that Euros are more of a currency than BTC. Converting to USD is a matter of convenience for you. But within the European economy that same project would have a near comparable EUR price in 12 months as it does today. That is not true for things priced in BTC as the value of the BTC is wildly fluctuating (though generally trending up).
Please find a contemporary (don't look to someone selling alpaca wool socks in 2010 and 2011), stable priced product line in BTC. Anything that I can be confident I will pay +/- 5% of the same BTC for over a 3 month period (I'm deliberately selecting a short period, most currencies are stable for 12+ months at a time when used to price goods and services).
This is all new to me, and I don't have any interest in BTC at all. But volatility and crazy inflation does happen in the realm of real currencies. BTC is unique because it's happening at the start of its existence rather than in the traditional death-spiral. Nor is currency speculation unique to BTC, it happens every day with traditional currencies. But maybe BTC can be forgiven for its volatility since it's such a unique and new concept?
As I understand it at some point there will be no new bitcoin left to mine, and it will just be available as a store-of-value currency -- if I have the concept correct. And the early adopters will be financially rewarded for helping to get it off the ground as they spend their BTC away into circulation.
What point are you trying to make? The question was about paying taxes to the IRS, which is the American tax collection agency. The assertion was that Euro's were acceptable to the IRS while BTC was not, but that actually is incorrect.
I have thought about this as well but realised the following:
Let's say you are Swiss and are trying to buy something from Amazon and everything is priced in Euro - you also have to convert all the prices in your head. Is the Swiss Franc not a real currency anymore?
To "measure" value we need to know the purchase power. People have no feeling for the purchase power of a highly volatile asset. hence most people convert the value to their local currency. We do this with gold/stocks/crypto. there is hardly any "deeper" meaning in that. its just how our brain can grasp what could be bought with X amount of asset Y.
If the stable currency would loos this property we would use another.
Like if the USD would become highly volatile or if there would be hyperinflation people would no longer convert to USD.
there are plenty places where the local currency isn't stable and people convert asset value to something else usually a foreign currency like the USD or EUR.
Silk Road is just one example, there a lot more. Though, you can use logic. Money transfers without governments control is what criminals want the most.
I wouldn't worry, in a world where Bitcoin takes over, the economic logic is such that no power can be used for non-Bitcoin purposes until profitable mining has been arbitraged away. This means that the vast majority of power generation will be dedicated to hashing while the oceans rise and the environment dies. The people with the bitcoin will not find a whole lot to buy for the coins in the wasteland when it all has played out.
Calculation of market cap is interesting, because we (almost certainly) know that a good fraction — as much as 20% — of mined bitcoins are lost forever through accidental key destruction. So you have to adjust this market cap by the remaining, probably liquid, pool.
They guess/assume with some addresses, like Satoshi's or the EC2 instance that was destroyed with the private key and all the customer's funds haven't moved since 2012
Ok, so now I get why Bitcoin is regarded as "deflationary": on long enough timescale almost all bitcoins will be lost this way, and the last man that still possesses his wallet keys will be a trillionaire. /s
It has no relation to transaction volume. It is related to the price of BTC and the block reward every 10 minutes. The higher the price, the more miners compete to find a block. Transaction volume can never increase because they have capped the block size at 1mb.
Good to know, appreciate the explanation. So these estimates that it uses about the same energy as Argentina are probably based on a rather old price and we could get to many multiples of that if the price keeps increasing?
It also depends on the available market for asics. In bear markets, asics are very affordable as miners go out of business but the price can go up quite a lot in bull markets which affects the profitability of buying new machines.
In case you’re interested the two bitcoin forks BCH and BSV have unlimited block size and so energy/transaction validated can scale very well. Eventually all forks will have to rely on transaction fees as the block reward has a halving schedule. If something like BSV succeeds the hash rate and thus energy consumption will be a complicated combination of transaction volume, and variable transaction fees. It will essentially be a race to the bottom to see who can provide the cheapest transactions while still being profitable. I think one should expect much higher energy efficiency than something like Visa just from pure scale and the intense competition.
> The higher the price, the more miners compete to find a block.
But only if it's profitable to miners coming in. Ultimately mining pressures miners into finding cheap sources of electricity. Yes, many just take advantage of subsidies (governmental or environmental) to lower their costs, but as mining difficulty and competition increases inefficient are kicked out.
How is a cryptocurrency with this type of wealth inequality supposed to help the common person?
It's already centralized, thus easy to manipulate. Bitcoin is reproducing the same type of wealth distribution we see in real life. What exactly does btc offer?
I don't understand how one can look at this distribution of bitcoins, where essentially the 1% owns most of it and people conclude that somehow this is different? That this in your favor as a newcomer? To me this looks like if you buy in now, you're going to become a bagholder for the 1%.
Because its proponents claim it's gonna make you rich. That you gotta board this rocket before it takes off to the moon.
A lot of the propaganda I remember about bitcoin is that it was going to help bank the unbanked. What I see about btc is that people will tell you anything to get you to buy. The goalposts get moved and depending on who you talk to: "it's a store of value, no it's like a stock! No it's a currency! No it's the instrument of world peace!"
Every time I go through comment sections it's like a magic 8 ball is coming up with the arguments in its favor.
All I see is that data above, about how heavily centralized bitcoin is. What's the reason to buy into something that's heavily weighed against you?
The distribution of capital allocation doesn’t change by adopting a non-central bank based monetary system.
The thing you can choose is who is doing the capital allocation: Satoshi / Winklewoss brothers / Chamath / Elon Musk / Michael Saylor, or Trump / Biden / Putin / Christine Lagarde.
If you like Biden and Jerome Powell, keep your money in USD. If you like Putin, buy RUB. If you prefer the libertarian crowd, buy Bitcoin. If none of this is good there are socialist cryptocurrencies as well for you to choose from or you can create your own.
Governments and central banks can and do make it a lot better by being able to print money and run social welfare programs off them, apart from taxation and other revenue. That's the reason that even gold producing countries have moved off the gold standard. Runaway deflation is as scary and catastrophic as runaway inflation seen in Zimbabwe.
Let's zoom out a bit. Is btc a currency or a stock or a store of value? Because depending on what you believe it is it will change how the discussion goes from here.
As a currency, which is what you mentioned, btc is awful. It's deflationary so nobody wants to spend it, it's volatile so you can get fucked in a transaction by the time it settles, and if you do spend it you have to pay a transaction fee. And where's the upside from all this pain? Nothing, cash is good enough.
If it's a store of value or a stock, then you should be absolutely worried about how it's distributed. Because based on that, it looks a lot like a ponzi scheme to me.
> If it's a store of value or a stock, then you should be absolutely worried about how it's distributed. Because based on that, it looks a lot like a ponzi scheme to me.
I don't follow this logic.
A ponzi scheme requires new entrants to pay out the previous ones at a higher rate so as to generate promised returns.
I'd expect this to spread out bitcoin ownership as previous whales ducked out while leaving the new entrants to holding the bag.
A high level of BTC concentration, then, would seem to be a counter-argument to the claim it's a ponzi.
What am I missing?
(BTW, I also think the basic analysis is incorrect--a large reason why BTC is concentrated in a small number of addresses is because most people don't hold their own BTC, but rather allow an exchange to hold it for them)
> Bitcoin is reproducing the same type of wealth distribution we see in real life.
That would be the best it can hope for. But it's very far from that. Just consider that one person (Satoshi) holds ~10% of all bitcoin. Or 2 other people (Winklevii) holding a few %.
The poor distribution is amplified by bitcoin being deflationary and emitting half in just the first 4 years (3/4 in the first 8, etc). A coin with a pure linear emission would at least keep eroding any wealth inequalities.
Call me old fashioned but I feel like bitcoin is similar to fiat currencies simply because it's not backed by anything. It has invented scarcity. If I just created giraffe coin and there were only 5 coins it doesn't mean it has any value. Would someone please explain why on earth I want to own bitcoin? I really don't understand the bull case for it.
The US Dollar is backed by 20 aircraft carriers, thousands of nuclear weapons, 350 million Americans who think they have a manifest destiny, and a government with a long history of invading countries that threaten the dollar.
Bitcoin is valuable as an investment in the same way that gold is valuable. It is scarce and the benefit it currently has over gold is it is completely portable and can be instantly be used as a means of exchange if necessary. Bitcoin has very little value as a currency.
You don’t have to want it, other people want it. You want to have a pile of lightweight, secure doodads that other people want, because that’s easier to exchange than terminal wants like cars and sheep. What’s really crazy is the only reason other people want it is this same reason; it’s circular. It takes coordination to bootstrap, but once it’s set up it can be stable. Like those circles of people all sitting on each-others laps.
It's not the "greater fool" theory. It's more like language. A new word doesn't have to have a real connection to its meaning. The word "cat" isn't structured like a cat, and when spoken aloud doesn't sound like one either. But we still like to be able to refer to cats without pointing, so we agree on something inherently meaningless and tie to to that.
Fiat currency is the same way. Rather than point a giant network of contracts together in order to create some monster transaction that satisfies a few hundred people evenly, we just agree to respect the unique-but-valueless papers produced by the crazy guy who will imprison anybody who tries to produce those same papers. It didn't have to be these papers; it didn't have to be bitcoin. It just had to be something that had the necessary properties: unique, scarce, lightweight, secure, and, most importantly, used by as many other people as possible.
I'm as skeptical as you are but the recent article by Ray Dalio explained well its value, which is still rather unconvincing to me. Still, I liken it to Monopoly money a group decided was worth actual money, obfuscated by technology, distributed systems, and other buzzwords.
The first question to ask is what is money? Money is just an efficient means of transferring value between strangers and storing value over time (second point could be debated, since the value of fiat currencies have almost always degraded over time due to inflation).
Why do we give USD value? Because most the population trusts the US government to keep the value of USD stable and we know it is widely used and accepted.
What has happened recently? Most fiat currency supplies have ballooned tremendously. This has undermined the collective view of the storing value over time argument. Bitcoin adoption has increased, which means more and more people recognize it as money and that it has value. Also since the supply is capped, it becomes more apparent that it will be a better store of value than USD.
If you have excess USD, why would you not want at least some exposure to bitcoin over USD?
Is there any good information on what set off this current bull run? The timing with the US election seems odd, but I can't see any causal mechanism that could link the two.
The most recent run seemed to start about the same time as GME - presumably people decided to hedge their bets. Maybe they sold GME at the peak and put it into things like BTC, coupled with a lot of new money trying to recover their losses from GME
Musk tweeted about it on Feb 8th which pushed it up, and then news stories of it hitting 50k, and now 1T, keeps the money coming in.
Stocks are massively overvalued, wouldn't surprise me if people are diversifying too.
Second US stimulus package plus inflation fears in recent weeks. A lot of it is speculation to be fair. As gold didn’t perform and lagged bitcoin, most institutional players bet on bitcoin instead.
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[ 2.8 ms ] story [ 179 ms ] threadCryptocurrency proponents are trying to get ahead of this by reframing Bitcoin as the people's currency, or an opportunity for average people to get rich while sticking it to evil governments. It's interesting to watch people with $1000 of Bitcoin in their Robinhood accounts feel like they're on the winning end of this deal when they see their $1000 investment go to $1300 in the span of a week.
So much of the investment frenzy is driven by "what if" scenarios where Bitcoin takes over the world and that $1000 investment eventually makes early adopters millionaires in the new Bitcoin world order. The problem with that hypothetical endgame is that reallocating the world's wealth according to how early someone went all-in on a cryptocurrency gamble (and how much capital they had to invest at the time) would create inequality at unimaginable scale, not to mention completely disconnecting wealth from societal value creation. Our current market-based system isn't perfect, but a hypothetical Bitcoin economy would be downright absurd. If we end up with a crypto economy, it won't be underpinned by a currency where people switched over at values ranging from $0.01 to $1,000,000 per coin.
What you are left with now is all the people who bought the bitcoin after it had already been pumped and dumped, and they aren't willing to sell it for less than they bought it for.
This means that the perceived value of the asset is now based on the notions held by millions of people who are holding and don't want to sell.
You haven’t seen something in the process of overtaking the market cap of gold—approximately $10 trillion.
The first trillion takes the longest; the next trillion will probably happen in far less time.
Right from birth, one person is destined to be poor while the other destined to be a millionaire.
Also please note most millionaires in the world are self made, with over 80%. Of the other 20% most made it to millionaire status before receiving an inheritance. Also note the people you most worry about, the ones who get money young, usually plow through it and leave nothing for their children.
You cannot just state one thing from the side of later comer, and later switch to the side of early comer. That way you are saying 2 things...
The first was recognizing that that inheritance mostly came from the labors of someone and they have a right to do with their money as they see fit. The second is acknowledging that the person who didn't work for their wealth usually squanders it so don't waste time being jealous of them.
So focus on being the person who creates wealth for themselves and try to educate your children so they will have good money habits later on in life and will squander less of what you leave them.
I'd be more sympathetic to inheritance if the primary source of taxation was wealth.
Unless someone was born into poverty and fought their way out, I don't count them as self made. No doubt these people exist, but it would never be 80%.
There's also a stronger social safety net in many countries that are poorer than the US, where you certainly don't have to worry about not getting to college (if you have good enough grades) due to family income.
Binary categories such as "self-made" vs "not-self made" fit poorly in the real world and suffer due to each individual having a different threshold of self-madeness. For some people it means not having directly inherited a lump sum, for others it means having made every single cent without outside help.
I honestly wanted to believe you were making an off the cuff uninformed remark, so I did a little digging and found this gem:
https://en.wikipedia.org/wiki/List_of_European_countries_by_...
Holy Christ it is worse than I imagined. Wow I never realized there was such a STARK difference between Western Europe and Eastern Europe with regard to wages. WOW.
But the key thing is if he'd failed, he had a cushion to fall back on. Had Microsoft gone the same way as many other computer companies, he could be confident he wouldn't end up on the streets.
It's massively deflationary, which is a terrible thing for a currency.
I doubt the guy who sold the 5000 btc pizzas still have them.
https://mobile.twitter.com/GregSchoen/status/702616488117616...
Who lamented making $400 instead of $13k back in 2011. Those coins would today be worth about $95m, but there's no way he'd have kept them -- same as the buy who bought the pizzas (or the guy who sold them)
This guy was bored of $14/coin, it wasn't moving
https://twitter.com/rockerest/status/91885405368098816?lang=...
So he took the loss (in July 2011 they were at a peak, jumping from 77 cents to $15 in 3 months)
Had someone found an old laptop with the coins, they'd have been looking for it in the 2017 craze (ala Big Bang Theory) and sold then.
Bitcoin is currently 3 times the peak in December 2017.
Yes. So what? I don't think the typical Bitcoin proponent is the kind of person to get outraged at Pareto distributions. They are against governments, they don't hate wealthy people just for being wealthy.
> The problem with that hypothetical endgame is that reallocating the world's wealth according to how early someone went all-in on a cryptocurrency gamble (and how much capital they had to invest at the time) would create inequality at unimaginable scale, not to mention completely disconnecting wealth from societal value creation.
How is that different from having invested in Amazon, Google or Apple in the early 00's?
Bitcoin (and other cryptocurrencies) does bring value to our society as a store of wealth that's not easy for governments to control.
It's funny how people keep saying this as if it's true. 99% of the market isn't buying crypto to "store value". This along with the idea that somehow it's a great currency bcs "no gov't" etc. is also a lie no one believes. Most of the market isn't actually making real-world transactions or storing value but somehow other people will start doing it in the future for some reason so gainz etc.
My personal take on this is that it's a temporary state of affairs. You might draw an analogy to the wild west of the Internet in the past, or e-mail. As Bitcoin goes mainstream, if it does, you will see familiar institutions built on it including fractional reserve banking that honor all the comfortable consumer things if you remain within their system.
The problem here is equality. People invented and see bitcoin as a "store value" because they want to protect themselves from the inequality being forced upon them from governments printing fiat. As so, your idea that people:
>don't get outraged at Pareto distributions
is in contradiction to
>Bitcoin (and other cryptocurrencies) does bring value to our society as a store of wealth
After all, if people weren't outraged at Pareto distributions why would it matter to them to store their wealth?
To reiterate, the greater point being made is that bitcoin ultimately won't solve anything regarding inequality. Adopting bitcoin isn't going against the man, it's just shifting who the man is from being "the government/FED" to "crypto exchanges/peddlers/other earlier hoarding crypto entities". With time people will come to hate such authorities just as they've come to hate the government. I mean just look at how people hate on mature big corps like Google these days, when many gave it fonder thoughts during it's earlier days... Bitcoin will be no different.
I understand why you'd want that, fairness is a strong human instinct, but I don't see where it has any bearing on the likelihood of this future occurring.
People don't enjoy having a high number in their accounting system, they enjoy being wealthy. If, say, African central banks start purchasing BTC, and India joins them, early adopters will cash out at whatever value makes them feel like they got their money's worth. Some people will only trade for real property. Some are in a position to hodl until they can buy a whole cruise ship or whatever.
Or they could lose it all when BTC crashes to the natural value of any completely hypothetical asset, which is zero. This still seems more likely to me than central banks taking up a position in BTC, but sadly, I lack the ability to predict the future.
Is it really that different from buying the first iPod, and thinking to yourself, "y'know this is a brand new Apple, I'm putting a few thousand bucks into their stock"?
It'll be interesting who's left "holding the bag" once its the end of the MLM-ponzi scheme of who you can convince to buy into it - save regulatory capture somehow forcing the rest of society to buy into it.
That's what happens, some little scheme gets too big to fail, so the taxpayer bails it out. Those that are in the schemes win, those that felt the scheme was stupid lose.
I remember seeing adverts on the London underground for icelandic banks offer 5% more than any other savings account. I chuckled and thought "surely nobody's that gullible".
There were many. Both individuals, who got bailed out by me (the taxpayer), and many councils (who lost money which belonged to the taxpayer)
For 20 years I laughed at these various get quick schemes. Then I realised that they don't fail. Profits are privitised, losses are socialised, and they taxpayer always loses.
When you realise that, you have to look at dodgy schemes in a whole separate light. Sure bitcoin is stupid, but as it gets larger and larger the chance of it failing without bailing out large institutions reduces, meaning the chance of me riding on the coattails increases.
Yes, the former is just straight up gambling, the latter is investing in a company that makes good products.
40% of the US can't afford a 400$ emergency. Someone who had arguably more than that has improved their position from hodling... by 400x.
[1] https://abcnews.go.com/US/10-americans-struggle-cover-400-em...
Where else can the average person make 6x's their money. And, it has already made plenty of average people. Millionaires.
Go to Vegas, bet on red three times.
Or, if you don't want to get on a plane during a pandemic, trade on margin.
Same thing with stocks. It kills me to hear of people talk about how they "lost money" when a stock they own comes down from a temporary high price. No, you only lost money relative to your hypothetical self who sold at the top of the stock's price.
I don't know anyone that prices anything in just BTC (it's all BTC converted from USD or whatever, because anything else would be madness) - and I don't know anyone that doesn't peg their bitcoin to what they'd get if they sold it for "real money".
Which makes me think any endgame isn't going to be the utopian, governmentless, money-freedom future I keep hearing promised.
Please find a contemporary (don't look to someone selling alpaca wool socks in 2010 and 2011), stable priced product line in BTC. Anything that I can be confident I will pay +/- 5% of the same BTC for over a 3 month period (I'm deliberately selecting a short period, most currencies are stable for 12+ months at a time when used to price goods and services).
As I understand it at some point there will be no new bitcoin left to mine, and it will just be available as a store-of-value currency -- if I have the concept correct. And the early adopters will be financially rewarded for helping to get it off the ground as they spend their BTC away into circulation.
It's all fun and games until you don't pay taxes, or you try to pay taxes using currency not recognized by the government.
Well, you see, you actually can pay taxes with Euros. In Europe. The USA isn't the only country in the world.
Let's say you are Swiss and are trying to buy something from Amazon and everything is priced in Euro - you also have to convert all the prices in your head. Is the Swiss Franc not a real currency anymore?
You forget to mention that a lot of early adopters are actual criminals. Yeah, go make them the rulers of the world. Let's see how this ends.
You have no evidence for this claim, it's just a profusely fantastic image that cleaves to your political bias.
If 10x the number of people start getting involved and transaction volume increases 10x as a result, will the network use 10x the energy?
But only if it's profitable to miners coming in. Ultimately mining pressures miners into finding cheap sources of electricity. Yes, many just take advantage of subsidies (governmental or environmental) to lower their costs, but as mining difficulty and competition increases inefficient are kicked out.
"Fortunately", most transactions aren't on the chain and are done in exchanges by good old RDBMS-column-of-numbers technology.
How is a cryptocurrency with this type of wealth inequality supposed to help the common person?
It's already centralized, thus easy to manipulate. Bitcoin is reproducing the same type of wealth distribution we see in real life. What exactly does btc offer?
I don't understand how one can look at this distribution of bitcoins, where essentially the 1% owns most of it and people conclude that somehow this is different? That this in your favor as a newcomer? To me this looks like if you buy in now, you're going to become a bagholder for the 1%.
[1] https://bitinfocharts.com/top-100-richest-bitcoin-addresses....
That seems like a weird assumption to start at.
A lot of the propaganda I remember about bitcoin is that it was going to help bank the unbanked. What I see about btc is that people will tell you anything to get you to buy. The goalposts get moved and depending on who you talk to: "it's a store of value, no it's like a stock! No it's a currency! No it's the instrument of world peace!"
Every time I go through comment sections it's like a magic 8 ball is coming up with the arguments in its favor.
All I see is that data above, about how heavily centralized bitcoin is. What's the reason to buy into something that's heavily weighed against you?
The thing you can choose is who is doing the capital allocation: Satoshi / Winklewoss brothers / Chamath / Elon Musk / Michael Saylor, or Trump / Biden / Putin / Christine Lagarde.
If you like Biden and Jerome Powell, keep your money in USD. If you like Putin, buy RUB. If you prefer the libertarian crowd, buy Bitcoin. If none of this is good there are socialist cryptocurrencies as well for you to choose from or you can create your own.
0.7% own 45.9%
8.5% own 85.6%
There are tons of valid criticisms of Bitcoin but this one doesn't amount to much.
As a currency, which is what you mentioned, btc is awful. It's deflationary so nobody wants to spend it, it's volatile so you can get fucked in a transaction by the time it settles, and if you do spend it you have to pay a transaction fee. And where's the upside from all this pain? Nothing, cash is good enough.
If it's a store of value or a stock, then you should be absolutely worried about how it's distributed. Because based on that, it looks a lot like a ponzi scheme to me.
I don't follow this logic.
A ponzi scheme requires new entrants to pay out the previous ones at a higher rate so as to generate promised returns.
I'd expect this to spread out bitcoin ownership as previous whales ducked out while leaving the new entrants to holding the bag.
A high level of BTC concentration, then, would seem to be a counter-argument to the claim it's a ponzi.
What am I missing?
(BTW, I also think the basic analysis is incorrect--a large reason why BTC is concentrated in a small number of addresses is because most people don't hold their own BTC, but rather allow an exchange to hold it for them)
That would be the best it can hope for. But it's very far from that. Just consider that one person (Satoshi) holds ~10% of all bitcoin. Or 2 other people (Winklevii) holding a few %.
The poor distribution is amplified by bitcoin being deflationary and emitting half in just the first 4 years (3/4 in the first 8, etc). A coin with a pure linear emission would at least keep eroding any wealth inequalities.
What's bitcoin backed by?
Fiat currency is the same way. Rather than point a giant network of contracts together in order to create some monster transaction that satisfies a few hundred people evenly, we just agree to respect the unique-but-valueless papers produced by the crazy guy who will imprison anybody who tries to produce those same papers. It didn't have to be these papers; it didn't have to be bitcoin. It just had to be something that had the necessary properties: unique, scarce, lightweight, secure, and, most importantly, used by as many other people as possible.
Why do we give USD value? Because most the population trusts the US government to keep the value of USD stable and we know it is widely used and accepted.
What has happened recently? Most fiat currency supplies have ballooned tremendously. This has undermined the collective view of the storing value over time argument. Bitcoin adoption has increased, which means more and more people recognize it as money and that it has value. Also since the supply is capped, it becomes more apparent that it will be a better store of value than USD.
If you have excess USD, why would you not want at least some exposure to bitcoin over USD?
https://www.visualcapitalist.com/the-worlds-10-largest-stock...
Is it Robinhood adding crypto?
Musk tweeted about it on Feb 8th which pushed it up, and then news stories of it hitting 50k, and now 1T, keeps the money coming in.
Stocks are massively overvalued, wouldn't surprise me if people are diversifying too.