[nbaksalyar]

> 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 anymore because of lost wallet keys (and there's no shortage of such stories).

[chrisco255]

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.

[EGreg]

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!

[chrisco255]

Bitcoin's decentralization remains unaffected by its distribution. But its distribution is fine. Any distribution is going to follow the pareto principle. No getting around that.

If you're looking for idealistic purity, and assume it's worthless if unattained, you're wrong.

[EGreg]

Somewhat a large strawman to go from “1% owns 92%” and “you just want idealistic purity”. And also “not decentralized” to “worthless”.

I thought this was supposed to liberate us from problems of the current financial system?

Decentralization of Bitcoin can be understood in a variety of ways.

1) To make forward progress: it is extremely centralized, all transactions in the world must go through a miner

2) In terms of concentration of ownership and effect on price: highly centralized, again

3) In terms of mining pools: once again, highly centralized

What exactly is the lure?

[chrisco255]

Decentralization is a security and censorship-resistant feature of Bitcoin. All transactions must go through a miner, but the only way to mine a block is by solving a SHA256 hash in competition with tens of thousands of other miners also trying to solve for the hash all around the world.

There is no way of saying 1% owns 92% (after all, I can churn out a million addresses used purely for one-off transactions, if desired, that's totally acceptable, wallets are practically free to produce). But it wouldn't matter if it did, because distribution of Bitcoin does not affect its security or censorship resistant properties. All transactions get the same amount of security. All holders are equal in terms of protection provided by the network.

Concentration of ownership of any capital asset is going to follow a Pareto distribution. That is not unique to Bitcoin... it's true of everything from stamps to stocks. Bitcoin never made the claim to some sort of idealistic theoretical "even" distribution as if that would be fair, but I digress... Bitcoin is also not the end all be all of crypto assets, and plenty of additional capital value has been distributed among the long tail of crypto assets that have cropped up since (over 60% of crypto's market cap is among other crypto assets).

Mining pools are not centralized entities. They are loose organizations that miners join to even out the yield on their mining equipment. A miner can fluidly leave and re-join a different pool at will. The pool's sole function is to smooth out yield. If a pool fails to do that, it loses its miners. It's not some central entity that can command the miners in it to 51% attack the network. That's not how pools work.

But even if they did, it would be painfully obvious that it was happening, and the Bitcoin community would mount a response, which may include a hard fork if desired.

I am more involved in the Ethereum community than Bitcoin. The lure is that I can borrow and send six figures worth of crypto in 2 minutes, and deploy it to a smart contract multisig and create an on-chain organization in a single afternoon that is used to deploy capital for anything from charitable fundraising to art commissions and auctions to online gaming production to startup operations. I can coordinate across jurisdictions frictionlessly. I can retain my assets when moving across borders. I can retain true ownership and custody of my funds without any central parties. I can earn yield on my funds by lending it out to on-chain options markets. I can fund any one I want on the internet without Paypal's permission or blessing. I can move to a third world country and still retain all of these capabilities.

It's not going anywhere, it's hugely valuable. It continues to get more powerful and more user-friendly.

[EGreg]

I just want to clarify where I stand

I’m a huge proponent of Web3 and smart contracts

I just criticize Blockchain as the underlying layer. I am saying the emperor has no clothes. I mean, even Polygon the so-called “scaling solution” for Ethereum is still built on Blockchain, and so stuff like this happened a week ago: https://www.coindesk.com/tech/2022/01/06/polygon-under-accid...

No one asks how many websites or emails per second can happen using HTTP or SMTP. Guess why… there is no bottleneck. There is no block and no miner. The entire network is what’s called “embarrassingly parallel”.

What we need is programmable smart contracts that are on an embarrassingly parallel network. And we would have been there by now if not for the profit motive of the blockchain bagholders. Most technologies get faster and cheaper over time — but first gen crypto had besn perversely designed to become slower and more expensive with time and adoption!

I submit that the ONLY reason people stick with first-gen stuff like Bitcoin, Ethereum Classic, and NFTs of pictures that anyone else can view without “owning” them, is the profit motive based on speculative greed of finding a “greater fool” to buy your “store of value”, followed by the sunk costs of having bought into this outdated technology. The utility is minimal beyond STORING value and the store of value is a self fulfilling prophecy. It’s like if people rediscovered retro video games and speculated with them because they were so rare, except what’s sad is ALL THESE NEWER PROJECTS which have so much promise are pegged to Bitcoin and when its price goes down, it drags them down too.

You’ll eventually see them decouple and then I wonder what will make Bitcoin so much better than a random ERC20 token. Why “store value” when I can grow it 300% a month?

[wmf]

There will eventually be 21M BTC and Satoshi mined 1M which is around 5%. Some people have estimated that ~20% of BTC is lost. That leaves 70% controlled by whales and exchanges.

[tromp]

Besides inequality in individual ownership of Bitcoin, there is also inequality of acquisition cost. The two are related since lower costs make it much easier to acquire large amounts as demonstrated by Satoshi himself. While we cannot reliably compute individual ownership inequality, all we need to compute cost inequality is the price history of Bitcoin.

Let d_0..d_n be all days in Bitcoin history sorted by price on day d_i. So d_0 is launch day, when Bitcoin was worthless, and d_n is the day when price last peaked.

Plot a graph where x coordinate is Sum 0<=i emission(d_i) and y coordinate is Sum 0<=i emission(d_i)*price(d_i).

If Bitcoin were a stable coin then this would produce a straight diagonal line. But not only did the price go up exponentially, at the same time the emission went down exponentially. The extent to which the graph lies below that line is the Gini index of Bitcoin price inequality.

[hiq]

That, and the fact that anyone can own an unlimited number of wallets.

[8note]

Never is a strong statement; Bitcoin has resulted in a lot of investment in hardware that can solve problems similar to "what's satoshi's private key"

[waffle_maniac]

A lot of that is large centralized exchange wallets that hold crypto for retail investors.