from Hacker News

It's time for an inequality index for cryptocurrencies distribution

by pog92 on 1/16/22, 5:17 PM with 110 comments

• by atmosx on 1/16/22, 6:04 PM

  > 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_.

• by PeterisP on 1/16/22, 6:03 PM

  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 .

• by nbaksalyar on 1/16/22, 5:36 PM

  > 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).

• by RichardHeart on 1/16/22, 6:11 PM

  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.

• by iskander on 1/16/22, 6:35 PM

  Wallets != people. Without proof of personhood, you never know the distribution.

• by leishman on 1/16/22, 5:48 PM

  Most people keep their coins on exchanges which are represented as large single holders on the blockchain so it’s not an accurate characterization.

• by howdydoo on 1/16/22, 6:26 PM

  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.

• by paulpauper on 1/16/22, 7:02 PM

  >It is quite famous that 95% of Bitcoin is owned by 2% of accounts. 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.

  It doesn't threaten it though. It would only threaten it if miners colluded. Crypto may be manipulated, but so is everything else, like Gamestock stock in 2021.

  The crypto bubble is already deflating, with btc having fallen 40% in the past 2 months. These problems will fix themselves as the bubble continues to deflate.

• by marto1 on 1/16/22, 7:22 PM

  So we have an asset that follows a Pareto distribution[1]. Now if one has spent any time and resources investing they'd notice that this holds true for a lot of assets. Bitcoin is really not exceptional in this.

  Are you after an asset that doesn't follow that distribution ? Do you consider this a good thing ?

  [1] https://en.wikipedia.org/wiki/Pareto_distribution

• by ryan93 on 1/16/22, 5:51 PM

  A lot of those accounts are run by exchanges. So we don’t and can’t know true distribution. Unless Coinbase and binance release stats on their customers

• by timdaub on 1/16/22, 8:03 PM

  - https://rugpullindex.com rates some ERC20 pools by gini index

  - In the future, we want to rank all of them

  - Method specification: https://rugpullindex.com/specification#CalculatingtheEqualit...

• by CodeWriter23 on 1/16/22, 7:18 PM

  I think a thought spent on crypto is a thought wasted.

• by gremlinsinc on 1/17/22, 5:48 AM

  I'd rather see a currency that has a guaranteed validated identity tied to every wallet, and you can only have 1 wallet, and that wallet has a max limit on currency.

  The coin would also tax based on hodl vs spending the lower your overall wealth and the more you spend monthly (more transactions, not more total) the more UBI you get, the more you hodl, the more your tax obligation is. The longer you hodl the more your tax obligation as well.

  Basically use it or lose it, and if it could become pegged to the price of a loaf of bread or something wherever you live... then it could achieve some form of universality...but that last bit would be hard to figure out as I'm no economist.

• by irvingprime on 1/16/22, 6:41 PM

  If you mean you want a way to quickly measure how distributed ownership of a particular currency is, that sounds fine. You should be able to develop a decent visualization from blockchain explorers themselves without too much trouble. Well, some trouble. But it's possible. Any moderately good programmer should be able to do it for you.

  Keep in mind, though, that other comments on this thread have pointed out that addresses and wallets don't have a 1 to 1 relationship with people. So you won't really be seeing who owns the most.

  Leave the word "inequality" out of it. I don't think it means what you think it means.

• by ur-whale on 1/16/22, 7:30 PM

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

  And, yet another claim that needs to be justified.

  Assuming one whale owns 20M Bitcoins, that still leaves 1M Bitcoins to use for transactions.

  That's 10^14 satoshis, plenty enough to allow people to exchange value in complete freedom.

  Can the one guy who owns the 20M tank the price by playing market games? Maybe, but why would he shoot himself in the foot by doing so?

  And even if he did and - say - crashed the price down to BTCUSD = 2 ... would that prevent people from using Bitcoin to exchange value? Nope.

• by rdbell on 1/16/22, 5:53 PM

  How are you defining an account when you say that 95% of BTC is owned by 2% of accounts?

• by TradingPlaces on 1/17/22, 4:47 PM

  Easy to calc: https://en.wikipedia.org/wiki/Gini_coefficient

• by JSavageOne on 1/20/22, 2:00 AM

  Yes I agree. Even if it's not a perfect metric, it'd still be useful.

• by hartator on 1/16/22, 6:36 PM

  How do you know concentrations is not even worse? Same person can have multiple accounts.

• by ur-whale on 1/16/22, 7:19 PM

  > It is quite famous that 95% of Bitcoin is owned by 2% of accounts.

  Is it?

  What's your evidence for this?

• by baby on 1/16/22, 7:04 PM

  Bitcoin is not proof of stake so I’m not sure why this would matter.

• by smoldesu on 1/16/22, 5:51 PM

  > 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 an investment asset. Gold is valuable due to it's scarcity. Diamonds are popular due to their demand. Cryptographic hashes are valuable because of their transient demand and abundant supply.

• by bogota on 1/16/22, 7:42 PM

  Crypto will be the death of HN. OPs comment is something that has been talk about since 2012 and looking at one or two parent comments they cover the depth that is required to answer why this doesn’t matter or can’t be determined. However it’s crypto so now we have 50+ comments about why X thinks Y is stupid. Why crypto is a waste. Why crypto is the best. But its all 100% stupid unfounded word vomit.

  HN has shows crypto is too polarizing of content to have intelligent discussion here.

  IMO is should be banned from the site. You could replace these comments with comments from a reddit post that hit the front page and you wouldn’t know the difference.