Interesting quotes from the first section of the paper:
"We first document that 90% of transaction volume on the Bitcoin blockchain is not tied to economically meaningful activities but is the byproduct of the Bitcoin protocol design as well as the preference of many participants for anonymity."
"We show that the Bitcoin mining capacity is highly concentrated and has been
for the last five years. The top 10% of miners control 90% and just 0.1% (about 50
miners) control close to 50% of mining capacity. Furthermore, this concentration of
mining capacity is counter cyclical and varies with the Bitcoin price."
"We show that the balances held at intermediaries have been steadily increasing
since 2014. By the end of 2020 it is equal to 5.5 million bitcoins, roughly one-third of
Bitcoin in circulation. In contrast, individual investors collectively control 8.5 million
bitcoins by the end of 2020. The individual holdings are still highly concentrated:
the top 1000 investors control about 3 million BTC and the top 10,000 investors own
around 5 million bitcoins."
I haven't read the methods yet, but the idea that the authors were able to do this analysis is fascinating.
There is a foundational theoretical text in materialist philosophy that predicts exactly this happening. It was written in 1867.
When reading articles like this I sometimes feel like the only thing we can learn from history is that we do not learn from history.
Yes, we know who those 50 are, and the wealth they own is in highly regulated markets. We know what they own, how much they own, when they buy/sell. We also dictate that they cannot trade on insider info and must generally play fair.
Say all you want about the efficacy of the above measures, they are absolutely not perfect. But it's completely different to bitcoin where none of the above applies, and often the opposite occurs.
'Bitcoin isn't any worse than other financial assets' doesn't give anyone a reason to use Bitcoin. As you point out, it appears to struggle with many of the same issues as other assets, with a bunch of extra baggage on top of it.
Soooo. . . you're saying a tiny fraction of the population controls the vast majority of the resource? You mean just like every other major resource on the planet? :)
Users, miners and developers all have different powers and hold each other to account in an interesting way that few people understand so far, affecting what 'control' really means. It needs to be put in context with alternatives. Compared to the alternative of corrupt governments that have complete control to print money at will, I have no doubt that it is a extremely promising experiment. ASICs do seem to pervert some incentives so people should be more interested in modified Proof-of-Work algorithms like Monero has been doing successfully
In what way do users have control over miners or developers? If the assumption is that corruption can overcome a democratic state, I never understood why its so crazy to suggest it can overcome developers or a mining cartel.
By users you mean investors? The article argues that only a small group of investors have power. So replacing one man one vote by one dollar (or bitcoin) one vote is a loss of democracy. I don't see how corruption can be prevented by restricting the voting rights to the rich.
> Compared to the alternative of corrupt governments that have complete control to print money at will
Major governments in wealthy countries have done an excellent job of managing currency. It's far more stable than cryptocurrencies, and the stability has improved as knowledge of economics has improved. They went through two massive economic calamities in 13 years (the Great Recession and the Coronavirus Pandemic) with almost no economic instability.
Cryptocurrency seems to me to be a far greater threat to economic stability and for corruption and undemocratic seizure of power.
I've become very disillusioned with this currency.
So far the only things of note that Bitcoin has achieved is having a considerable impact on global warming and making it near impossible for mere mortals to buy GPUs at reasonable prices.
Even if any of the touted advantages were to finally materialize now, it wouldn't have been worth it.
That's a pretty misleading headline. Miners and investors do not control Bitcoin regardless of their hash power or amount of BTC owned. 50+ miners is also well enough to prevent any 51% attack. Finally, the ownership estimate is flawed given that it relies on blockchain analysis. The existence and popularity of custodial wallets (e.g. exchanges) makes this sort of analysis extremely unreliable.
I don't see the problem. Compared to the disparity in realwrold money (dollars) Bitcoin distribution seems rather flat. How many of the world's supply of dollars are controlled by the top 10,000 richest people?
> Money is largely controlled by a small group of investors and central banks. [citation needed]
There are an estimated 40 trillion dollars in circulation alone. The US government debt is currently close to 30 trillion dollars.
The world's richest person has an estimated value of around 180 billion dollars, less than 1% of the US debt alone. I'm talking about projected value, not cash.
In contrast, it was already reported that a mere 100 individuals control around 13% of BTC's coins, and 1000 users control around 40%.
I'd say the main takeaway is that the narrative of "crypto currencies decentralize money and transfer the power and control from banks/rich people to the people" is just complete bullsh*.
Importantly, distributed public blockchains like Bitcoin and Ethereum don't give large holders the power to tax other participants, engage in seigniorage (1), or censor transactions and thereby become gatekeepers/tollgaters.
(1) PoW hardware or staked coins, in PoW and PoS Sybil control mechanisms, respectively, do give their owners the power to issue new currency and collect transaction fees, but it is an open market where all capital earns the same percentage return, and thereby does not exacerbate wealth inequality.
There is an obvious misconception in the title; two in fact:
1. If you are saying that investors separate from miners have "control" over Bitcoin, then you are strictly talking about the price and not the protocol. Investors (who are not miners, so no point in mentioning them) have zero influence over the Bitcoin protocol on a technical level. Perhaps you could make a separate argument about manipulating the community.
2. Barring the previous misnomer, miners alone do not control the Bitcoin protocol. Miners in combination with full nodes (running a full node requires a relatively tiny investment compared to mining) control the future of the Bitcoin protocol. Miners may choose to go down a certain protocol or ledger altering fork, but if even a small amount of full nodes go a different direction and users/holders follow the full nodes, then the path the full nodes chose will "win out," or at least survive.
If you want to talk about investors controlling crypto currencies at any scale, then look towards proof of stake. Otherwise you are conflating price control and protocol control.
The death-knell in my opinion for true decentralization of the bitcoin network (ignoring mining for a moment) happened when the blockchain became too large for it to be practical for normal users to have the whole blockchain on their machine and operate a real node. I am sure there is some creative solution to this, perhaps an additional mining process by which old records are combined to save space (i.e. transactions older than a week get squashed so that only the resulting balance is stored instead of the individual transactions, perhaps). It might also help to not even store information about a wallet address on the blockchain unless it has a nonzero balance. I have no idea how this is actually implemented so this is all speculation.
This is a good article, that hopefully can lead to some insightful discussions.
One thing the article or some people interpreting the article miss is that miners actually don't control the future of bitcoin as much as they think.
From 2017 we actually know that the people running the nodes have more power then the big miners - because the biggest miners back then were not able to push the protocol changes (like block size) through - because nodes just didnt validate/accept those new blocks. So in the end the end user decides.
This is true for changes to the protocol or code, it is not true for doing fraudulent transactions within the current protocol version. So colluding miners can have impact in that realm I'd say.
The famous (wealthy) families were mainly involved in the trade, I guess. Not so much the common man:
> Prices could be high, but mostly they weren’t. Although it’s true that the most expensive tulips of all cost around 5,000 guilders (the price of a well-appointed house), I was able to identify only 37 people who spent more than 300 guilders on bulbs, around the yearly wage of a master craftsman. Many tulips were far cheaper. With one or two exceptions, these top buyers came from the wealthy merchant class and were well able to afford the bulbs. Far from every chimneysweep or weaver being involved in the trade, the numbers were relatively small, mainly from the merchant and skilled artisan class – and many of the buyers and sellers were connected to each other by family, religion, or neighbourhood. Sellers mainly sold to people they knew.
> When the crash came, it was not because of naive and uninformed people entering the market, but probably through fears of oversupply and the unsustainability of the great price rise in the first five weeks of 1637. None of the bulbs were actually available – they were all planted in the ground – and no money would be exchanged until the bulbs could be handed over in May or June. So those who lost money in the February crash did so only notionally: they might not get paid later. Anyone who had both bought and sold a tulip on paper since the summer of 1636 had lost nothing. Only those waiting for payment were in trouble, and they were people able to bear the loss.
> No one drowned themselves in canals. I found not a single bankrupt in these years who could be identified as someone dealt the fatal financial blow by tulip mania. If tulip buyers and sellers appear in the bankruptcy records, it’s because they were buying houses and goods of other people who had gone bankrupt for some reason – they still had plenty of money to spend. The Dutch economy was left completely unaffected. The “government” (not a very useful term for the federal Dutch Republic) did not shut down the trade, and indeed reacted slowly and hesitantly to demands from some traders and city councils to resolve disputes. The provincial court of Holland suggested that people talk it out among themselves and try to stay out of the courts: no government regulation here.
They can undo transactions. Its a bit more complicated than that, but thats the gist of what control enables.
Basically, the first to mine a block has control over the history since the previously mined block. Because they have superior mining capability, they are more likely to be first to mine a block. They are also able to refuse to accept others blocks, which could effectively fork the blockchain, causing a split head, which results in other other issues.
EDIT: just reread, and theres 2 aspects to control. Theres the mining aspect (which i mention above) and then there is the market manipulation aspect (which is to do with pump/dump - unrelated to above).
[+] [-] jonas21|4 years ago|reply
https://www.bloomberg.com/news/articles/2021-10-25/bitcoin-s...
which is itself reporting on this paper from the NBER:
https://www.nber.org/system/files/working_papers/w29396/w293...
[+] [-] YossarianFrPrez|4 years ago|reply
"We first document that 90% of transaction volume on the Bitcoin blockchain is not tied to economically meaningful activities but is the byproduct of the Bitcoin protocol design as well as the preference of many participants for anonymity."
"We show that the Bitcoin mining capacity is highly concentrated and has been for the last five years. The top 10% of miners control 90% and just 0.1% (about 50 miners) control close to 50% of mining capacity. Furthermore, this concentration of mining capacity is counter cyclical and varies with the Bitcoin price."
"We show that the balances held at intermediaries have been steadily increasing since 2014. By the end of 2020 it is equal to 5.5 million bitcoins, roughly one-third of Bitcoin in circulation. In contrast, individual investors collectively control 8.5 million bitcoins by the end of 2020. The individual holdings are still highly concentrated: the top 1000 investors control about 3 million BTC and the top 10,000 investors own around 5 million bitcoins."
I haven't read the methods yet, but the idea that the authors were able to do this analysis is fascinating.
[+] [-] leonardp|4 years ago|reply
[+] [-] robocat|4 years ago|reply
Is there any reason to think bitcoin is that much different from ownership ratios of other financial assets?
[+] [-] qeternity|4 years ago|reply
Say all you want about the efficacy of the above measures, they are absolutely not perfect. But it's completely different to bitcoin where none of the above applies, and often the opposite occurs.
[+] [-] bart_spoon|4 years ago|reply
[+] [-] bobkrusty|4 years ago|reply
[+] [-] McGuive7|4 years ago|reply
[+] [-] ajkdhcb2|4 years ago|reply
[+] [-] jayd16|4 years ago|reply
[+] [-] stkdump|4 years ago|reply
[+] [-] wolverine876|4 years ago|reply
Major governments in wealthy countries have done an excellent job of managing currency. It's far more stable than cryptocurrencies, and the stability has improved as knowledge of economics has improved. They went through two massive economic calamities in 13 years (the Great Recession and the Coronavirus Pandemic) with almost no economic instability.
Cryptocurrency seems to me to be a far greater threat to economic stability and for corruption and undemocratic seizure of power.
[+] [-] EdwardDiego|4 years ago|reply
Are all governments inherently corrupt in your mind?
[+] [-] mike_d|4 years ago|reply
Calling 10,000 unaffiliated people "a small group" by comparison is kind of disingenuous.
1. https://oxfamilibrary.openrepository.com/bitstream/handle/10...
[+] [-] IndexCardBox|4 years ago|reply
[+] [-] JoiDegn|4 years ago|reply
[+] [-] mpfundstein|4 years ago|reply
[+] [-] chmod775|4 years ago|reply
So far the only things of note that Bitcoin has achieved is having a considerable impact on global warming and making it near impossible for mere mortals to buy GPUs at reasonable prices.
Even if any of the touted advantages were to finally materialize now, it wouldn't have been worth it.
[+] [-] abrkn|4 years ago|reply
[+] [-] olalonde|4 years ago|reply
[+] [-] sandworm101|4 years ago|reply
[+] [-] sb057|4 years ago|reply
[+] [-] pcwalton|4 years ago|reply
[+] [-] nuerow|4 years ago|reply
There are an estimated 40 trillion dollars in circulation alone. The US government debt is currently close to 30 trillion dollars.
The world's richest person has an estimated value of around 180 billion dollars, less than 1% of the US debt alone. I'm talking about projected value, not cash.
In contrast, it was already reported that a mere 100 individuals control around 13% of BTC's coins, and 1000 users control around 40%.
https://www.businessinsider.com/bitcoin-whales-the-key-facts...
[+] [-] Synaesthesia|4 years ago|reply
[+] [-] 2pEXgD0fZ5cF|4 years ago|reply
[+] [-] Proven|4 years ago|reply
[deleted]
[+] [-] CryptoPunk|4 years ago|reply
(1) PoW hardware or staked coins, in PoW and PoS Sybil control mechanisms, respectively, do give their owners the power to issue new currency and collect transaction fees, but it is an open market where all capital earns the same percentage return, and thereby does not exacerbate wealth inequality.
[+] [-] 8note|4 years ago|reply
[+] [-] SergeAx|4 years ago|reply
> top 1,000 individual investors accounted for about three million of the 8.5 million Bitcoins controlled by the top 10,000 investors
I beleive same stats are available for stock markets. I wonder what numbers are there.
[+] [-] peskysamurai|4 years ago|reply
https://awealthofcommonsense.com/2021/10/ownership-inequalit...
[+] [-] longhand|4 years ago|reply
https://mobile.twitter.com/n3ocortex/status/1356673243734822...
[+] [-] mattwilsonn888|4 years ago|reply
1. If you are saying that investors separate from miners have "control" over Bitcoin, then you are strictly talking about the price and not the protocol. Investors (who are not miners, so no point in mentioning them) have zero influence over the Bitcoin protocol on a technical level. Perhaps you could make a separate argument about manipulating the community.
2. Barring the previous misnomer, miners alone do not control the Bitcoin protocol. Miners in combination with full nodes (running a full node requires a relatively tiny investment compared to mining) control the future of the Bitcoin protocol. Miners may choose to go down a certain protocol or ledger altering fork, but if even a small amount of full nodes go a different direction and users/holders follow the full nodes, then the path the full nodes chose will "win out," or at least survive.
If you want to talk about investors controlling crypto currencies at any scale, then look towards proof of stake. Otherwise you are conflating price control and protocol control.
[+] [-] unknown|4 years ago|reply
[deleted]
[+] [-] unknown|4 years ago|reply
[deleted]
[+] [-] sam0x17|4 years ago|reply
[+] [-] janandonly|4 years ago|reply
[1] https://bitcoin.clarkmoody.com/dashboard/
[+] [-] kerng|4 years ago|reply
One thing the article or some people interpreting the article miss is that miners actually don't control the future of bitcoin as much as they think. From 2017 we actually know that the people running the nodes have more power then the big miners - because the biggest miners back then were not able to push the protocol changes (like block size) through - because nodes just didnt validate/accept those new blocks. So in the end the end user decides.
This is true for changes to the protocol or code, it is not true for doing fraudulent transactions within the current protocol version. So colluding miners can have impact in that realm I'd say.
[+] [-] buryat|4 years ago|reply
[+] [-] wsc981|4 years ago|reply
> Prices could be high, but mostly they weren’t. Although it’s true that the most expensive tulips of all cost around 5,000 guilders (the price of a well-appointed house), I was able to identify only 37 people who spent more than 300 guilders on bulbs, around the yearly wage of a master craftsman. Many tulips were far cheaper. With one or two exceptions, these top buyers came from the wealthy merchant class and were well able to afford the bulbs. Far from every chimneysweep or weaver being involved in the trade, the numbers were relatively small, mainly from the merchant and skilled artisan class – and many of the buyers and sellers were connected to each other by family, religion, or neighbourhood. Sellers mainly sold to people they knew.
> When the crash came, it was not because of naive and uninformed people entering the market, but probably through fears of oversupply and the unsustainability of the great price rise in the first five weeks of 1637. None of the bulbs were actually available – they were all planted in the ground – and no money would be exchanged until the bulbs could be handed over in May or June. So those who lost money in the February crash did so only notionally: they might not get paid later. Anyone who had both bought and sold a tulip on paper since the summer of 1636 had lost nothing. Only those waiting for payment were in trouble, and they were people able to bear the loss.
> No one drowned themselves in canals. I found not a single bankrupt in these years who could be identified as someone dealt the fatal financial blow by tulip mania. If tulip buyers and sellers appear in the bankruptcy records, it’s because they were buying houses and goods of other people who had gone bankrupt for some reason – they still had plenty of money to spend. The Dutch economy was left completely unaffected. The “government” (not a very useful term for the federal Dutch Republic) did not shut down the trade, and indeed reacted slowly and hesitantly to demands from some traders and city councils to resolve disputes. The provincial court of Holland suggested that people talk it out among themselves and try to stay out of the courts: no government regulation here.
[0]: https://theconversation.com/tulip-mania-the-classic-story-of...
[+] [-] latchkey|4 years ago|reply
[+] [-] exporectomy|4 years ago|reply
[+] [-] sunshinerag|4 years ago|reply
they can print more bitcoins into existence? they can fake a transaction? they can undo a transaction? they can steal from other wallets?
[+] [-] supermatt|4 years ago|reply
Basically, the first to mine a block has control over the history since the previously mined block. Because they have superior mining capability, they are more likely to be first to mine a block. They are also able to refuse to accept others blocks, which could effectively fork the blockchain, causing a split head, which results in other other issues.
EDIT: just reread, and theres 2 aspects to control. Theres the mining aspect (which i mention above) and then there is the market manipulation aspect (which is to do with pump/dump - unrelated to above).
[+] [-] EdwardDiego|4 years ago|reply
[+] [-] ur-whale|4 years ago|reply
In this particular instance, it means "they have more than me".