Is there any crypto inequality index? I thought that Gini index could work too!
I would like to find an inequality index in the cryptocurrency description on CMC and similar, it would help me make better investment choices.
What do you think?
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_.
Market goes down, crypto seems to go down with it. Look at something like 1-month BTC and 1-month APPL or something.
It's not supposed to be doing this. I think this is happening because it's become so easy to purchase that people now just have it in their "portfolio", basket of everything, and when they want to sell, they just sell everything, stocks and crypto. They are the same thing to a lot of people.
This means it is getting tied into the existing financial system anyway, even without specific "controls" like central banking.
The fact that its price somewhat correlates with the stock market and the fact that two parties can exchange bitcoins without any government being able to prevent the transactions from happening are two entirely unrelated things.
What's more, the first matters little (only because volatility can sometimes be annoying), while the second is an essential, even defining property of the system.
> It's not supposed to be doing this.
Why not? Again, Bitcoin was designed to solve one problem: allowing economic entities to exchange value freely.
Other than - maybe - the fixed supply, nothing was ever built in the protocol to control its price.
Is it really not? Both stocks and cryptocurrencies act as inflation hedges against the central bank.
In essence, the idea is that if a teenager in 2010 acquired 10,000BTC the society owes him food, shelter and luxury for generations to come.
It’s like being a landlord whom passive income guarantees him and his family a good life with no work when people working their arses off to be able to pay the rent.
Not necessarily. The state still takes a percentage eg: property tax, maintenance, utilities, safety certifications, etc.
Multiple choice question: Which of the following groups have lots of control over BTC?
A. BTC Core Developers
B. BTC Exchanges
C. Credit Card Processors/ACH Entities/Payment apps that allow people to buy BTC from fiat without exchanging physical cash
D. BTC Miners
E. Any judge in the country that can order you to hand over your BTC just like he/she can order you to dig up the cash he/she suspects you have and hand it over.
F. All of the above and many more
(It's F)
>and by _state control_ I mean something along the lines of a central bank.
So central bank control would be something like "expansion of money supply beyond 21 million bitcoins". Therefore, your options (B) Coinbase/Binance (C) Visa/MC/banks and (E) courts -- really have no "control" over that "central bankish" aspect.
EDIT reply to: >Central banks [...] don't have complete control about the money supply, because commercial banks also create money via fractional reserves.
The Federal Reserve (central bank) in USA is the entity that adjusts the fractional reserve requirement.
https://en.wikipedia.org/wiki/Federal_Reserve#Reserve_requir...
> The idea that no one can expand the supply of bitcoins beyond 21 million is a nothing but fairy tale.
It could theoretically be done but it would require the coordination of the Bitcoin developers + miners + node validators. A crypto-exchange like Coinbase can't do it.
As a previous case study, Coinbase was part of the group that aligned with majority miners to change the Bitcoin protocol to increase the block size -- but all that influence and miner support still couldn't get the Bitcoin network to adopt it.
Sure anyone can affect anything but how did any of them selfishly affect the fundamental properties of the protocol?
The ideal that Bitcoin lets you escape the current financial dogmas is completely wrong, it's a parody of the existing system.
Something like Freicoin would be more appropriate as an alternative, e.g. an "abundant" currency that always makes itself available to anyone who wants to trade.
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).
PS: if a bitcoin wallet belongs to one centralized exchange, it’s still under centralized control!
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.
If I choose to self-custody, it's much safer to memorize a seed phrase than to store cash in my mattress. Most people don't bother and use banks. But I think it's good that people now have a choice in the matter.
That isn’t what the sales pitch has been for the last 13 years, with lots of fanciful rhetoric about removing the need for banks (“you can be your own bank!” is basically a cliché by now).
> If I choose to self-custody, it's much safer to memorize a seed phrase than to store cash in my mattress.
Are you sure about this? Lots of people have been phished or compromised, whereas someone breaking in and searching your house is relatively uncommon and limited to people in the same area whereas your cryptocurrency can be stolen by anyone in the world.
It's like the elections being stolen, or anti-vax propaganda or whatever other idiocy being spread on FB on any given moment.
>95% of Bitcoin is owned by 2%
This is just the lower limit on the concentration of wealth in Bitcoin, found from onchain data. Since people can have multiple addresses it is possible that the 2% actually control 97% or even more of btc supply
More specifically: assuming we can't derive it by some clever means, or approximate it from some tax reporting data, isn't it a problem that we can't get such a distribution?
I mean this not as a moral judgement, but more as a system dynamics concern. It's easy enough to see how wealth concentration can destabilize a money/value system absent other factors. So my concern isn't about what's right or wrong socially, but whether there might be a reason to question the implicit trust that the maths will work out.
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.
Are you after an asset that doesn't follow that distribution ? Do you consider this a good thing ?
I think it's obvious that this extreme case is very bad. So there must be a point where alpha goes from being in "good" territory to being in "bad" territory, or there must be some gradient of "least concerning" to "most concerning".
The question asked by OP is basically equivalent to "what is the value of alpha?" Considering the potential for concern, this seems like a useful thing to measure.
I don't want to speak for anyone else, but when most people talk about wealth/income distribution or inequality, they generally aren't advocating for a flat line (everyone has an equal amount of dollars), they are generally advocating for keeping Pareto's alpha at some reasonable level.
And even then, I'd argue there's a lot of incentive to lie about it.
- In the future, we want to rank all of them
- Method specification: https://rugpullindex.com/specification#CalculatingtheEqualit...
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.
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.
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.
tl;dr: 98% of BTC in circulation at the time belonged to 2% portfolios.
Is it?
What's your evidence for this?
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.
If you think of gold as a speculative accounting system then it really is just a very resource inefficient way of book keeping. Digging up gold and going to war for gold mines makes you poorer, not richer. Yet people believe that this system is infallible.
Why does it matter how many people are associated with a particular wallet? The wallet with $150 worth of Bitcoin has the same amount of security as the wallet with $15M, and it's considerable. The protocol itself has never been hacked, despite holding nearly $1 trillion of value.
Because if people knew that BTC was hacked, the bottom would fall out under it, and all your stolen coins would become worthless.
Not to say that I think it's been hacked....
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.
