This is a really interesting thread with great detective work.
Hopefully Bitcoin doesn't end up with a 1%er problem but at the rate we're going at - I'm not sure how that would be avoided.
Yes. Thanks rpietila, for starting this thread. It's quite the eye opener. It is making me rethink whether I want to hold a currency with such a top heavy distribution. Disturbing to have your beliefs challenged, but useful.
I KNOW it's not a Ponzi pyramid scheme, but the shape of the adoption curve, and the growth pattern is similar enough that potential adopters might be thinking that, if it looks like a duck, and quacks like one too, then maybe...
That has to be a long term problem for mainstream take-up.
I would disagree that Bitcoin looking like a ponzi will be the cause of low uptake.
I suspect it's too sophisticated for most people and will just need adoption to come via recommendation. At some point it'll reach critical mass and be accepted just like Paypal.
I still remember the time when if you mentioned Paypal, people would look at you like some sort of computer nerd. These days it's commonplace to find it at any online store.
No-one cares that I've used PayPal to pay, just that I did. That's where I see Bitcoin when it's finally adopted by the masses.
No argument from me. I agree with you. I think that looking Ponzi-like is A barrier, not THE barrier. I still feel that until my 8000 year old aunt can use and keep safe Bitcoin while using Windows at the library, it will remain marginal.
Here, the important parameters I used were:
- average investment in bitcoin is $1000 (buy outright, or mining equipment)
- estimated the percentage of holders whether they had invested at $100, $10, $1, $0.1 or $0.01
- Ones invested at $100/BTC still have their whole investment, others have sold 20%, 40%, 60% or 80%, respectively.
- Calculate weighted average, how much is the present value of an average remaining bitcoin investment (=$3,400, which is quite small for the reason that 80% were estimated to have bought in at about $100)
- Divide bitcoin market cap by the previous figure, obtaining number of holders (700,000).
- arrange the number of people in a certain log-bracket so that they approximately conform to bell curve (found out in other similar data that thy do) and satisfy the constraints of total bitcoins and the known stash of Satoshi and some idea of the top-heaviness of the distribution. <= it is essentially a parameter, how many coins to allocate to BTC10,000+ bracket. I think the realistic range is BTC3M to BTC7M, including Satoshi's 1M.
- almost nothing in the distribution changes if the number of holders is 200k instead of 600-700k. The bulk of the bitcoins is held by the top, and their number is inversely correlated to their average holding. The average holding must follow certain rules so there are not many parameters.
edit: Ah, as I was writing, I remembered that average remaining investment was calculated with bitcoin price of $100 instead of the current $200. This makes the total number of bitcoin users 350,000, which I think is very realistic considering other metrics.
Does this remind anyone of the Drake equation? LOL.
Rpietila, this is the most fascinating thread in a LONG while. Thanks. What happens if you change some of your assumption parameters?
- average investment in bitcoin is $1000 (buy outright, or mining equipment) I wonder about this assumption. Why that particular number? What if you change this to the maximum amount one can withdraw from an ATM in one day? Say, $400 - a guess(!). I know...