
Bitcoin Wealth Distribution - jackgavigan
https://blog.lawnmower.io/the-bitcoin-wealth-distribution-69a92cc4efcc
======
nullc
The text on the bottom more or less explains why this kind of analysis is
almost worthless:

Due to the nature of easy & anonymous address creation, and corporate account
management inherent to Bitcoin & the companies in the ecosystem, estimating
the actual number of unique bitcoin holders as opposed to addresses is
unfortunately much more difficult — & not something we can glean from
observing its blockchain alone.

Addresses can not only overstate user numbers when single people unknowingly
control numerous addresses, but also understate user numbers when single
addresses hold the funds of numerous unknown people, like an exchange who may
control balances in a traditional database.

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noobermin
The thing I don't get with CS pop graphs (like this one) is if you want to
show something is an obvious power law distribution, why don't you plot it on
a log-log graph? Then it will be perfectly obvious.

~~~
loeber
Most people don't understand log-log graphs. Also, taking the log-log is so
powerful that even distributions that don't strictly follow a power law can
look as if they're approximately following a straight line.

~~~
noobermin
Plot two graphs, one loglog, one not. Also, "nearly linear" on a log-log graph
does mean almost power law.

~~~
smallnamespace

      being roughly straight on a log-log plot is a necessary
      but not sufficient condition for power-law behavior
    

Source: [https://arxiv.org/abs/0706.1062](https://arxiv.org/abs/0706.1062),
p.15

pp. 24-29 have nice log-log plots of various data sets, along with whether
they can plausibly described as power law distributions. 'Wealth',
interestingly enough, looks like a pretty straight line, but fails the
statistical test badly.

Btw, if you just take logs and run a regression to estimate the exponent, you
get a highly biased estimate.

In general, it's much better to do a _direct_ statistical test, although the
method described in the paper is somewhat involved.

~~~
noobermin
I like what you shared. I actually can't believe I haven't seen that paper
before (it has >4k citations ffs), but I admit, I work in a less statistical
side of physics.

What I'll say is that what something _is_ is a fuzzy term, although I
generally agree what you mean especially about a power law says about the
behavior in the tails especially. That comes from thinking a small deviation
on the tail is "small" due to optics and not realizing it is deviation on
orders of magnitude. That might be what the replier to my comment was
referring to. That's why "two graphs" is usually a good answer.

PS Also, I would _never_ fit a straight line on a loglog or semilog graph, nor
should anyone ever. People who do that don't understand what least squares is
at all.

~~~
kevin_thibedeau
It can still be useful to do a polynomial regression on log-log data that
doesn't quite obey a power law.

~~~
noobermin
No I meant log'ing the bins and then doing linear regression and calling that
an "exponential fit". Not so.

A polynomial is a power law...with more terms.

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kristopolous
"Many bitcoin are stuck in addresses with lost private keys".

Lol yep. Had a few thousand when they were worthless and don't remember what
happened to them.

~~~
Jasper_
It's extremely hard to exchange them into USD and trying to dump any of them
would trash the price. Don't worry, you didn't lose much.

~~~
bdcravens
Actually this isn't 2011. Going from zero to trading is about as complex as
stocks or any other security.

~~~
notyourwork
How do you figure? I can buy some bitcoin's, send them to btc-e and start
trading immediately. There is no friction involved aside from acquiring your
initial BTC.

~~~
bdcravens
I know, I was really replying to parent comment that it was "extremely
difficult" to trade, and drawing comparison to other markets seemed the most
apt. For those in the know, it gets easier.

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Retr0spectrum
Interesting, although I think graphs like this one give a better idea of the
distribution:

[https://medium.com/@jony_levin/the-lorenz-curve-of-
bitcoin-i...](https://medium.com/@jony_levin/the-lorenz-curve-of-bitcoin-is-
crooked-how-to-make-it-straight-f9179041b984#.43vun7u0s)

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wtracy
Now I'm curious who holds the wallet with 100,000 BTC. Is it publicly known
who owns it? My best guess would be either one of the early developers, or a
major exchange or bank.

~~~
lossolo
Someone estimated that Satoshi Nakamoto (founder of bitcoin) has around 1
million bitcoins spread around multiple addresses.

~~~
notyourwork
Awhile back I remember reading an article that found many addresses with
10,000 BTC (I might be mistaken on the exact number) deposited into them all
around a similar time frame and the coins have never moved.

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VertexRed
Isn't it inaccurate to base this on addresses, since nearly everyone uses more
than one?

~~~
notyourwork
If you define wealth distribution strictly against individual people. You can
report on distribution against anything really, in this case addresses. I
agree with your point and most naive readers will assume distribution is per
person.

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throwaway1974
So those 7.4+9.4 million bitcoin address with a balance of less than 0.0001
($0.06) are basically unusable at this time (due to current fee and blockchain
being constipated for most of 2016), the sum up to about 2600$ worth and
result in millions of "spam" entries on the blockchain

~~~
josephagoss
You're mostly right, Fees are not paid per address but per transaction.

If I had a thousand addresses full of these amounts (0.0001) I could spend
them all in one transaction into a single address.

The fee would end up being higher than the standard due to the recommendation
that fees are per byte.

So I might end up with 0.099 in the final address.

So it's possible to move them if you can combine enough of them together to
make the transaction worthwhile.

Of course the part where you're right is that it's unlikely a single person
owns a large number of these spam transactions and thus the economics doesn't
make sense for them to move at this time.

However, if Bitcoin were worth 100x and the fee remained in dollar terms
roughly the same , it would now become much easier to move these spam amounts.

~~~
pmorici
Transaction fees are really a function of transaction size in bytes not per
transaction. Adding an additional input address increases transaction size by
180 bytes. The output address and other common overhead is around 44 bytes.
The current minimum cost of block space is 0.0000001 BTC per byte if you are
willing to wait several hours for your transaction to confirm. At that rate
adding an additional input will cost you 0.0000180 so anything less than that
is not worth moving under current conditions. To be confirmed in a timely
fashion you need to pay a per byte fee of about 5x so in reality amounts under
0.00009 are currently not worth spending.

[http://bitcoin.stackexchange.com/questions/1195/how-to-
calcu...](http://bitcoin.stackexchange.com/questions/1195/how-to-calculate-
transaction-size-before-sending)

[https://bitcoinfees.21.co/#delay](https://bitcoinfees.21.co/#delay)

