

Rich-Get-Richer Effect Observed in BitCoin Digital Currency Network - soofy
http://www.technologyreview.com/view/518541/rich-get-richer-effect-observed-in-bitcoin-digital-currency-network/

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bbbhn
It would be great if MIT Tech Review dropped its political agenda and just,
you know, reported on technology.

These "rich-getting-richer" addresses may actually be held by businesses, and
the reason they are gaining more links and BTC is because more people are
storing their BTC with that business.

The study doesn't provide nearly enough evidence or context to justify MIT
Tech Review's politically-loaded rhetoric. There are ways to report on the
Bitcoin network without mucking it up with divisive classist rhetoric.

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Aqueous
If this article is slanted, it's because reality has a bias, not MIT.

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Natsu
There are actually two halves of Matthew's law: the rich get richer & the poor
get poorer. I wonder why they didn't say anything about the other half? I
suppose you might think it was entailed in the first, but I'm not sure how
valid reasoning that would be if it's not zero sum.

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oakwhiz
Due to the deflation, wouldn't the poor get richer in the exact same
proportion?

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Mikeb85
Deflation makes the value of currency go up, so the rich would get richer.

In an inflationary world, the rich actually get poorer, but typically have the
means to invest and thus negate the inflationary loss...

The reason for the typical rich-get richer scenario in the real world is that
the rich have enough assets that they don need to be liquid that they can
invest and increase their wealth, whereas the poor need to keep their assets
liquid for potential hard times, and thus by not investing they lose value to
inflation.

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Mikeb85
Of course this makes sense for Bitcoin. Early adopters had a much easier time
accumulating currency, and likely ensured a way for them to keep control of a
good amount of currency in the future.

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ewillbefull
This article has already been disputed. As bitcoin has grown businesses like
Bitpay are starting to handle payments for merchants, and exchanges and other
businesses are beginning to coalesce bitcoins into wallets. That is why
bitcoins are starting to become more concentrated, not because some
individuals are earning more.

It's actually very difficult to make bitcoins with bitcoin investment, there's
only risky bets and day trading right now. There are no reliable interest-
bearing instruments.

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Aqueous
Another way of saying this: When it rains, it pours.

And of course this is true. For any given node in an example network, the
number of incoming links to it is the same as the number of people who have
already 'vouched' for that person. Obviously, more links are given to those
who already have higher credibility in virtue of being vouched for. In a
social network this is true and in an economy this is true. The more incoming
links you have, the stronger your 'brand,' the more incoming links you have.

More than just a currency, what BitCoin offers is the most complete data on
any economy. In no other economy is a complete record of every transaction,
and every amount of every transaction, available. I wouldn't be surprised if
BitCoin's economy becomes an extremely popular laboratory for academic
economists to study actual, real-life economic effects with great precision.

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morgante
From my reading, this simply has nothing to do with the Matthew Effect. They
are measuring volume of transactions, not necessarily value and certainly not
wealth accumulation.

Naturally, those who engage in many transactions initially are likely to
engage in even more transactions in the future (ex. a new exchange starts with
many transactions and gets even more over time). This has no correlation with
actual wealth.

If we were to apply this logic to the real world, one would reach the
startling conclusion that delis are wealthier than high fashion boutiques.

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yetanotherphd
This is complete garbage. A bitcoin account in no way represents the wealth of
a person. If you look at the graph, you will see that bitcoin accounts
typically change in their "wealth" by orders of magnitude over the period of a
month.

So if this is some way represented the real economy, it would be saying that
in a given month, some people get 1000 times richer, some get 1000 times
poorer, but in some average sense, the rich tend to get slightly richer.

The whole article has the feel of researchers taking the data that exists and
is easy to analyze, doing some simple computations that are completely
meaningless, and then pretending these computations have some implications for
society.

EDIT: I was mis-reading that graph, but the point remains that bitcoin
accounts are no a meaningful quantity (if we are interested in the wealth of
individuals). In particular that figure (and their observations that the rate
of growth is higher for higher balances) only applies to the subset of
accounts whose balance increases. When you look at the accounts whose balance
decreases, almost all of the time the balance goes to zero.

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alexeisadeski3
I can't wait for the whole rich-get-richer meme to go the way of the dodo.

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freshhawk
So you are saying it's not a real effect that is observed? That's a surprising
statement to me.

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Mikeb85
It's a real effect but nothing inherent to a market economy. It's more a
result of human behavior....

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clicks
Why are we presupposing the market economy to be free of human behavior in any
case? In practical terms a market economy will always be involved with human
behavior... because _it 's a market where all parties involved are human_.

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Mikeb85
A market economy presupposes a market ruled by supply and demand, free from
regulatory interference. In such a market, there is no inherent mechanism to
make the rich richer, or the poor poorer.

Rather it's human behaviour which determines wealth and distribution of
wealth. So while this effect is certainly something that economists study and
will continue to study, it's entirely due to human behaviour, independent of
the 'type' of economy. Even in Communist countries you see this effect - the
ruling party consolidate their wealth and power while the subjects are handed
out a finite amount of resources/wealth.

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quadrangle
"A market economy presupposes a market ruled by supply and demand, free from
regulatory interference."

Science does not spent time on fantasy. Science is for things that exist in
the observable world.

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fennecfoxen
Excuse me. I spent some hours in high school physics learning the _non-
relativistic_ way to add velocity vectors, to say nothing of simplifying
assumptions ignoring friction or wind resistance. Turns out it's a pretty good
approximation in a variety of common cases. This is as much "fantasy" science
as the example you're complaining about is "fantasy" economics, and either are
darned useful ways to idealize problems where the discrepancies between the
real world and the fantasy world are small.

Now if you'll excuse me, I'm off to go work on my Turing machine with infinite
memory and all that jazz...

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dcc1
People getting rich of bitcoin are the enthusiasts who understand it and use
it daily, like myself

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mahyarm
How about cost of miners in this analysis. Power cost, hardware cost, time
cost?

