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Pardon my very limited knowledge about those things, but one thing I wonder and find fascinating about bitcoin is this : I understand that a very limited number

by bbrx 9y ago

Pardon my very limited knowledge about those things, but one thing I wonder and find fascinating about bitcoin is this : I understand that a very limited number of people, probably the initial developers, hold a very hight percentage of available bitcoin. (disregard the rest in case i'm even completely mistaken in that assumption...) Those people have an asset with an incredibly high face value. Of course, the market is probably far too shallow for them to cash out even a small part of this face value. The question is this : for those people, assuming or not that they can coordinate, what is the optimal strategy? I'm thinking something like draw regularly, in order to build a war chest to "defend" the cryptocurrency against too violent crashes, such sustaining the confidence of the public. In a way controlling and fine tuning the influx of external money coming in from fools wanting in on the pyramid effect. Is it realistic to think such strategy could be feasible, and if so, for how much time those people could/would want to sustain it?

michaelchisari 9y ago
On the flip side of that, how do you build an economy around a currency that front loads such massive wealth inequality out of the gate?
- bbrx 9y ago
  The moral angle is indeed the mindblowing part, but I wanted to sollicit the acute minds of hackernews to shine a light on the practical aspect of it.
- cat199 9y ago
  we have an answer for that: https://en.wikipedia.org/wiki/Bretton_Woods_system https://en.wikipedia.org/wiki/Bretton_Woods_system
0wing 9y ago
Because there's no inherent value and it's just traders making up theories, I would conclude there's this set of game theory: 1. Buy bitcoins or release media PR to pump price 2. Buy future shorts 3. Sell a large enough order to trigger margin calls and stop losses 4. Profit twice from your BTC sale, and short sale 5. If you believe the price will return, buy back in cheaper than you sold due to other panic sellers
- passwordreset 9y ago
  Could you please give me your reason for believing that there is no inherent value in Bitcoin?
  - 0wing 9y ago
    Namely the codebase, history, delusional claims, and alternatives (other crypto-networks) that make Bitcoin obsolete. See also the false equivalency to gold: If you understand the computer science behind Bitcoin, you'll realize how ridiculous the false equivalency to gold is. 1. The claim of "rare" doesn't exactly hold true. Consider the 10,000 BTC pizza - how did this happen? This was the direct result of Satoshi's economic policy, granting vast sums of BTC to mint out very quickly very early for a short duration to the very small pool of people who ran the software. Satoshi's algorithm produced BTC in plentiful quantities enabling the 10,000BTC pizza - thus it wasn't rare if you were Satoshi and the dozen other early whales hording as much as possible, until the algorithm begins cutting off the production and limiting later users from producing coins, starving the economy. Now there's a psychological game being played, where public relations and marketing must convince new users to buy in. Because the exchanges are unregulated, they can manipulate the spot price though wash trading and painting the tape [2] (where trades are falsified and you just sell the same item back and forth to your friend for a higher and higher price). The supply was created by running a piece of software. It's not magic. Most of the supply was produced very early on and as much as 30% of all Bitcoins are owned by less than 100 people. Best estimates are that there are about one million holders of Bitcoin; 47 individuals hold about 30 percent, another 900 hold a further 20 percent, the next 10,000 about 25% and another million about 20%, with 5% being lost. So 1/10th of one percent represent about half the holdings of Bitcoin and 1 percent close to 80 percent (http://www.businessinsider.com/927-people-own-half- of-the-bitcoins-2013-12). The concentration of Litecoin ownership is similar (http://litecoin-rich-list.blogspot.com). Most of the big wallets have been in place from early on, so sitting back and watching your capital grow has been a very successful strategy. The distribution of Bitcoin holdings looks much like the distribution of wealth in North Korea and makes the China’s and even the US’ wealth distribution look like that of a workers’ paradise 2. Easy migration to more advanced e-cash services, LTC, XMR, ETH, so on See: https://coinmarketcap.com/currencies/views/all/ https://coinmarketcap.com/currencies/views/all/ 3. Bitcoin network requires ASIC miners, largely centralized in China [3]. Assuming the inveitable surpassing of a more advanced cryptosytem making Bitcoin obsolete, as the market is informed there will be a decline in BTC's spot price and once this falls below the cost of OPEX for miners, the hardware goes offline and the network will cease to function. Maximalists will attempt to offer an emergency fork, in any attempt to save their "investment", just as they have developed the lightening network to create centeralized payment hubs, so "investors" can act as liquidity providors and take fees, instead of miners. 4. Electricty usage is unsustainable, GOTO 3 [1] https://bitcoin.stackexchange.com/questions/86/is-it-possible-to-estimate-the-gini-coefficient-for-bitcoins-and-if-the-trend-is https://bitcoin.stackexchange.com/questions/86/is-it-possibl... http://www.businessinsider.com/bitcoin-inequality-2014-1 http://www.businessinsider.com/bitcoin-inequality-2014-1 [2] https://www.youtube.com/watch?v=6r04gfWfRkE https://www.youtube.com/watch?v=6r04gfWfRkE [3] https://qz.com/1055126/photos-china-has-one-of-worlds-largest-bitcoin-mines/ https://qz.com/1055126/photos-china-has-one-of-worlds-larges...
659087 9y ago
> I'm thinking something like draw regularly, in order to build a war chest to "defend" the cryptocurrency against too violent crashes Or just print fake money and call it "USD" on your exchange.
jaggederest 9y ago
You sell a percentage of your (Bitcoin) for (cash) each time-period, and you buy (Bitcoin) with a percentage of your (cash) each time-period. You can put any two assets in the parentheses. You end up having a balanced ratio of assets according to the relative ratios of those percentages and the current value of each asset, and it will be balanced at a rate according to the total percentage you're trading on (10% means it'd be averaged over 10 time-periods). There is more formal analysis of this by people around optimal portfolio theory, math about how to balance your portfolio among a variety of assets to choose a risk level analytically, but this is the rule of thumb version AFAIK.

by bbrx 9y ago

michaelchisari 9y ago

On the flip side of that, how do you build an economy around a currency that front loads such massive wealth inequality out of the gate?

bbrx 9y ago
The moral angle is indeed the mindblowing part, but I wanted to sollicit the acute minds of hackernews to shine a light on the practical aspect of it.
cat199 9y ago
we have an answer for that: https://en.wikipedia.org/wiki/Bretton_Woods_system https://en.wikipedia.org/wiki/Bretton_Woods_system

0wing 9y ago

Because there's no inherent value and it's just traders making up theories, I would conclude there's this set of game theory: 1. Buy bitcoins or release media PR to pump price 2. Buy future shorts 3. Sell a large enough order to trigger margin calls and stop losses 4. Profit twice from your BTC sale, and short sale 5. If you believe the price will return, buy back in cheaper than you sold due to other panic sellers

passwordreset 9y ago
Could you please give me your reason for believing that there is no inherent value in Bitcoin?
- 0wing 9y ago
  Namely the codebase, history, delusional claims, and alternatives (other crypto-networks) that make Bitcoin obsolete. See also the false equivalency to gold: If you understand the computer science behind Bitcoin, you'll realize how ridiculous the false equivalency to gold is. 1. The claim of "rare" doesn't exactly hold true. Consider the 10,000 BTC pizza - how did this happen? This was the direct result of Satoshi's economic policy, granting vast sums of BTC to mint out very quickly very early for a short duration to the very small pool of people who ran the software. Satoshi's algorithm produced BTC in plentiful quantities enabling the 10,000BTC pizza - thus it wasn't rare if you were Satoshi and the dozen other early whales hording as much as possible, until the algorithm begins cutting off the production and limiting later users from producing coins, starving the economy. Now there's a psychological game being played, where public relations and marketing must convince new users to buy in. Because the exchanges are unregulated, they can manipulate the spot price though wash trading and painting the tape [2] (where trades are falsified and you just sell the same item back and forth to your friend for a higher and higher price). The supply was created by running a piece of software. It's not magic. Most of the supply was produced very early on and as much as 30% of all Bitcoins are owned by less than 100 people. Best estimates are that there are about one million holders of Bitcoin; 47 individuals hold about 30 percent, another 900 hold a further 20 percent, the next 10,000 about 25% and another million about 20%, with 5% being lost. So 1/10th of one percent represent about half the holdings of Bitcoin and 1 percent close to 80 percent (http://www.businessinsider.com/927-people-own-half- of-the-bitcoins-2013-12). The concentration of Litecoin ownership is similar (http://litecoin-rich-list.blogspot.com). Most of the big wallets have been in place from early on, so sitting back and watching your capital grow has been a very successful strategy. The distribution of Bitcoin holdings looks much like the distribution of wealth in North Korea and makes the China’s and even the US’ wealth distribution look like that of a workers’ paradise 2. Easy migration to more advanced e-cash services, LTC, XMR, ETH, so on See: https://coinmarketcap.com/currencies/views/all/ https://coinmarketcap.com/currencies/views/all/ 3. Bitcoin network requires ASIC miners, largely centralized in China [3]. Assuming the inveitable surpassing of a more advanced cryptosytem making Bitcoin obsolete, as the market is informed there will be a decline in BTC's spot price and once this falls below the cost of OPEX for miners, the hardware goes offline and the network will cease to function. Maximalists will attempt to offer an emergency fork, in any attempt to save their "investment", just as they have developed the lightening network to create centeralized payment hubs, so "investors" can act as liquidity providors and take fees, instead of miners. 4. Electricty usage is unsustainable, GOTO 3 [1] https://bitcoin.stackexchange.com/questions/86/is-it-possible-to-estimate-the-gini-coefficient-for-bitcoins-and-if-the-trend-is https://bitcoin.stackexchange.com/questions/86/is-it-possibl... http://www.businessinsider.com/bitcoin-inequality-2014-1 http://www.businessinsider.com/bitcoin-inequality-2014-1 [2] https://www.youtube.com/watch?v=6r04gfWfRkE https://www.youtube.com/watch?v=6r04gfWfRkE [3] https://qz.com/1055126/photos-china-has-one-of-worlds-largest-bitcoin-mines/ https://qz.com/1055126/photos-china-has-one-of-worlds-larges...

659087 9y ago

> I'm thinking something like draw regularly, in order to build a war chest to "defend" the cryptocurrency against too violent crashes Or just print fake money and call it "USD" on your exchange.

jaggederest 9y ago

You sell a percentage of your (Bitcoin) for (cash) each time-period, and you buy (Bitcoin) with a percentage of your (cash) each time-period. You can put any two assets in the parentheses. You end up having a balanced ratio of assets according to the relative ratios of those percentages and the current value of each asset, and it will be balanced at a rate according to the total percentage you're trading on (10% means it'd be averaged over 10 time-periods). There is more formal analysis of this by people around optimal portfolio theory, math about how to balance your portfolio among a variety of assets to choose a risk level analytically, but this is the rule of thumb version AFAIK.