7 ms·

Is the Bitcoin network an oligarchy?

88 points by rapnie 8y ago

strulovich 8y ago
2009-2013 is a long time ago, so maybe the title should be “Was the Bitcoin network an oligarchy?”
- garmaine 8y ago
  Unfortunately the answer is still yes, just a different composition of oligarchs.
  - darawk 8y ago
    That exact fact makes it not an oligarchy.
    - geomark 8y ago
      It's still a small group in control, so still an oligarchy. But the fact that there is a constant rotation of oligarchs makes it a little different, like maybe you could be the next oligarch.
      - garmaine 8y ago
        Churn at the top doesn't mean there's upward mobility.
        darawk 8y ago
        Yes, it literally does.
        garmaine 8y ago
        No.. it doesn’t. It is often a game of musical chairs with the same aristocratic class.
        darawk 8y ago
        ...if they're an aristocratic class, then it isn't churn, is it?
    - eksemplar 8y ago
      An oligarchy isn’t defined by a set of stable oligarchs. There can be a shift in power in a oligarchy and there typically will be because the oligarchs aren’t friends. If you look to ancient Athens, it wasn’t uncommon for an oligarch to be exiled. If you look to modern Russia, well, there is a reason a lot of former Russian oligarchs chose to live in London and not a Russian prison. An oligarchy is almost always a turbulent place, most of them making the BTC powershifts look calm.
      - darawk 8y ago
        Churn at the top is the exact thing you want in a dynamic, robust economy. You don't want equality. You want movement. Sure, Russia and Athens had some churn. But it was incredibly low.
atomical 8y ago
How do these users have political control like an oligarch would have?
- cowpig 8y ago
  This is a good question, and I'm afraid of the answer
- robertAngst 8y ago
  All around bad article. How did it get to top of HN?
- anoncoward111 8y ago
  Any entity that controls more than 51% of network capability (i.e. owns and operates a lot of expensive hardware) can, in theory, begin making fradulent transactions called "double spends". Any common user of the network that is unfortunate enough to get caught up in this scheme would lose their money. And the long term value of the network would most likely plummet, but in 2013 it didn't for some odd reason :)
  - atomical 8y ago
    When I think of political control and Bitcoin I think of people who have the power to build a consensus for a hard fork. It wouldn't really make sense for someone controlling 51% of the network to hack the network. Then all their bitcoins would be useless because everyone else would abandon the network.
    - EthanHeilman 8y ago
      They could do short, targeted 51% attacks without doing much harm to the value of Bitcoin. In 2013 Ghash.io a mining pool had an employee who carried out mining based doublespends against a gambling site [0]. Very few people abandoned the network because very few people were impacted by this attack. [0]: https://bitcointalk.org/index.php?topic=321630.msg3445371#msg3445371 https://bitcointalk.org/index.php?topic=321630.msg3445371#ms...
narrator 8y ago
Oligarchy means controlled by the few. Anyone with a Raspberry PI, decent network bandwidth, and a few terabytes hard drive can be a node and start validating and relaying transactions. Besides, Bitcoin is not proof of stake, so having a lot of bitcoin does not give someone more control of the network. So no, Bitcoin is not an oligarchy. All of these big addresses likely belong to exchanges like CoinBase, etc.
- perfmode 8y ago
  control requires hashing power
- adrianN 8y ago
  How many Petahashes do you get out of a Pi?
robertAngst 8y ago
>Leonardo Ermann from the National Commission for Atomic Energy in Buenos Aires, Argentina, and colleagues from the University of Toulouse, France, have examined the structure of the Bitcoin-owner community by looking at the transactions of this cryptocurrency between 2009 and 2013. The study is 5 years old? Guessing back then it was libertarians and drug dealers. Also isnt this true of any early adoptor? The first smartphones were a small group too. The bigger question is- Why is this news? This seems to be agenda driven rather than a discovery. Who benefits from pushing anti-bitcoin ideas? These are not accidents, these studies are expensive to run. Why was this study completed?
- paulie_a 8y ago
  It's still just drug dealers and people throwing money like they are at the craps table.
7373737373 8y ago
With the emergence of electronic id cards in several countries (e.g. Estonia, Germany), there is the real possibility of equally distributing currency to card holders, even depending on properties such as current residence or birth date (dystopian version: names or only people with specific biometrics: eye color, heights or specific facial features). It is possible to create a signature scheme that guarantees privacy while avoiding double spending. One limitation to this is that organisations wanting to use signatures (at least in my country) must register with the government as a service provider, which might be a point of failure.
21 8y ago
When bitcoin appeared, everybody was saying that "only retarded people would `invest` in such an obvious scam. you would be better to blow your money in Vegas, at least you'll get a free drink". Now the same people say "it's not fair that some got to buy it at such cheap valuations".
- tuesdayrain 8y ago
  Probably not the same people.
- jib 8y ago
  No we are still saying the same. Lots of people made money on pyramid schemes, that doesn’t make them a good investment. The longer a pyramid scheme runs, the dumber it is to invest in it. If you truthfully believe bitcoin will develop into a stable alternative to state run currencies, great, I wish you good luck. I don’t. To me it is like religion - they can’t all be right and they are mutually exclusive. I don’t trust myself to be able to pick the winner among all the losers.
  - dane-pgp 8y ago
    The notes and coins for the euro were first issued in 2002, and the first bitcoin was mined in 2009. What makes one a pyramid scheme and the other not? The answer surely can't be "every currency issued by a government is stable forever and every crypto-currency will collapse before 5 years". What I'm saying is, there are a lot of currencies out there, and some are more stable and have a better track record than others. You may not trust yourself to pick a winner among the losers, but I suspect you do use at least one currency from time to time, so you have picked one by default.
arisAlexis 8y ago
you and me can change that. instead of writing articles fire up full nodes and mine when you can
jcfrei 8y ago
Is this online "epdf" viewer by Springer running sluggish on purpose? Or is that just because of my dated notebook? Whenever graphs are rendered my CPU usage just spikes.
siruncledrew 8y ago
Honest question: Is there an etherscan.io for bitcoin to figure out what the largest token holding addresses are? If possible to figure out who the addresses belonged to, then the biggest coin holders could be known.
- dangero 8y ago
  Bitcoin wallets generally generate multiple addresses so most users have many. The wallet software does the work of displaying all addresses combined as a single balance. This is different than Ethereum where generally most users have 3 or less accounts. The effect of this is that Bitcoin appears less concentrated than it actually is in comparison.
- firsttimeuser 8y ago
  https://bitinfocharts.com/top-100-richest-bitcoin-addresses.html https://bitinfocharts.com/top-100-richest-bitcoin-addresses....
  - firsttimeuser 8y ago
    https://btc.com/stats/rich-list https://btc.com/stats/rich-list
    - firsttimeuser 8y ago
      https://99bitcoins.com/bitcoin-rich-list-top100/ https://99bitcoins.com/bitcoin-rich-list-top100/
- fru2013 8y ago
  https://arewedecentralizedyet.com/ https://arewedecentralizedyet.com/
sanxchit 8y ago
Pardon my ignorance, but how is it possible to track Bitcoin holders? I thought that it was really easy to create multiple Bitcoin addresses, so if a rich miner wanted to hide his holdings he could create a separate address for each transaction and he would in effect be untraceable right?
- dangero 8y ago
  There is lots of other metadata to collect: You can monitor which nodes received the transaction first. Edge nodes can get IP address of sender. Who are the transactions with? Amounts, quantity, and time of day/week/month could all provide correlation.
craigc 8y ago
I am well aware that most people on Hacker News hate Bitcoin and cryptocurrencies so a lot of these types of studies and articles that are negative end up making their way to the top. It is strange that this study was from 2017-2018 and yet they only considered data from 2009-2013. Would be nice if there was an explanation as to why. One thing I wanted to point out is this seems to be presented to shine a negative light on Bitcoin, but I have a feeling that if you were to plot the owners of any equity you would find the exact same patterns. People who get in early will own a majority of the supply. For example take a look at Morgan Stanley stock. 86% of the shares are owned by institutional investors and of that chunk, five institutions own 58% of them: https://www.nasdaq.com/symbol/ms/ownership-summary https://www.nasdaq.com/symbol/ms/ownership-summary I also think these types of patterns with regards to transactions probably exist with other currencies as well, but it is just that the data is not available for the public to analyze.
- wjnqx 8y ago
  To be fair, stock in Morgan Stanley is not marketed as "decentralized."
  - craigc 8y ago
    Bitcoin is not marketed as anything. There is no company and there are no marketing or sales people. That is part of the beauty of it. The decentralized claim refers to a decentralized network where the miners and nodes connected to the network are decentralized and no single entity controls 51% of the network (if they did it would collapse). Ownership of coins is not the same as hashing power. Nowhere do people claim that the coins themselves are decentralized.
    - dnomad 8y ago
      This is not true. Bitcoin was heavily marketed as a currency. It failed at this. Bitcoin was heavily marketed as decentralized where no single entity owns 51% of the network. In fact Bitmain likely already does or soon will control 51% of the network [1]. The remarkable thing here is that despite these clear, observable failures... Bitcoin will go on. The true believers will continue to HODL and while shorts may pile on in the absence of fundamental economic data there's little reason to buy or sell. The price now is purely a popularity contest. [1] https://bitcoinist.com/bitmain-51-percent-bitcoin-hashrate/ https://bitcoinist.com/bitmain-51-percent-bitcoin-hashrate/
hapnin 8y ago
Of course only small communities have a majority of btc. Too many people - geeks included - spent too many years believing the fud being broadcast about Bitcoin while others were collecting btc. I've seen the blistering scorn from some here on HN over the years. When I first ran across Bitcoin in 2010, I thought it was a scam but was intrigued by the tech. After studying it for about a month, I realised it wasn't a scam (though scamsters abound in cryptocurrencies, as in all things money) and went around to my friends in the tech community in my city to show it to them. They know me to be literate in networks and cryptography but only one person in the ten or twelve I approached was equally interested. The rest poopooed Bitcoin, some outright laughing me out of their offices. Institutional thinking is what kept a lot of smart people from even looking at Bitcoin early on. The findings in this study shouldn't be surprising. In five years, should the internet still be functioning, Bitcoin will be more spread out than it is now.
- eksemplar 8y ago
  What are you basing this on, your gut feeling? If I look at where I can actually use bitcoins, or crypto currencies in general, the list is dwindling. A few years ago I could buy coffee with crypto, I can’t today. A few years ago I could buy certificates (if I could also pass them) and other Microsoft products with crypto, I can’t today. A few years ago I could rent an vacation home with crypto, I can’t today. Hell these days I can’t even conver crypto into actual money in my country. Maybe it’s not like that in the US, but the only useful thing I can spend crypto on as a Scandinavian is paying for my domains.
  - hapnin 8y ago
    I'm basing it on eight years of experience in Bitcoin. "Bitcoin for coffee" and the like is a waste of the tech, imo. Buying network services such as you described is a better use as intercountry payments with debit cards isn't always feasible. Bitcoin's use is better as a transnational currency when traditional payment channels are cumbersome. To be frank, Bitcoin still has some work to do in the payment channel dept but Lightning Network is getting there. In the US, there are more than a few places where you can trade out btc for gold/silver and sell the metal for fiat. It's preferable to selling on an exchange, imo. If you can't spend now, hang onto your btc until you can. Saving is always a good idea.
UncleEntity 8y ago
I'm going to totally guess (having only read the article abstract) and say the circles they are observing are in large part due to the exchanges. So the exchanges are the oligarchs?
deepnotderp 8y ago
HN 2015: Bitcoin is bullshit, don't waste your money on it. HN 2018: people who got in early in bitcoin have more of it, thus it's bad.
- jib 8y ago
  Those are not contradictions, you realise that right? MLM schemes are bullshit, don’t waste your money. If you buy into Herbalife now you are truly not making a good decision, because there is already a huge pyramid of people above you. MLM schemes are a bad idea at the start because they are unlikely to take off, and they are a bad idea when they are running because they are unlikely to be profitable for anyone at the lower levels due to the unsustainable structure of profit distribution. It’s just another hot potato game.

88 points by rapnie 8y ago

strulovich 8y ago

2009-2013 is a long time ago, so maybe the title should be “Was the Bitcoin network an oligarchy?”

garmaine 8y ago
Unfortunately the answer is still yes, just a different composition of oligarchs.
- darawk 8y ago
  That exact fact makes it not an oligarchy.
  - geomark 8y ago
    It's still a small group in control, so still an oligarchy. But the fact that there is a constant rotation of oligarchs makes it a little different, like maybe you could be the next oligarch.
    - garmaine 8y ago
      Churn at the top doesn't mean there's upward mobility.
      - darawk 8y ago
        Yes, it literally does.
        garmaine 8y ago
        No.. it doesn’t. It is often a game of musical chairs with the same aristocratic class.
        darawk 8y ago
        ...if they're an aristocratic class, then it isn't churn, is it?
  - eksemplar 8y ago
    An oligarchy isn’t defined by a set of stable oligarchs. There can be a shift in power in a oligarchy and there typically will be because the oligarchs aren’t friends. If you look to ancient Athens, it wasn’t uncommon for an oligarch to be exiled. If you look to modern Russia, well, there is a reason a lot of former Russian oligarchs chose to live in London and not a Russian prison. An oligarchy is almost always a turbulent place, most of them making the BTC powershifts look calm.
    - darawk 8y ago
      Churn at the top is the exact thing you want in a dynamic, robust economy. You don't want equality. You want movement. Sure, Russia and Athens had some churn. But it was incredibly low.

atomical 8y ago

How do these users have political control like an oligarch would have?

cowpig 8y ago
This is a good question, and I'm afraid of the answer
robertAngst 8y ago
All around bad article. How did it get to top of HN?
anoncoward111 8y ago
Any entity that controls more than 51% of network capability (i.e. owns and operates a lot of expensive hardware) can, in theory, begin making fradulent transactions called "double spends". Any common user of the network that is unfortunate enough to get caught up in this scheme would lose their money. And the long term value of the network would most likely plummet, but in 2013 it didn't for some odd reason :)
- atomical 8y ago
  When I think of political control and Bitcoin I think of people who have the power to build a consensus for a hard fork. It wouldn't really make sense for someone controlling 51% of the network to hack the network. Then all their bitcoins would be useless because everyone else would abandon the network.
  - EthanHeilman 8y ago
    They could do short, targeted 51% attacks without doing much harm to the value of Bitcoin. In 2013 Ghash.io a mining pool had an employee who carried out mining based doublespends against a gambling site [0]. Very few people abandoned the network because very few people were impacted by this attack. [0]: https://bitcointalk.org/index.php?topic=321630.msg3445371#msg3445371 https://bitcointalk.org/index.php?topic=321630.msg3445371#ms...

narrator 8y ago

Oligarchy means controlled by the few. Anyone with a Raspberry PI, decent network bandwidth, and a few terabytes hard drive can be a node and start validating and relaying transactions. Besides, Bitcoin is not proof of stake, so having a lot of bitcoin does not give someone more control of the network. So no, Bitcoin is not an oligarchy. All of these big addresses likely belong to exchanges like CoinBase, etc.

perfmode 8y ago
control requires hashing power
adrianN 8y ago
How many Petahashes do you get out of a Pi?

robertAngst 8y ago

>Leonardo Ermann from the National Commission for Atomic Energy in Buenos Aires, Argentina, and colleagues from the University of Toulouse, France, have examined the structure of the Bitcoin-owner community by looking at the transactions of this cryptocurrency between 2009 and 2013. The study is 5 years old? Guessing back then it was libertarians and drug dealers. Also isnt this true of any early adoptor? The first smartphones were a small group too. The bigger question is- Why is this news? This seems to be agenda driven rather than a discovery. Who benefits from pushing anti-bitcoin ideas? These are not accidents, these studies are expensive to run. Why was this study completed?

paulie_a 8y ago
It's still just drug dealers and people throwing money like they are at the craps table.

7373737373 8y ago

With the emergence of electronic id cards in several countries (e.g. Estonia, Germany), there is the real possibility of equally distributing currency to card holders, even depending on properties such as current residence or birth date (dystopian version: names or only people with specific biometrics: eye color, heights or specific facial features). It is possible to create a signature scheme that guarantees privacy while avoiding double spending. One limitation to this is that organisations wanting to use signatures (at least in my country) must register with the government as a service provider, which might be a point of failure.

21 8y ago

When bitcoin appeared, everybody was saying that "only retarded people would `invest` in such an obvious scam. you would be better to blow your money in Vegas, at least you'll get a free drink". Now the same people say "it's not fair that some got to buy it at such cheap valuations".

tuesdayrain 8y ago
Probably not the same people.
jib 8y ago
No we are still saying the same. Lots of people made money on pyramid schemes, that doesn’t make them a good investment. The longer a pyramid scheme runs, the dumber it is to invest in it. If you truthfully believe bitcoin will develop into a stable alternative to state run currencies, great, I wish you good luck. I don’t. To me it is like religion - they can’t all be right and they are mutually exclusive. I don’t trust myself to be able to pick the winner among all the losers.
- dane-pgp 8y ago
  The notes and coins for the euro were first issued in 2002, and the first bitcoin was mined in 2009. What makes one a pyramid scheme and the other not? The answer surely can't be "every currency issued by a government is stable forever and every crypto-currency will collapse before 5 years". What I'm saying is, there are a lot of currencies out there, and some are more stable and have a better track record than others. You may not trust yourself to pick a winner among the losers, but I suspect you do use at least one currency from time to time, so you have picked one by default.

arisAlexis 8y ago

you and me can change that. instead of writing articles fire up full nodes and mine when you can

jcfrei 8y ago

Is this online "epdf" viewer by Springer running sluggish on purpose? Or is that just because of my dated notebook? Whenever graphs are rendered my CPU usage just spikes.

siruncledrew 8y ago

Honest question: Is there an etherscan.io for bitcoin to figure out what the largest token holding addresses are? If possible to figure out who the addresses belonged to, then the biggest coin holders could be known.

dangero 8y ago
Bitcoin wallets generally generate multiple addresses so most users have many. The wallet software does the work of displaying all addresses combined as a single balance. This is different than Ethereum where generally most users have 3 or less accounts. The effect of this is that Bitcoin appears less concentrated than it actually is in comparison.
firsttimeuser 8y ago
https://bitinfocharts.com/top-100-richest-bitcoin-addresses.html https://bitinfocharts.com/top-100-richest-bitcoin-addresses....
- firsttimeuser 8y ago
  https://btc.com/stats/rich-list https://btc.com/stats/rich-list
  - firsttimeuser 8y ago
    https://99bitcoins.com/bitcoin-rich-list-top100/ https://99bitcoins.com/bitcoin-rich-list-top100/
fru2013 8y ago
https://arewedecentralizedyet.com/ https://arewedecentralizedyet.com/

sanxchit 8y ago

Pardon my ignorance, but how is it possible to track Bitcoin holders? I thought that it was really easy to create multiple Bitcoin addresses, so if a rich miner wanted to hide his holdings he could create a separate address for each transaction and he would in effect be untraceable right?

dangero 8y ago
There is lots of other metadata to collect: You can monitor which nodes received the transaction first. Edge nodes can get IP address of sender. Who are the transactions with? Amounts, quantity, and time of day/week/month could all provide correlation.

craigc 8y ago

I am well aware that most people on Hacker News hate Bitcoin and cryptocurrencies so a lot of these types of studies and articles that are negative end up making their way to the top. It is strange that this study was from 2017-2018 and yet they only considered data from 2009-2013. Would be nice if there was an explanation as to why. One thing I wanted to point out is this seems to be presented to shine a negative light on Bitcoin, but I have a feeling that if you were to plot the owners of any equity you would find the exact same patterns. People who get in early will own a majority of the supply. For example take a look at Morgan Stanley stock. 86% of the shares are owned by institutional investors and of that chunk, five institutions own 58% of them: https://www.nasdaq.com/symbol/ms/ownership-summary https://www.nasdaq.com/symbol/ms/ownership-summary I also think these types of patterns with regards to transactions probably exist with other currencies as well, but it is just that the data is not available for the public to analyze.

wjnqx 8y ago
To be fair, stock in Morgan Stanley is not marketed as "decentralized."
- craigc 8y ago
  Bitcoin is not marketed as anything. There is no company and there are no marketing or sales people. That is part of the beauty of it. The decentralized claim refers to a decentralized network where the miners and nodes connected to the network are decentralized and no single entity controls 51% of the network (if they did it would collapse). Ownership of coins is not the same as hashing power. Nowhere do people claim that the coins themselves are decentralized.
  - dnomad 8y ago
    This is not true. Bitcoin was heavily marketed as a currency. It failed at this. Bitcoin was heavily marketed as decentralized where no single entity owns 51% of the network. In fact Bitmain likely already does or soon will control 51% of the network [1]. The remarkable thing here is that despite these clear, observable failures... Bitcoin will go on. The true believers will continue to HODL and while shorts may pile on in the absence of fundamental economic data there's little reason to buy or sell. The price now is purely a popularity contest. [1] https://bitcoinist.com/bitmain-51-percent-bitcoin-hashrate/ https://bitcoinist.com/bitmain-51-percent-bitcoin-hashrate/

hapnin 8y ago

Of course only small communities have a majority of btc. Too many people - geeks included - spent too many years believing the fud being broadcast about Bitcoin while others were collecting btc. I've seen the blistering scorn from some here on HN over the years. When I first ran across Bitcoin in 2010, I thought it was a scam but was intrigued by the tech. After studying it for about a month, I realised it wasn't a scam (though scamsters abound in cryptocurrencies, as in all things money) and went around to my friends in the tech community in my city to show it to them. They know me to be literate in networks and cryptography but only one person in the ten or twelve I approached was equally interested. The rest poopooed Bitcoin, some outright laughing me out of their offices. Institutional thinking is what kept a lot of smart people from even looking at Bitcoin early on. The findings in this study shouldn't be surprising. In five years, should the internet still be functioning, Bitcoin will be more spread out than it is now.

eksemplar 8y ago
What are you basing this on, your gut feeling? If I look at where I can actually use bitcoins, or crypto currencies in general, the list is dwindling. A few years ago I could buy coffee with crypto, I can’t today. A few years ago I could buy certificates (if I could also pass them) and other Microsoft products with crypto, I can’t today. A few years ago I could rent an vacation home with crypto, I can’t today. Hell these days I can’t even conver crypto into actual money in my country. Maybe it’s not like that in the US, but the only useful thing I can spend crypto on as a Scandinavian is paying for my domains.
- hapnin 8y ago
  I'm basing it on eight years of experience in Bitcoin. "Bitcoin for coffee" and the like is a waste of the tech, imo. Buying network services such as you described is a better use as intercountry payments with debit cards isn't always feasible. Bitcoin's use is better as a transnational currency when traditional payment channels are cumbersome. To be frank, Bitcoin still has some work to do in the payment channel dept but Lightning Network is getting there. In the US, there are more than a few places where you can trade out btc for gold/silver and sell the metal for fiat. It's preferable to selling on an exchange, imo. If you can't spend now, hang onto your btc until you can. Saving is always a good idea.

UncleEntity 8y ago

I'm going to totally guess (having only read the article abstract) and say the circles they are observing are in large part due to the exchanges. So the exchanges are the oligarchs?

deepnotderp 8y ago

HN 2015: Bitcoin is bullshit, don't waste your money on it. HN 2018: people who got in early in bitcoin have more of it, thus it's bad.

jib 8y ago
Those are not contradictions, you realise that right? MLM schemes are bullshit, don’t waste your money. If you buy into Herbalife now you are truly not making a good decision, because there is already a huge pyramid of people above you. MLM schemes are a bad idea at the start because they are unlikely to take off, and they are a bad idea when they are running because they are unlikely to be profitable for anyone at the lower levels due to the unsustainable structure of profit distribution. It’s just another hot potato game.