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> Capitalism itself is naturally centralizing. That is why we have anti-thrust laws. We don't just leave it to consumers to make sure centralization does not ha

> Capitalism itself is naturally centralizing. That is why we have anti-thrust laws. We don't just leave it to consumers to make sure centralization does not happen in the market. It is the job of the government to prevent it. Centralized social systems such as Governments, Banks etc exist mostly because we need someone we trust (Bank) to arbitrate interactions between two peers, if you remove these kind of trust with the help of tech (eg cryptography) the bank and governments become obsolete because we can now verify things for our self without a 3rd party.

nosuchthing 7y ago
Simply not true. Faith in cryptography will not help anyone with fraud, theft, and trust. Naive neo-liberal libertarians and anarchocapitalists attempt to claim deregulation will just work because they've never encountered abuse, fraud, negligence, or read any history. One important point: if we actually include all 7 billion people on the earth, most of whom have zero BTC or Ethereum, the Gini coefficient is essentially 0.99+. And if we just include all balances, we include many dust balances which would again put the Gini coefficient at 0.99+. Thus, we need some kind of threshold here. The imperfect threshold we picked was the Gini coefficient among accounts with ≥185 BTC per address, and ≥2477 ETH per address. So this is the distribution of ownership among the Bitcoin and Ethereum rich with $500k as of July 2017. In what kind of situation would a thresholded metric like this be interesting? Perhaps in a scenario similar to the ongoing IRS Coinbase issue, where the IRS is seeking information on all holders with balances >$20,000. Conceptualized in terms of an attack, a high Gini coefficient would mean that a government would only need to round up a few large holders in order to acquire a large percentage of outstanding cryptocurrency — and with it the ability to tank the price. With that said, two points. First, while one would not want a Gini coefficient of exactly 1.0 for BTC or ETH (as then only one person would have all of the digital currency, and no one would have an incentive to help boost the network), in practice it appears that a very high level of wealth centralization is still compatible with the operation of a decentralized protocol. Second, as we show below, we think the Nakamoto coefficient is a better metric than the Gini coefficient for measuring holder concentration in particular as it obviates the issue of arbitrarily choosing a threshold. ...However, the maximum Gini coefficient has one obvious issue: while a high value tracks with our intuitive notion of a “more centralized” system, the fact that each Gini coefficient is restricted to a 0–1 scale means that it does not directly measure the number of individuals or entities required to compromise a system. Specifically, for a given blockchain suppose you have a subsystem of exchanges with 1000 actors with a Gini coefficient of 0.8, and another subsystem of 10 miners with a Gini coefficient of 0.7. It may turn out that compromising only 3 miners rather than 57 exchanges may be sufficient to compromise this system, which would mean the maximum Gini coefficient would have pointed to exchanges rather than miners as the decentralization bottleneck. Conversely, if one considers “number of distinct countries with substantial mining capacity” an essential subsystem, then the minimum Nakamoto coefficient for Bitcoin would again be 1, as the compromise of China (in the sense of a Chinese government crackdown on mining) would result in >51% of mining being compromised. - Balaji S. Srinivasan (the CTO of Coinbase) https://news.earn.com/quantifying-decentralization-e39db233c28e https://news.earn.com/quantifying-decentralization-e39db233c...

nosuchthing 7y ago

Simply not true. Faith in cryptography will not help anyone with fraud, theft, and trust. Naive neo-liberal libertarians and anarchocapitalists attempt to claim deregulation will just work because they've never encountered abuse, fraud, negligence, or read any history. One important point: if we actually include all 7 billion people on the earth, most of whom have zero BTC or Ethereum, the Gini coefficient is essentially 0.99+. And if we just include all balances, we include many dust balances which would again put the Gini coefficient at 0.99+. Thus, we need some kind of threshold here. The imperfect threshold we picked was the Gini coefficient among accounts with ≥185 BTC per address, and ≥2477 ETH per address. So this is the distribution of ownership among the Bitcoin and Ethereum rich with $500k as of July 2017. In what kind of situation would a thresholded metric like this be interesting? Perhaps in a scenario similar to the ongoing IRS Coinbase issue, where the IRS is seeking information on all holders with balances >$20,000. Conceptualized in terms of an attack, a high Gini coefficient would mean that a government would only need to round up a few large holders in order to acquire a large percentage of outstanding cryptocurrency — and with it the ability to tank the price. With that said, two points. First, while one would not want a Gini coefficient of exactly 1.0 for BTC or ETH (as then only one person would have all of the digital currency, and no one would have an incentive to help boost the network), in practice it appears that a very high level of wealth centralization is still compatible with the operation of a decentralized protocol. Second, as we show below, we think the Nakamoto coefficient is a better metric than the Gini coefficient for measuring holder concentration in particular as it obviates the issue of arbitrarily choosing a threshold. ...However, the maximum Gini coefficient has one obvious issue: while a high value tracks with our intuitive notion of a “more centralized” system, the fact that each Gini coefficient is restricted to a 0–1 scale means that it does not directly measure the number of individuals or entities required to compromise a system. Specifically, for a given blockchain suppose you have a subsystem of exchanges with 1000 actors with a Gini coefficient of 0.8, and another subsystem of 10 miners with a Gini coefficient of 0.7. It may turn out that compromising only 3 miners rather than 57 exchanges may be sufficient to compromise this system, which would mean the maximum Gini coefficient would have pointed to exchanges rather than miners as the decentralization bottleneck. Conversely, if one considers “number of distinct countries with substantial mining capacity” an essential subsystem, then the minimum Nakamoto coefficient for Bitcoin would again be 1, as the compromise of China (in the sense of a Chinese government crackdown on mining) would result in >51% of mining being compromised. - Balaji S. Srinivasan (the CTO of Coinbase) https://news.earn.com/quantifying-decentralization-e39db233c28e https://news.earn.com/quantifying-decentralization-e39db233c...